Sharing, gift cultures and reciprocity are as old as human civilisations and possibly as old as human species – even without a smartphone! But since we have the latter, things have started changing dramatically. We have not become much more generous all of a sudden. But the number of opportunities to share has dramatically increased – thanks to the work of clever innovators.
The sharing economy is an important trend following the invention of the world wide web.
Like web 1.0, the early sharing economy ideas have not unleashed the full potential of the idea. As was web 2.0, the sharing economy (call it 2.0) is an exciting rebirth of this socio-economic trend that plays an increasing role in people’s life and present so many innovation ideas.
Join me for a journey through the exiting examples of the sharing economy 2.0.
At TedxSydney (2010) Rachel Botsman, the author of the book “The Rise Of Collaborative Consumption” famously asked, “How many of you own a power drill?” Nearly everyone raised their hand. “That power drill will be used around 12 to 15 minutes in its entire lifetime,” Botsman continued with mock exasperation. “It’s kind of ridiculous, isn’t it? Because what you need is the hole, not the drill.”
Her question describes the premise of the original sharing economy well (though next time I will put this into context). With this, the power drill (and durable goods more broadly) were the first hero of the sharing economy. The Great Recession of 2008 and real lower wages seemed to make this a compelling argument. But many start-ups that have embarked on these ideas in various forms and flavours are not around any longer: Ecomodo, Crowd Rent, Share Some Sugar, Thingloop, OhSoWe and SnapGoods.
In 2015 then, FastCompany noted the death of the original sharing economy. The idea though has survived and spread to many other areas. I will cover a lot of areas and clarify what is part of the sharing economy and what is not.
Durable and consumer goods
Durable goods were among the first applications of the sharing economy. Items used only occasionally, such as tools, appliances, gardening or leisure equipment are ideal.
Probably the closest you can get to the original ideas of the sharing economy are platforms like Peerby. They allow to borrow/loan everyday items to people in your neighbourhood for free(!). There are no fees involved, neither to the platform nor between participants. With that, it is a trust-based system. Obviously, it relies on capturing both parties’ address as well as phone numbers, Facebook account, thus some sort of minimal identification requirements.
It is a peer-to-peer platform to give temporary access to goods. You couldn’t get much closer to the original sharing economy idea. But the truth is that there are only a few of these platforms and they are not of massive scale. Many have tried similar approaches and not been successful
Bicycles may well be the secret hero of the sharing economy 2.0. They are probably the most shared item (at least looking from the number of companies that have emerged). But consider the difference between people sharing infrequently used tools and sharing bicycles. Basically, all bike sharing companies own the asset. As with tools and other items, these are shared among peers.
Distribution models can also differ. The early bike sharing companies have a number of pick-up/drop-off points in town. Some of the newer bike sharing companies allow pick-up and drop-off anywhere. Both models have their pro and cons which I will cover in the next article.
Anything that you may need on the go, from battery packs to umbrellas, you will likely find a platform for it. These are not peer-to-peer and like bicycles (also an on-the-go item) owned by the company and rented temporarily the consumer. In the below examples the items are to be collected at a dispensing station.
As you have seen, asset ownership model and the distribution model are two important variables to play with in your innovation ideas.
Non sharing economy examples
I am excluding a number of ideas from the sharing economy. But that doesn’t mean these things are not a great idea in themselves. Examples:
- Ebay is a great platform business model (examples here) with lots of second-hand stuff on Ebay. But second-hand is definitely not part of the sharing economy. It’s often a one-off ownership transfer rather than providing temporary access (thus enabling a continuous re-usage of the same item). Ebay also hosts lots of small and large firms that sell online to consumers.
- Rockbox is also a great idea that loans jewellery to subscribers for a recurring fee. The subscriber receives regularly new jewellery and returns the previous items. This falls clearly under the subscription business model
Car sharing / ride sharing (ride hailing)
Let’s continue our journey to a hotly debated area: sharing of cars and rides. Uber has not seen themselves as part of the sharing economy. But most sources do count them in. But before we get lost in this (less-fruitful) discussion lets look at various options of car and ride sharing.
