The Rise of the Sharing Economy
by Erica Swallow
Collaborative consumption, peer-topeer marketplaces, the sharing economy — it‘s been called a few names by now, but no one is denying that the idea of accessing rather than owning is controversial — and it‘s taking the Internet by storm. Peer-to-peer marketplaces, of which Airbnb is the beloved poster child, have been popping up for the past few years, but 2011 was an explosive year for the sector. Whether you wanted to borrow or rent someone‘s apartment, bike, car, parking spot or random household good, you could find a marketplace to do it. This is only the beginning, though; 2012 looks to be a promising year for those involved with the sharing economy. Super angel Ron Conway recently identified it as 2012′s hot area for angel investment in The Economist. And Fast Company deemed 2012 the ―year of peer-to-peer accommodations,‖ thanks to the emergence of Airbnb clones that hinged off of the company‘s outstanding growth. Collaborative consumption services are getting a lot of attention, yes, but I couldn‘t help but notice that only a small percentage of my contacts — even my super techie friends — have tried any of them. So, what gives?
On a mission to understand what motivates users to participate in the sharing economy, and eager to learn how we can take this idea mainstream, I interviewed a number of users and founders behind some of the most buzzed about peer-to-peer marketplaces. Read on to see what they had to say about the current state and future potential of the space.
It’s All About Value
The common theme across every interview I held is that collaborative consumption is, for the most part, about value. While there are a number of non-financial reasons for participating in the sharing economy, most of the people I spoke with agreed that the number one driver is cost savings.
Real estate expert Roberto Gonzalez says Airbnb is a ―better and much more profitable way‖ to rent out his extra bedroom than the old Craigslist go-to. Citing Airbnb as his favorite website ever, Gonzalez uses it as a pillar of his popular Skillshare class on ―How To Live RentFree in NYC.‖ He‘s definitely on to something — Airbnb hosts in New York City make an average of $21,000 annually through the system, according to Airbnb CEO Brian Chesky. Knodes and SnapGoods founder Ron J. Williams advises other startup founders to focus on value when marketing peer-to-peer marketplaces, something he says he would prioritize more if he were to launch SnapGoods again. ―[Peer-to-peer marketplaces] are not driven by the ethos of sharing, but by the fact that people are making real money,‖ he says, cautioning startup founders from pushing the hippy-dippy movement message. ―Most people are talking about this as a movement, but most people don‘t care about movements. They care about convenience — people use ZipCar because it‘s convenient.‖ For those renting out their cars on WhipCar, ―it‘s less about needing the money and more about being smart with what you own,‖ says marketing director Jonathan Clark. ―Collaborative consumption is common sense. A car can cost almost £7,000 a year to run, and the majority of car owners don‘t drive their car every day. WhipCar enables them to earn money during this idletime — it‘s even possible to totally offset the cost of owning a car by renting it to neighbors when it‘s not being used.‖
Renting vs. Borrowing
While it‘s called the ―sharing economy,‖ not everything is free. Some peer-to-peer marketplaces are transaction-based, while others only encourage sharing free-of-charge. It seems the exchange of money has an effect on the culture that forms around a site. Photographer and videographer Adrian Manzano is a power user of a number of peer-to-peer marketplaces, including SnapGoods, Couchsurfing, Airbnb and Craigslist. He offered his thoughts about the differences in cultures between Couchsurfing and Airbnb: ―People on Couchsurfing tend to be very open-minded, hippy, free, Burning Man type of people. With Airbnb, you get more ‗regular‘ people, just looking to make a buck or save a buck. So, ‗normal,‘ whatever normal means.‖ The collaborative consumption space is young, though, so we‘ll have to wait and see whether the cultural differences between transaction-based and borrowing-based marketplaces survive.
Fostering a Lifestyle
Will Dennis, founder of peer-to-peer bike rental marketplace Spinlister, says that he sees ―collaborative consumption in the long term as the most efficient way to get what you want when you want it.‖ It is a shift in consumer behavior brought about by the emergence of social networks and real identity online. ―The social web results in trust, access to what you need quickly, and in the long run, a more authentic and interesting experience,‖ he says. While all of these peer-to-peer marketplaces offer a more convenient way to share goods and services, the problem is that they don‘t currently communicate with each other.
If you want to book a trip on Orbitz, you can browse hotels, flights, car rentals and activities all in one place. With the current peer-to-peer markets, though, the experience between one type of good and another is fragmented. If you want to rent a car, you go to GetAround or RelayRides; for apartments you have Airbnb and Wimdu; for others‘ goods, you can try SnapGoods or NeighborGoods. Wow, that‘s a lot of work, right? Launching this week, Uniiverse is a new collaborative consumption platform attempting to solve the fragmentation problem. Calling itself ―the world‘s marketplace for collaborative living,‖ it aims to be the place you go for any of your peer-to-peer needs. In Uniiverse‘s words, ―Users can share their interests, resources, time, space, skills and knowledge in real life – for free, or to make a little bit of money.‖ McGill University student and Uniiverse user Stéphanie Domagalski says Uniiverse helps her live on a tight budget and has improved her life. ―I can make money, doing things I enjoy. I‘ve met awesome people. I can borrow things instead of buying them,‖ she says. ―I‘m connecting to my community, enjoying what my city has to offer, sharing my passions, and I feel like I‘m making a difference.‖
One Neighborhood at a Time
One of the difficulties of kickstarting some of these peer-to-peer marketplaces is the fact that, in some cases, you need an entire community to be on board for the idea to work.
Park Circa, for example, is a private network of micro-shared parking spaces. Co-founder Chadwick Meyer says that for its relaunch, the Park Circa will target neighborhoods one by one to get entire localities signed up. ―As we build up enough inventory, we‘ll then have a launch party in that neighborhood to release it,‖ he says. Entrepreneurs looking to enter the collaborative consumption space, take note — if you don‘t have users living nearby each other, it‘s simply not going to work. Plan accordingly.
The Trust Factor
For those building peer-to-peer marketplaces, one of the biggest pain points is figuring out how to communicate trust between users — Airbnb experienced a number of PR setbacks in that area last year, and therefore launched a Trust & Safety Center, which included a $50,000 host insurance guarantee.
Sites like Airbnb and homeswapping site Love Home Swap have focused on integrating a user‘s social graph in order to better confirm identity and convey trust to users. Through Airbnb‘s Social Connection feature or Love Home Swap‘s Social Circle feature, users can rent or swap homes with people from their personal networks. This same functionality is also available through both company‘s Facebook apps. Startup TrustCloud aims to empower the social economy by developing a portable reputation system for the Internet. The company calculates a user‘s reliability, consistency and responsiveness by measuring his social presence across other sites, including Twitter, Facebook and LinkedIn.
Love Home Swap founder Debbie Wosskow says that her startup will be taking peer-to-peer marketplace trust to the next level soon. Love Home Swap has teamed up with British insurance market Lloyd‘s to develop bespoke home and travel insurance for site users. A product that covers the full costs of a host‘s home, as well as a traveler‘s flight, does not currently exist. However, Wosskow believes that the entire industry will head in this direction.
―If you own something, it owns you,‖ Manzano says. Whether collaborative consumption is truly a shift in consumer behavior or just a glitch on the radar, at the very least, it has shifted the mindsets of a small subset of our population. People have a new space in which to reallocate resources and lessen waste. Don‘t get me wrong — people have been sharing for ages now, but online peer-to-peer marketplaces are making it dead simple. ―Society is simply better when we pool our resources and skills together,‖ says Domagalski. ―There is no need for the pursuit of more when everything we need is all around us.‖