June 4, 2015
2015 Will Be The Year That The Sharing Economy Grows Up
Even beyond the world of travel, it is hard to argue with the statement that 2014 was the year of the sharing economy.
From Uber’s $40 billion valuation (I apologize in advance if this number is outdated by the time you read this – it seems to go up on a nearly daily basis), to Airbnb being named Inc.’s Company of the Year, it was difficult to avoid coming across a darling of the sharing economy world no matter where you looked this past year.
Given all of the buzz, it may seem counterintuitive to argue that this year will see a dramatic shift in how the sharing economy works, and even in what it actually means, but that is indeed the case.
From the very start the sharing economy has had a “feel good” vibe about it.
In an era of increasing concerns about the environment, finding ways to better and more efficiently access underutilized assets rather than building and/or buying entirely new ones gave people the sense that they were doing good even as they did well.
This overall sense no doubt helped the sharing economy catch on quickly with a Millennial generation that prides itself on being more attuned and socially and environmentally conscious than the generations that preceded it.
Even though the space often had a bubble gum and rubber band feel to it, this was a tradeoff many Millennials were willing to make.
It certainly did not hurt that the pricing was more competitive on the buy side, and that the sell side created opportunities to earn more money in an economically perilous time.
But even as its popularity grew to ever-heightened levels with Millennials, cracks in the sharing economy façade began to show.
Regulators, no doubt urged by vested interests in established industries, began to pay unwanted attention to the space.
Not only were existing laws enforced more vigorously, but also local governments began creating entirely new rules and regulations seemingly designed with the sole purpose of punishing companies like Uber and Airbnb as well as their customers.
Things got so bad by the end of 2014 that in December Uber’s CEO was actually indicted by South Korean authorities.
I have previously argued that to succeed sharing economy companies will need to find ways to work within the legal framework, even as they push to change it.
Uber’s hiring of David Plouffe can be seen as a move in this direction. Similarly, Airbnb has started the year by working with local governments, not against them.
This is all a start, but just the start.
Here and now
Another move these companies, and the space in general will need to make as they seek to go even more mainstream, is to provide a better, more curated, and more professional experience.
2015 will be the year this starts to happen in a big way.
Early on it was enough for sharing economy companies to operate as siloed marketplaces.
They brought parties together enabling them to transact, but after that initial introduction the companies in the middle had little to do with the actual experience.
This hands off approach has led to rape allegations against Uber drivers, as well as squatters and sex parties in Airbnb units.
News of this sort is hardly likely to encourage middle class, middle aged, or Middle America to start using the sharing economy in the way that will be required to truly make the space transformative.
Fortunately the dominate players in the space are beginning to realize this, and as 2014 ended and 2015 is beginning we are seeing a shift away from the amateurism that has defined the sharing economy to date, and towards the curated professional experience that will be required going forward.
Uber has already begun an audit of its driver screenings, taking ever-greater ownership of the experience once a passenger enters an Uber vehicle.
The growing influence of Chip Conley at Airbnb speaks to the company’s shift away from a pure marketplace and towards an integrated hospitality company.
And HomeAway’s integration with Uber, Instacart, and Gogobot all speak to the company’s shift from simply serving as a listing site, to becoming more of a purveyor of experiences.
This shift will not occur overnight, and it will not be easy.
Providing online marketplaces and mobile apps is certainly very different from delivering operationally in the physical world.
What it all means
Some of the players who succeeded in the first phase of the sharing economy may find they are unable to compete in this new phase.
And entirely new players will no doubt crop up, to the detriment of incumbents, but to the benefit of consumers.
Though it will be difficult, it is a shift we have seen before.
It may be hard to remember, but in its earliest days eBay was a marketplace where soccer moms sold Beanie Babies to other soccer moms. It was a marketplace built entirely around and for amateurs.
How times change. As of today, over 80% of eBay’s revenues come from “Power Sellers,” essentially professionals using the eBay marketplace as their storefront.
Some purists may complain, and even argue that this shift is a corruption of the vision and the promise of the sharing economy. In fact, it is just the opposite.
The vision was never to provide people with inconsistent amateurism.
Rather, the point was to make better and more efficient use of underutilized assets and resources.
Operating in a one-off manner simply is not efficient. Operating at scale is.
As the sharing economy shifts with the rise of professionals in its 2.0 phase, we are not seeing a corruption of the vision, but rather the fulfillment of it.