- Turo: Turo is a car sharing company that allows direct peer-to-peer renting of cars for one or more days. It is also being called the “Airbnb for cars” in that the shared asset is being used by the renter without the owner’s further involvement (unlike Uber or other ride sharing companies). The platform connects car owners with car renters and thus compares to rental car companies. The Washington Post reports that incumbent car rental companies are as worried about this trend as taxi companies are about Uber.
- Zipcar is also a car sharing company. But the key difference to Turo is that Zipcar owns (or leases) their cars. They have a fixed parking spot for each car and allow rental duration from one hour. Zipcars are in clusters close to the targeted customer segments, e.g. students. Instead of being in one large car park at the airport, Zipcars are scattered on various roads close to a university campus as an example. Most transactions (booking, picking-up, returning, opening, fuelling, minor maintenance, cleaning) are conducted by the car renter. In return, the costs are much lower than traditional rental cars.
Ride sharing can come in different ways as well.
- BlaBlaCar: Is a true car pooling company. The driver is travelling in the same direction as riders. It is used only for inter-city trips, i.e. rides taking a few hours or more. Trips are announced with a few days notice so that riders can book a convenient ride. This is probably as close as you can get to the original idea of the sharing economy from a single ride perspective. We can be certain that the trips are not for commercial reasons as there is no profit for the driver if you check fares. It reduces their fuel bill.
- UberPool and LyftLine are also examples for car pooling. They combine different people headed in the same direction into the same ride. The difference to a puristic car pooling (such as Blablacar) is that UberPool and LyftLines are doing the rides for the purpose of making money and are not headed in that direction. They will do several rides on that day and compete with taxis and other public transport as well as rental cars.
But what about the “standard” Uber ride, i.e. UberX?
They do not fit into the narrow definition of the sharing economy. That is because some consider it as a pure service offering rather than sharing the car (as in Turo) or at least the ride to the same destination (as in BlaBlaCar). Looking from an individual ride, UberX is undoubtedly not part of the sharing economy (not even in the wider understanding). However, on the aggregate level the assessment could be different.
Regardless which way you measure, it seems cars are parked roughly 95% of the time. Add to this the fact that it costs an average of $8,558 per year to own a car in the U.S. Peter Cohen, et al. found an estimated consumer surplus for UberX users of $6.8 for the US in 2015 alone. With a wider penetration of services like UberX, you can argue that on aggregate there is a sharing effect. Having alternatives like UberX and especially UberPool (because it is priced at a point where the daily commute to work is not prohibitive) can avoid some consumer from buying a car or at least delaying for a considerable period. From this angle it could well be seen as a sharing of underutilised assets.
It is not my aim to argue that Uber is part of the sharing economy or not. I want to just sharpen your views for these kind of considerations. The gig-economy is a related phenomenon (coming with a negative notion). And Uber is its poster child. The sharing economy as well as the gig-economy trends require clarification on legislative and social dimensions (more another time).
Uber’s business model & strategy
Learn all about Uber’s business model in my various articles:
Real estate, space and Accommodation
Real estate can be shared in various forms. Airbnb is the most-known representative but by far not the only one.
Different platforms allow sharing of:
- Office space
- Parking space
- Storage space
- Leisure space
- Accommodation: rooms, units, homes
Here are just a few examples.
Sharedesk is “On-demand workspace, when you need it. Book a coworking space, business center, or shared office space nearby. Discover spaces to rent by the hour, day, or month.”
Spacer is an online marketplace for sharing storage and parking. If you look closer, you will see many commercial (and semi-commercial) offers. I.e. it is peer-to-peer (P2P) but also a lot of business-to-customer (B2C) via an online marketplace.
I have covered Airbnb extensively in previous articles:
Durable and consumer good are the first things that come in mind as objects of the sharing economy 1.0. Car and accommodation sharing are the most widely known due to the massive success of Airbnb and Uber. But there are many intriguing examples covering non-tangible items, such as education, services & skills, finances, media. Many overlook these categories, others don’t believe that these can be part of the sharing economy.
Let’s continue our journey with one example that clearly demonstrates the opposite. There is no doubt that the Khan Academy is part of the sharing economy. Once we agree on that we can continue our journey.
