How Couchsurfing became the Friendster of the sharing economy

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Credit: iStock

Before there was Uber, Lyft, or Airbnb, there was Couchsurfing. For a certain sect of millennials — say, those entering college between 2005 and 2011 — Couchsurfing was transformative. Members all over the globe offered up their couches for free to these cash-strapped travelers.

It was the original sharing economy, except there was a lot more “sharing” in Couchsurfing’s version than there was “economy.” And that was the problem.

Without a way to properly support itself, the application staggered under the burden of its popularity. It nearly went out of business because of technical problems, and its community struggled to maintain its values with the flood of new users. Raising venture funding just exacerbated the problem, triggering power struggles between long time volunteers and new leadership.

Couchsurfing learned the hard way that “sharing” doesn’t scale easily. Can an organization founded on cooperation sustain itself in a capitalist world?

The collective of coders

Couchsurfing had conflict between for-profit and not for profit ambitions from its earliest days. Founded in 2004 as the brainchild of a man named Casey Fenton, it ran like a collective for almost ten years, with volunteers pitching in code and working as the ambassadors for each city. It made money here and there through donation requests but by and large it didn’t generate much cash. Fenton’s business partner, Daniel Hoffer, intended to change that from the moment he joined the company. It took a long time for that to happen.

Photo from a 2008 Couchsurfing camping trip in the south of France with 50+ local members

Photo from a 2008 Couchsurfing camping trip in the south of France with 50+ local members

The digital psyche was far different back then, so it’s shocking people took a chance on the service at all. Sharing economy companies had not yet emerged. Smartphones had not proliferated. Facebook was not a thing. When you were meeting strangers off the Internet, they really were strangers.

For many users, Couchsurfing gave them the opportunity to travel when they might not otherwise be able to afford to do so. Experiencing the world at an early age altered the course of some people’s lives. “I discovered that I had a passion for meeting people and traveling through Couchsurfing,” long-time user Jordan Urbanovich told me. He grew up in a cookie cutter American suburb, but after visiting Europe on people’s couches the hobby stuck. Seven years later he’s still using Couchsurfing — he skyped me from Nepal, where the power cut out a few times in his Internet cafe.

Couchsurfing was magical in the early days, but its honeymoon period didn’t last long. As the word started to spread among users and more and more people joined the application, its cooperative ethos backfired. Its collectively-coded website couldn’t handle heavy amounts of traffic. Bugs abounds and crashes were common.

In one particularly bad server failure in 2006, key data and software were permanently deleted. Fenton announced he was shutting Couchsurfing down as a result. But the organization operated more like Wikipedia than the Encyclopedia – there were armies of people invested in it who had dedicated personal time to building it. They rallied together to keep it going.

From cool to creepy

The technical issues weren’t the only ones Couchsurfing faced as it scaled. Soon, more worrisome problems started to occur. Newcomers changed the energy.

“It became this weird playground for people who had social anxieties or were socially inept,” former Couchsurfing user Christa Gallo told me. “They’d show up and didn’t know how to hold a conversation.” Many of the newscomers used Couchsurfing meetups as social events, without actually hosting visitors or traveling themselves.

Christa Gallo (left) and a fellow member of the French Couchsurfing community rock company swag.

Christa Gallo (left) and a fellow member of the French Couchsurfing community rock company swag.

Gallo wasn’t the only one noticing the difference. Urbanovich also felt a change around 2011. “I was hosting in New Orleans and I got a lot of bullshit from new visitors — copy and pasted messages, people who had no desire to hang out with me and only wanted a free place to stay, or people just looking for festival accommodations.”

The Couchsurfing community struggled to spread its ethics to newcomers. People started using the service like a dating application with predictably bad results. Rape and assault incidents garnered international attention and female couchsurfers began receiving tons of emails from other overly friendly users. Some men even published guides for how to turn couchsurfing into a “real sex pipeline.” This one has lovely little recommendations, like telling men to target newer female users because “they haven’t [yet] developed a firm mindset on what the site is for.”

One woman, writing for Narratively, detailed her chilling encounter with a host named “Raul,” who posed as a woman on the site to convince her to stay with him. By the time she realized he had lied, she was in his apartment, in a foreign country late at night, with many bags and nowhere to go.

