A decade ago, no one would have believed two startups with limited capital and near non-existent assets would become billion-dollar companies. Today, companies like Uber and Airbnb are likely in every university business textbook, seen as role models to aspire to. In retrospect, this was all thanks to the sharing economy that they both gave rise to, which allowed for this quick and tremendous growth.
Today, these companies are beginning to revert their businesses to something a bit more traditional. To understand why this, we need to understand what prompted their initial success.
The consumer becomes an employee and a source of revenue
According to Investopedia, “The sharing economy is an economic model defined as a peer-to-peer (P2P) based activity of acquiring, providing, or sharing access to goods and services that is often facilitated by a community-based on-line platform.
“Sharing economies allow individuals and groups to make money from underused assets. In a sharing economy, idle assets such as parked cars and spare bedrooms can be rented out when not in use. In this way, physical assets are shared as services.”
The rise of companies like Uber and Airbnb was a real market changer, especially for aspiring startups. While not the first to truly debut the concept of the sharing economy – that was primarily thanks to eBay – they did help revolutionize it.
Essentially, their new business model allowed them to start their company in a relatively short period of time with little capital. The potential for swift expansion was similarly great, as we see these two companies rise from general unknowns to some of the largest brand names in the world.
The premise was simple. By building the technical infrastructure for their businesses, they could have consumers handle their day-to-day for them. It sounds absurd on paper and idea that would lead to all sorts of problems, but in practice was a stroke of genius that would make both companiess billion-dollar household names.
At a time when regulation regarding the sharing economy was non-existent, Uber and Airbnb were able to operate rather unrestrained, despite later issues of customer safety and privacy. In fact, the attitude at a company like Uber has long been ‘it’s better to beg forgiveness than ask permission,” who has been at direct conflict with regulators in its later years as it pushed towards aggressive expansion.
So, with barely any regulations restraining them, the two startups went ahead with their business models: Uber would offer car owners the opportunity to become pseudo-taxi drivers, using Uber’s infratructure and network, in exchange for an opportunity to make some money on the side during their day. Uber would in turn take a cut for facilitating this transaction between driver and rider.
Similarly, Airbnb would allow landlords of properties and rooms of any size to quickstart their own landlord/hotelier business in exchange for a cut of the earnings.
In essence, both companies utilized the desire of people looking to make some extra cash on the side as a selling point to bring them onboard, while simulataneously growing their own brands and reach. With little set-up required, you could be earning some extra cash besides your day job. What was there not to like?
It reached a point where renters and drivers using both services as a side business turned them into their full-time gig, eventually becoming full-time drivers/landlords, which further boosted both companies.
Eventually both companies reached the mainstream status they have today, prompting similar sharing economy startups like WeWork, Lyft and others to follow in their stead.
The shift to something more traditional
While Uber and Airbnb were seen as major disruptors of their respective fields, posing a significant risk for rivals, they have become much more similar to the companies they had aimed at disrupting, which might be inevitable after a budding startup achieves the success it so desires.
Today we hear news of Uber selling ads on its drivers’ cars, much like a New York City taxi would. However, it is still bringing its own touch to it.
“As you would expect with a data-rich company like Uber, the ad display will respond to both location and time of day.” The Verge explains. “According to Adweek, the ads will be geofenced and can also sync with other Adomni-managed displays. ‘Imagine you’re at a busy urban intersection and all the cars and billboards are showing the same ad,’ Adweek reporter Scott Nover tweeted, which is really just a harrowing thing to imagine.”
Uber is also considering owning a fleet of driverless cars, which might come as a shock for a company that prided itself on succeeding without owning a single car. They’ve also been dabbling with leasing cars to their drivers, as Fortune reports.
Airbnb has been making a similar shift in its business as well.
In an exclusive Op-Ed provided to AMEinfo, we saw how professional property management companies were getting more involved with Airbnb’s business of renting accomodation. Frank Porter, an Airbnb Management company, had announced their representation of the SOHO Residential Building in Palm Jumeirah, the first building in the UAE to be solely managed by the company under the Airbnb name.
More often, we are seeing Airbnb change from its original simple premise of ‘rent your spare room for some extra cash’ to something more corporate, and surprisingly, more similar to the traditional property market.
“What even is Airbnb anymore?,” Quartz asks, pondering on how the company has changed over the years.
“You might Airbnb a fully-serviced, multi-room vacation rental or villa, where your ‘host’ will likely be a person employed by a vacation rental management company. You could be staying in an old-school guest house or actual bed & breakfast, because Airbnb invited those to join the platform, too. And perhaps most surprisingly, you may well find yourself in the type of accommodation Airbnb originally positioned itself as the quirky, authentic alternative to: a hotel room.”
“If you can book all these things and more on Airbnb, it’s worth asking: What even is Airbnb these days?”
With scale, Airbnb’s ambition grew, and simply relying on small-time landlords renting rooms for change was never going to cut it, especially with an IPO on the horizon this year. Similarly, Uber has never been profitable during its 11 years of business, and their efforts could be seen as a push towards attaining that profitability. Uber has even dabbled with food delivery in an effort to diversify its business.
Like these businesses, the sharing economy started as a simple business idea with unparalleled potential, but it too will need to evolve if it is to continue growing. As such, the sharing economy will continue to change, growing beyond the confines of ‘rent your room’ or ‘rent your car’ into ‘rent your professionally-managed 15-story property’ and ‘lease your fleet to our drivers.’