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Trust, Convenience, and Millennials: The Collaborative Economy

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In this chapter from The Social Business Imperative, Clara Shih examines the collaborative (or more accurately, sharing) economy, how it digitally connects on-demand labor with consumers, how social media factors in building trust, how the attitude of the millennial generation is transforming, business, and much more.
This chapter is from the book
  • “Give me what I want, when I want it.”
  • —Consumers everywhere

Drivers for hire. House rental this weekend. Valet service from anywhere. Ingredients for tonight’s dinner recipe delivered to your doorstep. Someone to clean your house, mow your lawn, help you move, cater your party, walk your dog, or babysit your kid RIGHT NOW. The collaborative economy is all around us, accessible via mobile apps on our smartphones through which we can hire underutilized assets (such as empty houses, idle cars, and labor) from other community members via Lyft, Uber, Airbnb, Luxe, Instacart, Thumbtack, TaskRabbit, and other real-time service marketplaces.

While collaborative economy—also known as the sharing economy (though this is somewhat of a misnomer, given that people are really “renting” rather than “sharing”), gig economy, on-demand economy, or peer-to-peer commerce—is a relatively new and trendy term, the idea of sharing or renting is nothing new. As defined by my friend Jeremiah Owyang, founder of Crowd Companies and key thought leader in this space, the collaborative economy is “an economic model where commonly available technologies enable people to get what they need from each other.” Certainly Vacation Rentals By Owner (VRBO), Craigslist, eBay, and even used clothing stores and carpools fit this description, and all of them have been around for decades.

What is new and unprecedented is the expected instant gratification and high participation rate, which have been fueled by nearly ubiquitous smartphone penetration and increased levels of online trust thanks to social networks. Mobile devices that are location aware and able to process real-time transactions have enabled widespread adoption of the collaborative economy by instantly connecting workers and consumers. There are now more than 2 billion smartphone subscribers worldwide, which means 2 billion people who can more easily than ever connect to the supply or demand side (often both) of the collaborative economy. As noted in Chapter 2, smartphones have become the remote control by which consumers can order almost anything with a tap and swipe. For on-demand workers, smartphones are the dispatcher and gig supervisor, continually collecting data on everything from GPS location to customer ratings.

Just as the Internet of Things digitally connects all physical objects, so the collaborative economy digitally connects on-demand labor with consumers. From transportation and hospitality to home improvement, dining, and child care, the collaborative economy is extending the digital last mile to traditionally offline services. The opportunities in this realm are enormous. PwC estimates the movement from traditional employment and services to collaborative, on-demand consumption is driving upward of $15 billion in annual revenues today, with this revenue stream expected to exceed $300 billion in the coming decade. Table 3.1 summarizes the top players in this market.

Table 3.1 Major Collaborative Service Categories and Providers

Category

Marketplace Companies

Transportation

Uber and Lyft are the largest and best-known ride-sharing services. Consumers can select from a traditional car service (town car or SUV), taxi, or community driver (least expensive option), and within minutes their ride will show up.

Luxe is an on-demand valet parking service, targeting urban consumers who are frustrated with having to keep circling the block in search of a parking spot.

Food and food delivery

DoorDash, Postmates, and Caviar (acquired by Square) are mobile-first delivery services that enable consumers to order from popular local restaurants and have those orders delivered typically within an hour.

Sprig, SpoonRocket, and Munchery actually make, sell, and deliver all of their own food; thus they are more like virtual restaurants.

For consumers who appreciate the convenience of delivery but want to cook themselves, Instacart and Postmates provide on-demand grocery delivery and Blue Apron delivers preportioned ingredients for seasonable recipes it formulates.

Delivery

Shyp will send an on-demand courier to pick up packages that consumers wish to send, then take care of all the packaging and shipping, including comparing rates across FedEx, UPS, and USPS.

In addition to food delivery, Postmates also provides general courier services for “anything.” Uber has also expanded into delivery and logistics.

Tasks/gigs

Thumbtack, TaskRabbit, and Handybook help connect consumers with professional services delivered in the home, such as housecleaning, home repair, painting, and dog-walking.