Couchsurfing was experiencing what any company that is truly representative of a “sharing economy” would. When the pool of potential “sharers” is so diverse, unvetted, and uncontrolled, there will inevitably be some bad actors.

Meanwhile, things weren’t going well for the company financially. Couchsurfing’s request for a non-profit status was rejected because the IRS didn’t believe it was charitable in nature. It was saddled with the bills, and if it was going to survive, it needed a savior.

An illustrated history of Couchsurfing with an optimistic future. Drawn years before it received its venture funding

An illustrated history of Couchsurfing with an optimistic future. Drawn years before it received its venture funding

The saving grace

Enter Benchmark. In 2011, the venture capital firm, along with the Omidyar Network, gave $7.6 million in initial funding. A year later, both reupped in a $15 million Series B round along with some new investors, to turn the volunteer-run service into a sustainable enterprise with venture level returns.

Erik Blachford, who is currently Couchsurfing’s Executive Chairman, wasn’t advising the company at the time. But in retrospect, he thinks it was the right move. “At some point if you’re not in the situation to take donations the best path forward is to make a business out of it,” Blachford said to me.

In comparison, Airbnb — Couchsurfing’s far more successful rival in the sharing economy — was designed to make money from the get go. It didn’t go through years of trial and error with its business model, and its outsized profits and rapid growth reflect that. Despite being founded five years after Couchsurfing, it currently has a reported $13 billion valuation and had raised almost $1 billion in venture funding. It’s looking like it will be one of Silicon Valley’s biggest wins from the recent tech rebirth.

Airbnb’s success does not preclude Couchsurfing from thriving. Although they may compete in small ways, the two services are so different in experience — and cost — that they serve different markets. For all its achievements, Airbnb is ultimately a glorified hospitality service, not a cultural idea exchange. As Fred Wilson put it, it’s part of the “rental economy,” not the “sharing economy.”

As sharing grows, caring goes

Couchsurfing meetup in Amsterdam to celebrate Christmas, 2009

Couchsurfing meetup in Amsterdam to celebrate Christmas, 2009

Before and after its venture funding, Couchsurfing cycled through CEOs, acquiring and discarding them like ill-fitting t-shirts. Each one tried hammering the organization into some semblance of professionalism, efficiency, and money-making and each encountered intense push back from the community. Couchsurfing was founded on the ethos of cooperation, not capitalism, and its most involved users were intensely suspicious of the ulterior motives of the service’s overlords.

“Imagine if you’ve been contributing to Wikipedia for years and one day the founders say they are selling it for a large personal profit but you’re still free to use it. Yup, it’s like that,” one former Couchsurfing ambassador explained on Medium in 2013.

Users made meme videos poking fun at the corruption of the organization’s leaders and published cartoons to represent them. The community that had once volunteered hours to run Couchsurfing could not bring itself to trust leaders overseen by a venture capital firm.

Couchsurfing’s corporate team inflamed these problems with drastic product changes. It started making parts of its website public so Google could index them, but in doing so it published personal, sensitive member information, like phone numbers and names. It cut “city groups,” which were hubs of information for Couchsurfing communities, enraging volunteers who had dedicated time to maintaining those forums. Users fought back with online protests, but to no avail.

Couchsurfing also tamped down on free speech on the application. It deleted profiles of some long time city ambassadors who were critical of the company. Many Couchsurfing diehards started calling for defection, telling other users to join the alternative: An open source, non-profit site called BeWelcome. Long time Couchsurfers believed, perhaps rightly so, that the company had started to focus on growth at the expense of community and it was time to abandon ship.

BeWelcome delegate and author of a recent book on traveling cheaply, Anja Kühner, explained how it differs from Couchsurfing. “In terms of the amount of members, BeWelcome will maybe never reach the numbers of Couchsurfing,” Kühner told me. “But sheer quantity is not our goal. It is the quality of encounters that counts for us.”

A reset and changing of the guard

One long time Couchsurfing user said this comic is symbolic of Couchsurfing's leadership. "This company is like the villain in a slapstick cartoon, threatening the hero while holding the gun backwards."

One long time Couchsurfing user said this comic is symbolic of Couchsurfing’s leadership. “This company is like the villain in a slapstick cartoon, threatening the hero while holding the gun backwards.”

