The Secret of Airbnb’s Pricing Algorithm

The sharing economy needs machine intelligence to set prices

How much should you charge someone to live in your house? Or how much would you pay to live in someone else’s house? Would you pay more or less for a planned vacation or for a spur-of-the-moment getaway?

Answering these questions isn’t easy. And the struggle to do so, my colleagues and I discovered, was preventing potential rentals from getting listed on our site -- Airbnb, the company that matches available rooms, apartments, and houses with people who want to book them.

In focus groups, we watched people go through the process of listing their properties on our site—and get stumped when they came to the price field. Many would take a look at what their neighbors were charging and pick a comparable price; this involved opening a lot of tabs in their browsers and figuring out which listings were similar to theirs. Some people had a goal in mind before they signed up, maybe to make a little extra money to help pay the mortgage or defray the costs of a vacation. So they set a price that would help them meet that goal without considering the real market value of their listing. And some people, unfortunately, just gave up.

Clearly, Airbnb needed to offer people a better way—an automated source of pricing information to help hosts come to a decision. That’s why we started building pricing tools in 2012 and have been working to make them better ever since. This June, we released our latest improvements. We started doing dynamic pricing—that is, offering new price tips daily based on changing market conditions. We tweaked our general pricing algorithms to consider some unusual, even surprising characteristics of listings. And we’ve added what we think is a unique approach to machine learning that lets our system not only learn from its own experience but also take advantage of a little human intuition when necessary.

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Digital Oilfields: Redefining Pipeline Operations

While oil and gas pipeline operators are investing heavily in new technologies for better control, inspection and maintenance of assets, an increasing number of devices are linked to the industrial internet, the global network connecting people, data and machines. These trends foreshadow the future for the pipeline industry.

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The Robots Are Coming

How Technological Breakthroughs Will Transform Everyday Life

Robots have the potential to greatly improve the quality of our lives at home, at work, and at play. Customized robots working alongside people will create new jobs, improve the quality of existing jobs, and give people more time to focus on what they find interesting, important, and exciting. Commuting to work in driverless cars will allow people to read, reply to e-mails, watch videos, and even nap. After dropping off one passenger, a driverless car will pick up its next rider, coordinating with the other self-driving cars in a system designed to minimize traffic and wait times—and all the while driving more safely and efficiently than humans.

Yet the objective of robotics is not to replace humans by mechanizing and automating tasks; it is to find ways for machines to assist and collaborate with humans more effectively. Robots are better than humans at crunching numbers, lifting heavy objects, and, in certain contexts, moving with precision. Humans are better than robots at abstraction, generalization, and creative thinking, thanks to their ability to reason, draw from prior experience, and imagine. By working together, robots and humans can augment and complement each other’s skills.

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Welcome to the Home of the Future

The increasing use of intelligent devices combined with ongoing breakthroughs in robotics, cloud computing, and other technologies are leading to a new era of digital living spaces. Next-generation entertainment centers will lead to the installation of sound systems and screens within walls to save space. Smart windows will be bigger than traditional windows, and increased use of shared, driverless cars will eliminate the need for garages or dramatically reduce their size, according to architect Tom Kinslow. Smartphones could become the remote controls for smart homes. Sprinklers, kitchen appliances, washers, dryers, lights, windows, and pools all could be controlled from a smartphone or tablet, predicts futurist Paul Saffo. Robots also will be a major component of future smart homes. Within 10 years, general-purpose robots will perform house chores while users are at work, says Bossa Nova Robotics co-founder Sarjoun Skaff. In addition, future homes likely will have networks that connect all of their appliances. Microsoft already has developed HomeOS, an operating system designed to turn homes into live-in computers, and Google recently launched Android@Home, an ecosystem for managing every electric home device. Meanwhile, Apple is developing an energy-management system that uses intelligent power-line networking to measure and control which home devices are consuming power.

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