The Khan Academy is truly a sharing platform. They have a large and growing video library of lessons on all sorts of subjects from maths, physics, chemistry, biology, humanities, economics and lots more. It is best explained in their own words:
“For free. For everyone. Forever.
No ads, no subscriptions. We are a not‑for‑profit because we believe in a free, world-class education for anyone, anywhere. We rely on our community of thousands of volunteers and donors. Learn more about getting involved today.
Our mission is to provide a free, world-class education to anyone, anywhere.”
Take from this that sharing economy platforms can be not-for-profit and mission-driven. And they can feature non-tangibles. Three more important attributes!
How this can scale up is demonstrated by the numbers.
- Has delivered over one billion lessons worldwide
- Used by 40 million students and two million teachers every month
- Revenue: US$33 million (2015)
- 150 Employees (2018)
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There are millions of web pages also offering free educational content. They too could be seen as education sharing. Our own pages are one of these!
Let’s compare this to a different platform in the education sector. StudentVIP in Australia focuses on students as their customer segment. It connects several types of actors to each other for various purposes:
- A marketplace for sales of second hand textbooks
- A tutoring marketplace: connecting more advanced peers to peers as well as experienced tutors to students
- A marketplace for sharing of notes on subjects for a fee (the notes are specific to the respective university and subject at the uni!)
- A notice board for upcoming (paid and free) student/uni events
There are interesting items in this list with the sharing of student notes for a specific subject being the closest to the idea of the sharing economy. And there are some great samples (here one on anatomy check out the preview). I wish we would have had a portal like this for my subjects, instead of randomly seeking for these things and often ending up compiling one myself.
- P2PU (or Peer 2 Peer University) is an online and in-person, non-profit open learning community. Users can organise or just participate in courses and study groups to learn about specific topics. Definitely a sharing economy platform
- Skillshare, Coursera and others are more commercial platforms that offer some free and premium (=paid) access to the material
Services and skills
The field of personal services is a contentious one. Many of the examples in this field are also described as gig-economy.
TaskRabbit connects “taskers” (previously “rabbits”) to those needing someone to do DIY jobs around the house or to run errands. TaskRabbit states that taskers are vetted and rated, i.e. reducing risk. The list of jobs is long and covers handyman jobs, moving/packing, furniture assembly, garden work and more.
Previously, taskers would bid for any posted job. But in 2014, they changed to a system whereby the taskers would post their minimum rate for a given type of job. A job poster gets matched with the eligible taskers and the first tasker accepting a job gets it. Notably, TaskRabbit was acquired by Ikea in 2017.
Are TaskRabbit or similar gig-economy platforms part of the sharing economy? Only in the very wide sense.
Other service sharing platforms:
- Freelancers (=service providers) post their services along with completed projects/portfolios for each service
- Services are computer-based
- Typically freelancers have 1-10 services of which some are customisable and starting at $5
- Service seekers choose from the listed services. Where required, they can ask the service provider for more customisation
- Projects are typically simple
- Like Fiverr, this is also a platform for computer-based projects but for more complex projects
- The starting point is not the service providers’ portfolio but the service seekers project brief
- This allows for more complex and customised projects than Fiverr
- The platform has built-in features such as payment on milestones, clear definition of milestones, arbitration and escrow features
- As all platforms, these are review and ratings based
- A freelancer hiring platform for computer-based work (from web designer, developer to consultant) connecting businesses and professionals
- It allows for interviews, recording of timesheets and takes screenshots during the work
- Targets small businesses as well as enterprises as their customer segment
Fiverr & Freelancer have a peer-to-peer character. Those seeking services on these platforms would typically be individuals or small business owners in the start-up phase. By the wider definitions that don’t exclude gig-economy work from the sharing economy per se, TaskRabbit, Freelancer and Fiverr could be sharing economy platforms. Upwork on the other side is more an online labour hire platform (though the service providers are still seen as freelancers rather than contractors which is an important distinction to labour hire).
Let’s enter the miraculous world of finance and money. There are a number types of sharing economy financial platforms:
- Peer-to-peer lending
- Peer-to-peer / crowd funding
- Peer-to-peer insurance
- Crypto currencies (excluded)
LendingClub connects borrowers with lenders (called investors). It returns interests to investors of 4-6% per annum which is higher than normal term deposits or the risk-free rate of the US 10-year treasury bond. Risk exposure to any individual borrower is low by splitting each loan into small fractions (of as small as $25 notes). Each loan is assessed for its risk and returns are adjusted for risk (see S-3 form filed with the SEC, pages 48-50). LendingClub only lends to credit scores of 660 and above (i.e. excludes subprime).