It came to a head in October 2013. The latest CEO, Tony Espinoza, stepped down after less than two years at the helm, citing a need for Couchsurfing to “crystalize and strengthen [its] core values.” Couchsurfing’s then-head of member experience, Jen Billock, replaced him. She wasted no time in wiping the slate clean.

She laid off 40 percent of the staff, a dramatic restructuring. She believes the layoffs were necessary, although hard, in order to build the foundation for the company’s future.

Couchsurfing entered a long period of hibernation. Although people could still use it and it continued to grow, the company ceased most publicity, media interviews and marketing. Billock buckled down with her remaining team, putting into place a more competitive, hard-working staff culture.

“The thing I like to play with as a leader is, ‘How can we have emotionally intelligent work place that is also a super high performance work place?’” Billock told me. “Let’s set an aggressive deadline and run towards it.”

Since the Couchsurfing application was first built in 2003 and had been amended and rejiggered over the years, the technology was a mess. It certainly wasn’t capable of adapting to the mobile era that dominates today. Eventually Billock resigned herself to the fact that the entire thing would need to be rebuilt … from scratch. The databases of customer information would need to be migrated, the design redone, and the backend code rewritten, in a more modern code language.

For the last year and a few months, that’s exactly what Couchsurfing’s staff did. Hustling away in their San Francisco office, as the likes of Airbnb and other “sharing economy” companies grew bigger and bigger and Couchsurfing’s name faded away. But not for good.

In November 2014, the company unveiled its big new relaunch and set its sights on the future. It will try to answer the question: Can the “sharing economy” survive when it focuses on the sharing and not the economy?

It’s not just a down-market Airbnb

A thank you card from some Couchsurfing vistors to their host

A thank you card from some Couchsurfing vistors to their host

Although its technical problems are behind it, Couchsurfing’s most difficult challenges are ahead. It’s been three years since it took venture funding, and before the decade is out it will need to start making money.

One problem: Couchsurfing’s free cost is, in essence, its core product. That’s what fosters connection between visitors and hosts, encouraging them to spend time together. If you were paying for the couch, well, then it would be just another place to sleep at night….like a down-market Airbnb.

“There’s lots of different services where you can find a place to stay,” investor Blachford told me. “What makes [Couchsurfing] special is you’re going to stay with someone. We want to be very careful to preserve that.”

Couchsurfing’s leaders are going to try to make money the freemium route, with features like profile verification and host-visitor gift exchanges.

That may wind up backfiring too though. The service attracts people with a certain mindset. Urbanovich, who has paid the verification donation in the past, told me if payment was required he wouldn’t bother verifying his profile. “Like anything in life it just builds resistance if someone’s telling you what to do,” Urbanovich said.

There’s a lot at stake, and not just for the company and its investors. There’s nothing else in the world quite like Couchsurfing. It opens up travel opportunities for those who might not otherwise be able to afford it and connects cultural strangers as a result. It’s the largest such network with the biggest brand awareness. For better or worse, Couchsurfing is the strangers-helping-strangers travel organization that stuck. It has survived in spite of itself.

Billock is optimistic. She said, “The market has evolved beautifully for Couchsurfing and now Couchsurfing is evolving to take its position.”

 

This post has been updated to reflect that it was Benchmark, not Greylock, that invested in Couchsurfing. It has also been updated to show that founder Casey Fenton’s business partner, Daniel Hoffer, had always had for-profit intentions for the company.

24 Comments

dtraveler

Trustroots has only been online for less than a month, and features and improvements are being added by the hour! It was launched with just the simplest of a framework, something they readily acknowledge: https://www.trustroots.org/#!/about

The fellows working furiously around-the-clock on it now, spent years investing significant technical effort into BeWelcome, and Couchsurfing before that. So they obviously know what they’re doing, and truly enjoy doing it.

The statistics for BeWelcome show that half of the accounts haven’t been active in a year or more, and few members have ever messaged another. Or left a comment for someone, which indicates actual hosting and traveling not just chatting on a forum. BeWelcome, just like Couchsurfing, gladly counts every single sign-up ever created, no matter how incomplete or inactive.