Hospitality

Airbnb is the leader in allowing consumers to list, discover, and book apartments, rooms, entire houses, and all kinds of unique spaces, such as castles, yerts, and treehouses. HomeAway and VRBO are more traditional listing services and do not currently handle payments.

Hotel Tonight provides consumers with great deals on last-minute hotel inventory.

Professional services

Priori, Upcounsel, and Lawdingo connect mostly small and medium business (SMB) clients looking to trim costs with experienced business lawyers for both one-off projects and ongoing legal services.

Scripted is a marketplace for businesses to find writers who will draft blog posts, email campaigns, whitepapers, and other collateral.

Upwork, Freelancer, and LinkedIn ProFinder are more generalist business professional marketplaces for everything from web and mobile development, design, and translation to accounting, legal services, and copywriting.

Doctor On Demand, MDLive, American Well, and Teladoc offer quick virtual consultations with licensed physicians.

For traditional companies, the greatest risk is losing control of the customer as the last mile goes digital and onto someone else’s mobile app. The threat isn’t disintermediation (as was a common fear with the Internet), but rather intermediation by a collaborative economy platform such as Postmates or Uber. Perhaps that is the reason why GM invested $500 million in Lyft in 2016. As we’ll discuss later in this chapter, the challenge for many product and service companies today is finding a way to stay relevant to a customer who increasingly seeks services over products and service marketplaces over service providers.

Social Networks Meet the Collaborative Economy

Social networks have provided an important foundation of online trust, which has in turn enabled the emergence of the collaborative economy. It’s easy to take for granted now, but this online trust is relatively new. In the early days of the web, users didn’t use their real names, and forums and chats were populated with fake identities prone to spamming and scamming. A New Yorker cartoon published in 1993 illustrates the state of online trust prior to Facebook, popularizing the saying, “On the Internet, nobody knows you’re a dog” (Figure 3.1).

Figure 3.1

Figure 3.1 A 1993 New Yorker cartoon underscoring the lack of trust on the Internet (Source: The New Yorker)

“Real identity” on the web, popularized by Facebook and LinkedIn’s respective real-name policies, is actually relatively new. When you deal with a Facebook-verified person on the web whom you may not know personally, you are able to (usually) rule out that you’re interacting with a fake bot or a scammer. All of the major social networks have invested tremendous resources in this area, and it has created a new level of trust online. The collaborative economy platforms are doing their part, too.

But for Facebook and LinkedIn, providing trusted online identity is just the beginning. In very different ways, both of these organizations are seeking to play an even greater role in collaborative economy transactions. As we’ll explore in greater detail in Chapter 7, Facebook Messenger’s recently introduced payment capabilities will unlock many new areas of social commerce, including on-demand transactions. I would bet that in relatively short order, Facebook will become a major clearinghouse for consumer products and on-demand services between or involving its members. Facebook Messenger has already been integrated with on-demand service companies like Uber to allow consumers to transact within the Messenger app. In the Uber case, consumers can order rides in the context of making plans with friends (Figure 3.2). The integration automatically provides an estimated wait time and arrival time to all parties involved. In China, WeChat users have been able to hail a Didi Dache taxi from within the app since 2014, though it functions more as an “app-within-an-app” rather than in context with messages.

Figure 3.2

Figure 3.2 Consumers can order a ride from Uber from within Facebook Messenger (Source: Facebook)

Professional services, by comparison, are typically not on-demand services. Instead, they often involve extensive vetting, and the services are provided over a period of weeks, months, or years rather than instantly. Upwork (formerly Elance-oDesk) and Freelancer are the leading professional services marketplaces, but LinkedIn has recently entered into the space with its new ProFinder service, which connects businesses and individuals with freelance accountants, bookkeepers, content strategists, copywriters, editors, graphic designers, and more.

LinkedIn brings important elements of trusted online reputation, such as profiles, connections in common, experience, education, endorsed skills, and recommendations, to the equation and will likely be a formidable player. ProFinder is a logical extension to LinkedIn’s existing Talent Solutions business, which enables recruiters to connect with qualified candidates generally for full-time positions. Both professional service marketplaces and transactional service marketplaces will dramatically change our economy and society.

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