When Brian, Joe, and Nathan rented out air mattresses on the floor of their San Francisco apartment during a conference in 2008, they never predicted that they were in the process of founding an international corporation (Econsultancy, 2016). Now, claiming over 7 million listings in over 100,000 cities and 8.2 million guest arrivals in the first 6 months of the year, we know them as Airbnb (The Guardian, 2019).
Founded in late 2008 and Uber in early 2009, it’s just over 10 years since the seeds were planted for these two startups to flourish into some of the most successful international corporations and recognizable brands today. Uber and Airbnb have many common traits, but the most common denominator being that they became leaders of the shared economy sector, transforming the way business interactions take place.
The shared economy sector has seen more than $23billion in venture capital funding since 2010, so it’s no surprise that the industry will boom to be worth a huge $335bn by 2025 (Econsultancy.com, 2017, The Balance SMB, 2019a). The simplicity of share-based transactions has allowed people from all demographics to get involved in the seamless economic model that tends to only require internet access. With 20-30% of the Western workforce based in the shared economy, and over 86.5 million users in the US by 2021 (The Balance SMB, 2019a), the shared economy model has become integrated into the way of life with total reliance on companies like Airbnb and Uber for both livelihood and services.
10 years down the line and with a combined market cap of $103 billion, (Airbnb $31 billion and Uber $72 billion) together they would rank as the 38th wealthiest country in the world (The Balance SMB, 2019a).
No one would have ever predicted that Uber would populate the planet with more Priuses and Skodas than one could ever imagine and in New York City alone there are approximately 4.5 times more Uber drivers than yellow cabs, causing the price of owning a yellow cab taxi license to plummet to less than a quarter of what one was worth four years ago (The Balance SMB, 2019a). But, can you blame us for supporting their growth? 83% of consumers say shared economy models are more affordable and a further 83% think that these models are also more convenient and efficient than traditional methods (PWC, 2015). On reflection, that is exactly what Uber promises and successfully delivers time and time again; an affordable, safe and convenient alternative to traditional cabs.
Uber reached its peak in 2018 when it saw over 48 million users and over 833,000 drivers in the US alone (The Balance SMB, 2019 b). With intent to dominate the market and confidence that they were succeeding, Uber’s initial public offering (IPO) came at the mark of 10 years since founding. Although, as one of the most anticipated public offerings of the decade, critics could not help but question Uber’s intent of only releasing their IPO at the same time as their growth rate began to slow down and their losses were at more than one billion in the first quarter of 2019 alone, suggesting desperation for some quick cash (Inc., 2019). Critics were not proven wrong as the company ended up well short of the $100 billion valuation that some expected from the IPO, only raising $8 billion (Market Watch, 2019). Yet, in spite of an embarrassing fail of the IPO, Uber still has big plans for the future; from driverless cars to ‘Uber Freight’, an app that matches carriers to shippers.It’s safe to say, that in some areas of the world Uber has become a brand the consumer of the shared economy cannot do without.
With equally large dreams for the future, Airbnb is equally not yet satisfied. In September the company floated the idea of going public for January 2020 and in November they announced that they planned to venture beyond renting home-sharing and into building new homes designed to accommodate short-term rentals (CNBC, 2018). With a bigger picture in mind, both companies had a plan which ensured their success in the shared economy sector. The 10 year takeover could not have taken place without the following 3 traits;
78% of US consumers that have experienced the shared economy acknowledge that it builds a stronger community, as the business model is reliant on trust (PWC, 2015). The company needs to trust in the consumer almost as much as the consumer would traditionally trust in the company to deliver a product. Airbnb leads by example, placing complete faith in people from all around the world who choose to rent their properties on their platform, in the hope that what they see, is what the visitor will get. Likewise, Airbnb requires the hosts to place trust in their guests, who are not known to Airbnb before their first use of the site. Accompanied by a campaign titled “Stories from the Airbnb Community” to reinforce their message, this (mainly) positive shared experience of community is more likely to make a consumer remain loyal when they think about the emotional trust based connection they developed with the company, leading them to return to Airbnb or Uber in the future.
As mentioned previously, it is widely accepted by consumers (89%) that a successful model of shared economy is based on trust (PWC, 2015). It is one thing to retain trust once a community has been built but it is another to gain it. Ratings and reviews are a fantastic way to showcase the quality of your business. Uber’s minimum requirement of 4.6 “Stars” for a driver has always assured passengers on the safety and quality of the experience that they will have, reinforced by the fact that a driver who falls below the threshold is liable for deactivation from Uber. Likewise, at Airbnb the ratings of the hosts and guests play a huge role in matching them as pairs. Airbnb have limited control over the whole customer experience and the only place they can really have an impact is through the website by ensuring the hosts and visitors are matched appropriately. This makes it crucial that they not only showcase their community well but stay responsive on their customer service platform. Both Uber and Airbnb are known to take responsibility immediately for faults from within their community; whether it be refunding a cancellation fee on Uber if a driver takes too long, or relocating a group whose host was unresponsive at time of arrival. As Uber's policy states; "Respect is a two-way street, and so is accountability”.
Shared economy creates a relationship between the company and consumer, bringing awareness to the company as a whole rather than just the product. As consumers increasingly care about what a brand represents; sustainability, functionality and inclusivity are all put under the spotlight in the shared economy. Airbnb’s recent campaign to fight discrimination within its platform (2016) reflected their values as an inclusive company, but this value goes much deeper. According to its Nondiscrimination policy, “Airbnb is, at its core, an open community dedicated to bringing the world closer together”. The entire structure of the platform challenges the conventional concept of a holiday and invites families from all socio-economic backgrounds to swap homes at whatever price point suits them. Equally, in order to tackle discrimination and show it would not be tolerated, Uber introduced the ability to deactivate a customer’s account if anti-social behaviour took place. However, only this year in 2019, Uber has finally set goals to address the lack of diversity within its company. Whilst not perfect, inclusion has allowed these companies to flourish with global support.
10 years later and there is no doubt that Uber and Airbnb have their faults, but their determination to build their vision has paid off and they continue to attract more and more consumers everyday, who feel at ease in the shared economy communities they have built.