BeWelcome has never been more than a hollow, stagnant “anti-Couchsurfing complaint and commiseration forum,” and only sees the occasional peak in interest whenever Couchsurfing makes a major change (which just happened again, hence this article.) Then activity plunges back down to almost nothing. The vast majority of people sign-up at BeWelcome, take a look around in frustration and disappointment, and then never return again.

Trustroots has been online less than a month! https://www.trustroots.org/#!/statistics

IsJournalismDead?

I don’t know but bashing CS and BeWelcome as a way to promote Trustroots seems to go against the idea of your own name of ‘trust’ somehow… maybe it’s just me – also if you’re going to talk about frustrations on sites like BeWelcome [which may be justified it would be great if your own site didn’t have a bunch of issues itself – it’s a bit like the pot calling the kettle black]… that said, it’s always nice having a new alternative…

I think what is immediately segmentary about Trustroots is that it brands itself/appears to focus on just hitchhickers [yes i saw the extra words afterwards but it feels more like an after thought just to cover more of the population].

As for the article, it’s a nice cursory glance at the state of things but it would have been nice if it was accurate and not having a bunch of erroneous information.

Could have been worse though too…

steodosic

Couchsurfing is a brilliant idea and I loved everything you wrote at this website, but to be honest – Airbnb is also excellent. When it comes to creating your own site for it and to click here for more, fast personal loans can be used as a good starting point.

ladyfilosopher

Wow! I had no idea of what this article had described. I have been so busy with my own pro’ fessional updating that I had not been able to offer a ‘couch’ for quite a while. I had ‘nosed’ that there had been changes: I stepped away when people were making me part of a mass mailing process. I also had had NO luck finding a place to stay when I traveled to a particular city because those offering were either super limited (any person taller than 170cm might not be comfortable on the small couch in the kitchen) to CREEPY. My page is full of information about who I am, who has been hosted by me. I LOVED the original Couchsurfing; the experience was warming, exhilirating, humanising, and especially growth oriented.
I came upon this detailed article while heading over to the site to try to find a host in that city I go to often. I feel better informed. Thanks for the update in such a succint, and factual manner while keeping the friendly positive attitude. Here I go, off to try out the new (denatured?) Couchsurfing

axcatbkh

@dtraveler,
Can you tell me where you see the number of members on TrustRoots, and the growth?
BeWelcome has gown 8 times in 4 years, which means they duplicate every year.

On Trustroots i like the layout and , but at the moment many things are still missing, such as:
– Hosts within hitchiking distance. It’s supposed to be a hitch-hikers site, and there’s no hosts for 700km in Italia or 900km in Spain
– Search with filters
– Comments (to improve trust…)
– Privacy (contact list is private on BeWelcome but public on TrustRoots)
– Trips (so that people can invite you)
– Events
Still, i hope it will expand and be usable some day.

Also, there are no “founders” on BeWelcome (not like CS), it belongs to the non-profit organization BeVolunteer, so that it cannot be sold to private investors.

gtraveler

@dtraveler,
on Trustroots i like the layout and , but at the moment many things are still missing, such as:
– Hosts within hitchiking distance. It’s supposed to be a hitch-hikers site, and there’s no hosts for 700km in Italia or 900km in Spain
– Search with filters
– Comments (to improve trust…)
– Privacy (contact list is private on BeWelcome but public on TrustRoots)
– Trips (so that people can invite you)
– Events
Still, i hope it will expand and be usable some day.

And about the growth of BeWelcome, it’s 8 times bigger now, than 4 years ago, which means they duplicate every year.

Also, there are no “founders” on BeWelcome (not like CS), it belongs to the non-profit organization BeVolunteer, so that it cannot be sold to private investors.

dtraveler

BeWelcome is still a toxic wasteland of antiquated, unreliable web-code and cliquish elitism. After nearly eight years of floundering around with effectively zero growth in membership, and never a site improvement or bug correction.

It’s little more than an amateur vanity project for a married couple in Belgium who became infuriated with Veit Kuhne’s Hospitality Club. And more lately, simply the “I-Hate-Couchsurfing-Too” Club. The so-called founders have infuriated and driven away every enthusiastic, talented web coder who’s volunteered to address literally endless needs, by requiring obeisance to their intricately contrived “club” bureaucracy.