Firstly, let’s ask what is the difference between Lending Club and traditional banks? The risk on borrower default sits in these cases with the lender. In many developed countries, normal bank deposits are covered by a government-backed deposit insurance (e.g. in the US the FDIC) to reduce the risk of bank runs. Lending Club investments are not covered by this insurance (only cash holdings are but they don’t get any return and are put into a trust account). The other big difference is that Lending Club cannot create money to the tune of the fractional reserve banking ratios.
Despite these differences, which make lending club indeed more peer-to-peer than traditional banks, I wouldn’t consider Lending Club as part of the sharing economy. There is as such no interaction between the peers and the primary purpose of lending is to seek returns.
But a lending platform can definitely be a sharing economy platform. Meet Kiva!
This is a not-for-profit organisation which doesn’t take cuts of the borrowed money and aims to facilitate credits for borrowers with less means. There is a stated ambition to means-test recipients. Loan requests have different purposes including using it for micro businesses. The risk assessment and underwriting process are not as regulated as you would find in developed countries.
Here is what Kiva says: “Partner loans are facilitated by local nonprofits or lending institutions, which approve the borrower’s loan request. Kiva does due diligence and ongoing monitoring for each of these Field Partners. Direct loans are approved through “social underwriting,” where trustworthiness is determined by friends and family lending a portion of the loan request, or by a Kiva approved Trustee vouching for the borrower.“
Here are the key differences to platforms like Lending Club:
- It matches individuals with each other. As a lender you know who you give money to and accept total loss of your principal
- And not only that you don’t receive any interest to compensate for your risk. With this, it is clear that the motivation is to support and (drumroll) share!
Take from this that the purpose for which you engage in a sharing economy platform is an important dimension.
Other finance platforms
- Peer-to-peer / crowd funding
- Kickstarter: is a crowd funding platform focusing on “Art, Comics, Crafts, Dance, Design, Fashion, Film & Video, Food, Games, Journalism, Music, Photography, Publishing, Technology, and Theater.” Their mission is: “Kickstarter is a community of people committed to bringing creative projects to life.” One of their rules states clearly: “Projects can’t offer equity. Investment is not permitted on Kickstarter. Projects can’t offer incentives like equity, revenue sharing, or investment opportunities.” The most common contribution is $25 per backer aiming to democratise the funding process and have an alternative to the typical wealthy patronage (“gatekeeper”) tradition typical for some of these areas
- gofundme: And of course there are many other crowd funding platforms of every shape and form. One of them is gofundme that allows people to raise funding for any purpose. Their top categories are medical, memorial, charity
- Peer-to-peer insurance
- Teambrella: Insurance Business describes this P2P insurance platform as “A more recent development in peer-to-peer insurance moves even further towards pure mutual insurance models and aims at acting as a complete substitute for an insurance company. For example, as a truly peer-to-peer solution, Teambrella promises direct coverage from teammates by forming self-governing consumer communities. Each community determines its own rules and is self-responsible for approving or denying claims.”
Another example that gets frequently mentioned as sharing economy example is Netflix. But it actually is not a sharing economy example. Netflix is an on-demand subscription business model. It is also not a pay-per-use business model (which is another often-repeated misnomer). You can watch 24/7 or nothing at all. The bill will be the same for you so long you had subscribed for that month. Digital media can be used by millions at the same time or by one person (as can any TV or radio program). That does not make it a sharing economy example.
Same applies to Spotify, iTunes, Google Play and similar platforms. They are a different distribution channel than the brick-and-mortar retail channel. But they are not a sharing economy platform. Nevermind, they all are super-exciting innovations!
But digital media can well be used as a medium of the sharing economy. The videos of the Khan Academy are an excellent example. Another great example are the economy education videos of the Marginal Revolution University.
I hope you have found a few things you were not aware of. But this is by far not an exhaustive listing of all sharing economy or related platforms.
