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The Quick Rise of Uber and Airbnb

The growth charts are impressive indeed. Uber and Airbnb have attracted customers, suppliers, and venture capital dollars at a massive scale – but as they grow, the business models of these “sharing platforms” spark criticism from regulators as well as consumers . Many people now feel that the aggressive drive for growth of these companies comes at a cost for the societies they operate in, a trend that is clearly visible in social media commentary.

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While governments  are trying to keep pace with these new global players and are quick to ban or severely regulate their services, consumers are increasingly more discerning also. They are asking questions about service quality but also about the medium- to long-term impact on the existing infrastructure (hotels, taxis).

Clearly, these companies think big when they talk about changing the world. After its services were banned in the city of Seoul, Korea, Uber responded to the city of Seoul that  “…Seoul is in danger of remaining trapped in the past and getting left behind by the global ‘sharing economy’ movement.” Not suprisingly, a few people were quite upset by this half-baked corporate lobbying effort. Do you think your Uber driver is picking you up because he is part of a movement? Do you believe your AirBnB host would sublet if she didn’t have bills to pay?

To Big to be Trusted

Consumer trust in Uber and Airbnb is eroding. Both have grown too big to manage quality in their  supplier network according to customer expectations and are headed for a tipping point where they are not seen as innovative “sharing” platforms for a niche audience, but rather as a branded service provider that needs to meet and exceed customer expectations.  Customer experiences  get amplified on social media (last minute cancels, no-shows, and other issues, all associated with the brand name of the platform supplier), just as they would in case of major chains.

Sharing platforms tend to have trouble managing quality when they grow beyond a certain size. Background checking Uber drivers and AirBnB hosts does not scale as easily as hotel or fleet quality management. If you do the math as a Uber or AirBnB customer, you will find that the (in some cases) lower price you pay may just be a compensation for relinquishing your consumer rights. For some, this is a reason to return to their personal networks instead. When you think about it, isn’t it surprising that facebook hasn’t introduced a “find a place to stay within your network” feature? If it is done right it might be a matter of months to take down AirBnB.

At the same time, new sharing networks emerge literally by the thousands, and do so quickly. Lyft (“Hey Uber, Lyft Is Growing Faster Than You”, <http://techcrunch.com/2013/12/18/uber-lyft/) is catching up and is taken very seriously as a competitor by Uber. Other smaller networks like Knok (a European family travel network run by a couple out of Barcelona), and many others have no intention to grow – for them it is sufficient to exist. They are changing societies in the true sense of the word “movement”. Setting up a sharing network has never been easier as the technology is increasingly commoditized (no coding skills required) and that’s why the model is becoming so widespread.

The Tipping Point for Uber and Airbnb?

Looking at the factors at work in the maturing of sharing business models, Airbnb and Uber raise interesting questions about the tipping point ahead.  When is a network too big to be trusted? And what does the “trough of disillusionment” hold for Uber and AirBnB, and the sharing economy in general? Nobody can tell for sure, but most likely the old and the new will coexist in some way or another. Managing fraud and quality, however, will become increasingly relevant for Uber and Aribnb.

Therefore the challenge for Uber and AirBnB to continue to inspire trust in their customers and service providers will only get bigger. They might find ideas in unexpected places like http://www.hospitalityclub.org/, a network that lets guests and hosts rate each other and has been in existence since 2002.  A decision to work with local regulators, not against them would also help Uber and AirBnB  build a trust in a global, networked world. The first signs of appeasement are visible already. Just recently, Uber announced a platform for German Taxis to offer their services on.

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  1. Jelena Perfiljeva

    Jens, why did you post it in the personal space instead of the Business Trends? This actually qualifies as the business trend and sharing economy is indeed a hot topic.

    Jimmy Fallon made a joke about uber just a few days ago (see the clip here, uber is around minute 2 mark). I’m all for supporting the innovation as well as sharing resources, but would be a bit concerned about safety using such service. Your blog raises other valid questions.

    At the same time I believe sharing is an effective and relatively simple way to limit our environmental resource usage. For example, perhaps people wouldn’t buy as many trucks and minivans that they don’t really need on daily basis if they were easier available as a shared resource? Sure, there are car rental companies, but such vehicles are not always available and can be quite expensive to rent for other than few days a year. There is lawn and sports equipment, kitchen appliances and tools that are seldomly used and could be shared. It’s a very interesting topic indeed.

    Thank you for sharing.

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