However, after years of waiting for something truly selfless, reliable, and modern, hosts and guests finally have a brand new, non-profit option on the scene and it’s going to blow every other HospEx site out of the water! Launched less than a month ago, and sign-ups continue to sky-rocket, by the hour!

https://www.trustroots.org/#!/about

Robert Brooklyn

Great to see trustroots.org’s PR machine running full steam ahead. Hopefully Carmel will do a better job at fact checking than some “trustroots” vendors.

guaka

This wasn’t really Trustroots PR machine activity. I’m part of the “Trustroots team” and I don’t like this comment here at all. I’m sure same goes for other team members: we support other non profit hospitality exchange organization that is using open source software. That includes BeWelcome, and also Warm Showers, https://www.warmshowers.org/, a US non profit that actually managed to obtain the 501(c)(3) status.

As for the article itself, with 1M$+ per year CouchSurfing was making enough money from “verification” to be sustainable. Personally I stopped volunteering with CS back in 2007, because of the requirements for volunteers (crazy strict NDAs) and the lack of any willingness to go open source.

Carmel DeAmicis

Thanks for all the comments guys I appreciate the dialogue. I’ll respond to some commonalities in your discussion here:

1) My brain swapped Benchmark and Greylock. Thanks for flagging, I have since corrected.

2) Some of you have pointed out that bringing in $2 million in revenue a year, as Couchsurfing was doing before raising venture, is not “small amounts of cash.” You make a good point, although “small” is a matter of perspective. Airbnb was believed to be making at least 125x that in 2013*. The question becomes: Is $2 million substantial enough to support an enterprise that became as popular as Couchsurfing? Staff, server space, a legal team, engineers, who are notoriously expensive to employ. I’ll add the revenue number to the story for context. (* http://www.wsj.com/news/articles/SB10001424052702303802104579451022670668410)

tamaraspieling

Apparently more than $20 million hasn’t been enough to even start to improve the website. Since the closing of the non-profit and the secret sale of its assets to a Fenton/Hoffer-owned Delaware shell corporation, “Better Business Through Travel, Inc”, CS has gone through a first .php rewrite, non-functional cell phone apps, then a Ruby on Wheels rewrite, accompanied by several stages of major downgrades in site functionality, before again “starting from scratch” with a new site that has even less functionality, where the mostly beginner programmers have tried to “reinvent the wheel”. Not surprising since present software staff is reportedly earning a fraction of what the people they replaced made.

None of this software rewrite has been useful, site functionality is at an all-time low. One can only assume that the reason for the rewrite is to try to facilitate some vague ideas about revenue stream. And yet, increased membership has apparently led to decreased revenue. Are owners simply preparing the site for sale to the tourism trade, as the presence of Blanchford would indicate? The only believable hypothesis is that ownership wants to radically increase membership, no matter whet the cost in functionality and usefulness, in order to avoid the firesale of a business plan that has been in freefall since privatization. The massive fraudulent creation of robot-generated fake members (apparently by CS Inc insiders) comforts this hypothesis. The only value left in the Corporation is its exaggerated membership numbers. But analysts are unlikely to be fooled again.

dtraveler

“Staff, server space, a legal team, engineers, who are notoriously expensive to employ…”

Couldn’t agree more, Carmel. Trying to build and maintain these kinds of sites while also defiantly and proudly refusing to address (financial and technical) needs vital to the very survival of the site, is clearly not a a viable position. Let alone if you ever expect to reliably support more than just a handful of users.

http://www.horizonapp.co/blog/hospitality-networks-failed/

Drew Meyers

Hey dtraveler
Indeed. Thanks for the share to the article I wrote. We’re bullish we have a viable model. Feel free to email me if you want to discuss – drew at horizonapp co

glennfleishman

The process of it converting from a New Hampshire non-profit (without federal 501(c)(3) or similar recognition) to a for-profit B Corporation is an interesting one, but mostly not well told. The version here elides a lot of the drama, including the state’s pressure, the group’s failure to reply to the IRS denial (which could have been responded to, as many 501(c)(3)s were initially denied, and it may have been recognized as a (6) or (7)).

