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To: stockman_scott who wrote (5403)	6/5/2011 10:36:22 AM
From: Glenn Petersen	1 Recommendation Respond to of 6763

Online Rental Sites Tout Options By SPENCER E. ANTE Wall Street Journal JUNE 3, 2011 A second wave of online rental sites is catching fire with consumers and investors, with start-ups like spare-room market Airbnb Inc., textbook lender Chegg Inc. and fashion outfit Rent the Runway following the success of pioneers like Netflix Inc. and Zipcar Inc. While many of the companies took off during the frugal days of the recession, they are continuing to do well in a climate where consumers remain cautious about paying full price for things they don't need or want to own. The first wave of online rental companies plied areas like cars and movies where deep secondary markets already existed. The current wave is taking the concept further and actually creating new national and global markets for goods—some personal—that hadn't existed before. Airbnb started an online marketplace that lets people rent out spare rooms in their homes or apartments. Brian Chesky, Airbnb's co-founder and chief executive, stumbled on the idea during a design conference in San Francisco in 2007. The hotels were sold out, and Mr. Chesky needed money for rent, so he and his roommate turned their place into a makeshift bed and breakfast with three air beds. "It inspired us," he said. Today, the service claims nearly 700,000 users and has rooms listed in 13,000 cities across 181 countries. And they aren't just plain old rooms. On Airbnb, you can rent out sailboats, tree houses in South Africa, a castle in Morocco and even an igloo in Slovenia. The company is rolling out offices around the world and plans to offer a new service that will let people rent spaces for longer than 30 days. "For the first time, we were giving people access to spaces they never had access to before," Mr. Chesky said. Bob Patterson, an account manager with the San Francisco public-relations firm VSCpr, tapped Airbnb when he was looking for a place to stay earlier this year during the South by Southwest festival in Austin, Texas. All of the hotels were sold out, but he found a clean room in a house with a bathroom across the hall for $60 a night. His host even drove him to the convention center each morning. Mr. Patterson said he has recommended the service to co-workers and plans to use it again. "I am thinking of renting a whole house next year in Austin," he said. Airbnb's move into longer-term rentals will put it in competition with bigger rivals like vacation-rental site HomeAway.com Inc. Airbnb still doesn't generate positive cash flow, but Mr. Chesky said it is close. The company isn't yet aiming to be profitable while it plows money into expanding overseas. So far, Airbnb has raised about $8 million, but is out looking to raise a large amount of money. Chegg rents textbooks to college students for around 25% to 50% of the cost. Chief Executive Dan Rosensweig says the company has rented over five million textbooks to students since it was founded in 2007 and claims at least one active user on 7,000 of the 8,000 U.S. college campuses. "People don't want to own the majority of the textbooks," said Mr. Rosensweig, a former chief operating officer of Yahoo Inc. who took over the company in February 2010. "You are seeing technology enabling greater efficiency." Other companies have caught on to the idea. Chegg faces growing competition from other start-ups as well as established players like Barnes & Noble Inc. Rent the Runway, a New York start-up founded in 2009 by two Harvard Business School graduates, lets women rent dresses and accessories from famous fashion designers such as Nicole Miller, Narciso Rodriguez and Vera Wang for a fraction of what it would cost to buy. "People are using it as a way to test drive aspirational brands," said co-founder and Chief Executive Jennifer Hyman. For $50 to $350, a woman can rent a designer dress for four nights. The dresses are shipped directly to the customer and dry cleaning and return shipping are included in the price. Women also get a backup dress in a different size shipped to reduce the risk of a bad fit. Damage insurance costs $5, but if a dress is damaged beyond repair the renter must pay the full retail price, which could be anywhere from $300 to $3,000 or more. Erin Malone-Smolla, a 22-year old student at Duke University, recently used the service when she was looking for something chic to wear to her boyfriend's formal. She ordered a silver Nicole Miller dress for $50, which retailed for more than $600, and ended up using the backup size. "It's really great because you can look nice for an event," she said. "It adds diversity to your wardrobe on a college budget." The risk for Rent the Runway is that fashion changes quickly, and there is no guarantee the company will be able to rent out its dresses often enough to cover their cost. Last month the company raised another $15 million. It plans to use the funds to open new warehouses and develop a more sophisticated inventory and reservation system. Write to Spence E. Ante at spencer.ante@wsj.com online.wsj.com