In today’s mobile age, we’re seeing more and more businesses harnessing the power of the Internet by taking traditional services and turning them on their heads with the help of of on-demand apps and crowdsourcing. These businesses are part of what’s known as the “sharing economy”. In update episode 8 we talk about the benefits and drawbacks of on-demand services for both consumers and businesses, and how we’re all going to turn into the people from Wall-E (pictured above).
The big players
Notable examples of companies using this distributed economy include Uber (a multinational transportation service), Airbnb (a multinational room rental website) and Deliveroo (a UK based food delivery service). For consumers, arguably the biggest benefit of services like these is convenience. Right now, the power to book a taxi, book a holiday and order a three course meal for delivery is right here at my fingertips and, perhaps best of all, I don’t even need to speak to a real human in the process. As a developer who prefers to hide behind the safety of the computer screen wherever possible, that last point alone is enough to earn a big thumbs up from me!
A matchmaking service in disguise
These businesses rely on crowdsourcing in some form or another, and for new businesses, it’s an effective approach. It reduces startup costs and, compared to a traditional business, it involves less risk for each party investing in it. The “crowdsourcers” are also the suppliers of the service that the business advertises to consumers. A very simplified version of the process that generates revenue for the business goes something like this: the business provides a mobile app or website that acts as a matchmaking service between suppliers and consumers. Using this, consumers and suppliers find each other, then transactions take place. The business takes a cut of the earnings from all these transactions. Easy.
Turning the industry on its head
At first, it sounds like a win-win situation, but these on-demand businesses are causing huge amounts of distress for existing businesses the world over. You may have heard of the worldwide controversy surrounding the negative impact that Uber and Airbnb have had on existing taxi and hotel businesses respectively. In the summer of 2014, taxi drivers in London held large scale protests against Uber, dubbing it unfair competition due to its the lack of regulations. Airbnb has faced similar criticism, and until late 2014, was illegal in its home city of San Francisco. Its legality is still questionable as some homes are sneakily being converted into full-time hotels, leeching from the city’s already scarce housing market.
It’s not all fun and games for the consumer either. There have been concerns surrounding customers getting rides with Uber drivers that haven’t undergone a background check. Similarly with Airbnb, it’s impossible to regulate the service provided by its hosts and therefore an element of risk is involved. There are two-way rating systems between supplier and consumer aim to reduce these issues for both Airbnb and Uber, but does this really compare to the official regulations that bind traditional businesses?
Anyway, enough about the two giants of the sharing economy! How is this model encouraging businesses to get more creative? Listen to Update Episode 8 where we talk about some of the more interesting examples of collaborative consumption from teaching to snow ploughing, and where we think the sharing economy might be heading in the future.