Carmel DeAmicis

Hey Glenn, I didn’t delve too deeply into the non-profit saga due to space limitations and the focus of Gigaom’s audience (namely people in tech, not people in the non-profit world).

Thanks for providing some color on this for readers who made it this far in the story!

tamaraspieling

It’s not clear that CS, Inc is out of the woods yet concerning its “non-profit saga”, from an investor perspective. Questions about the legality of the so-called “conversion” of a non-profit into a C Corporation may still present exposure to investors who fear not only the continuing bad press, but also the legal exposure.

Ex-CEO Espinoza reported that he required “guru” Fenton (who styled himself as “Chief Inspirational Officer”) to provide contractual reassurance to CS, Inc concerning the transfer of the intangible assets of the non-profit. There are indications this information was not revealed to investors.

Tamara

My have you got things wrong!

Fenton associate Hoffer revealed (to a business conference at his school, Stanford) that they had agreed from day one of the non-profit on how to split up the to-be-privatized scam.

The technical problems of CS are very much front and centre with a severe downgrade of the site that is the 4th major rewrite since privatization.

The non-profit revenue exceeded $2 million annually, much more than necessary to run and improve the site as a non-profit. But most of that money was diverted by Fenton into personal pleasure.

“Greylock” was not an investor. The novice CEO Billock did not pilot the recent disastrous changes, it was the seasoned tourist businessman Chairman of the Board Blanchford.

Carmel DeAmicis

Hey Tamara,

I didn’t come across Hoffer’s admission of profit intentions during my research and interviews. If you send me the source, I’ll include it in the piece (carmel.deamicis@gigaom.com).

I also didn’t come across any proof that Fenton pocketed most of Couchsurfing’s money prior to venture investment. I spent months researching this story, but it is possible to miss information. Again, feel free to send me the source on that and I can take a look.

tamaraspieling

Here is one article concerning Hoffer’s public statements:

http://thedishdaily.com/2013/01/14/couchsurfing-co-founder-and-former-ceo-daniel-hoffer-discusses-leadership-at-the-stanford-gsb/

Concerning Fenton’s alleged fraud of CS assets, you might want to start with the “exceptional” payments the non-profit made to Fenton and other insiders, emptying the coffers of the non-profit with large cash payments to themselves, before secretly buying the fruit of volunteer labour with the Fenton/Hoffer Delaware shell corporation, “Better Business Through Travel, Inc”. Fenton himself was well aware in 2011 of the New Hampshire legislation against non-profit clinics carrying out the same sort of operation.

POLYGLOT

Well researched and written overall. Just a few inaccuracies:
– Couchsurfing is a company, a website and a community, not an application (app use is minor)
– The first round investor was not Greylock, but Benchmark Capital.
– Erik Blachford may be an investor, but as far as is known not in CouchSurfing.
– CS had other options than to go for-profit.
– as for “by and large it didn’t generate much cash”: in the year before it went for-profit, it generated approximately $2.5 million in verification revenue.

Carmel DeAmicis

Hey Polyglot,

I’m glad you liked the story and thanks for your notes. I discussed a few of your points in the overview comment above, but here are some more specific responses:

I was using the term “application” to refer to Couchsurfing’s website, which is a web application. I’ll consider replacing it with a different term though so readers don’t think I’m referring to the mobile app.

Erik was an independent investor and he’s not a partner at the VC firms that invested in Couchsurfing. He was recently brought in as a key advisor because of his experience at Expedia.

I didn’t focus too much on Couchsurfing’s decision between staying non-profit and becoming a venture-backed company because of space limitations and Gigaom’s audience, which is largely people in tech. I figured those in the startup world would be more interested in learning why Couchsurfing didn’t become Airbnb, not why Couchsurfing didn’t become a non-profit.

tamaraspieling

Are you saying Blanchford has no equity in Couchsurfing? That he was “brought in” after the last CEO was fired?

POLYGLOT

Thanks Carmel. Your statement “There’s lots of different services where you can find a place to stay,” investor Blachford told me.” suggests, in the context of the article, that Blachford is an investor in Couchsurfing. I would rephrase that to avoid this misunderstanding, unless you have information indicating he did actually invest in Couchsurfing (while also advising then-competitor Tripping.com). Also, isn’t Executive Chairman a bit more than an “advisor”?

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