Here are a few more:
- Medical / health
- Crowdmed allows patients to submit their case online and get help from the “wisdom of (medical practitioning) crowds”
- Cohealo “Cohealo’s cloud-based platform, supporting logistics capabilities, and analytics enable health systems to manage equipment centrally and make it available across all facilities – on-demand.” This is a service company that helps utilise medical equipment more efficiently
- Gridmates “Gridmates enables the giving of energy. Anyone can donate for energy and help improve the lives of people who cannot afford to pay for heating, cooling, lighting, cooking, etc. Gridmates converts your dollar to energy.” You can select the cause that you want to donate energy for
- Fon “We pioneered residential WiFi sharing over a decade ago, and now we manage a network of over 21 million hotspots worldwide. We are experts in keeping people seamlessly connected by aggregating residential and prime public WiFi footprints, as well as facilitating interconnection between WiFi networks.“
- Mealsharing works in three steps: “(1) EXPLORE: Search for home cooked meals while you travel or right in your own community (2) BOOK: Hosts will set a day, time and price for the meal. If you are loving the host and their menu, then book the meal and pay through the website (3) EAT: Now all you have to do is show up at your host’s home, eat great food, and meet new people.” Yes, it is Airbnb for meals
- Sharecity “With planetary urbanization fast approaching there is growing clarity regarding the unsustainability of cities, not least with respect to food consumption. Sharing, including food sharing, is increasingly being identified as one transformative mechanism for sustainable cities: reducing consumption; conserving resources, preventing waste and providing new forms of socio-economic relations.“
- You can find a few more types of sharing on Wikipedia but note that not all of the listed categories can be considered part of the sharing economy
Sharing in cities
The sharing economy principles are a opportunity for cities. I am citing from an interesting paper (pdf) of the World Economic Forum:
“The sharing economy has virtually disrupted all sectors, creating a multitude of platform-based marketplaces that connect individuals, enterprises and communities at a peer-to-peer level. The sharing economy is making cities redefine land-use strategies, minimize their costs, optimize public assets and collaborate with other actors (for-profits, nonprofits, social enterprises, communities and other cities) in developing policies and frameworks that encourage continued innovation in this area.
What are city governments sharing?
Like individual sharing practices, cities can also leverage the potential of the sharing economy in municipal goods, municipal spaces, civic assets, municipal services and skills and talent of city residents such as:
1. Municipal goods. City-owned equipment, machinery, vehicles and other goods can be shared among departments or with neighbouring municipalities. Munirent is one example of a company that facilitates equipment sharing within and between governments
2. Municipal spaces and civic assets. These include civic amenities or spaces such as gardens, subways, cityrun schools, hospitals and libraries, and city recreational centres. Idle capacity in municipal spaces can be used for urban farming, pop-up shops, parking and start-up hubs, supporting local business and culture. For example, Seoul operates a websitevii to reserve sports facilities, lecture halls and meeting rooms for educational and cultural events.
3. Municipal services. Municipal governments in many areas have collaborative agreements to facilitate providing services to the citizens they serve, and have been working together in this way since long before the sharing economy.
4. Municipal residents. Municipalities can organize the sharing of residents’ skills, talent and professional experience to fill a short-term need in a specific area or subject. In Seoul, for example, the “My Real Trip” platform connects tourists with local guides. Also popular is municipal time-banking, in which citizens give up their time for tasks of public interest to the city and are given access to civic resources.”
I have covered the sharing economy in great detail over many articles. The figure gives an overview. Here is a quick link collection:
- Business models:
- The platform business model is the business model used by practically all sharing platforms. But not all who use a platform business model are considered a sharing platform (e.g. Expedia, TripAdvisor, Google, Facebook, etc). This is a comprehensive guide to this business model
- Sharing economy based business models: this is an article on the specifics of the platform business model applied onto sharing platforms
- The impacts:
- Can sharing platforms self-regulate? An important question that will have significant impact on the trajectory of sharing platforms (especially the major ones): if they can’t participate in the discussion constructively chances are they will be hit with heavy-handed regulations
- Utopia or Dystopia? The social impacts, risks and opportunities are what drives the necessity for regulation. Understanding this fundamental layer will help widen your horizon and the discussions