Why the next Airbnb won't be the next Airbnb
Google “collaborative economy” and you’ll get 139 million hits. That’s no surprise as well-known platforms like Uber and Airbnb have millions of users but they’re only a part of an overall marketplace that includes thousands of companies.
Along with collaborative economy, many terms have been coined to describe the sharing of goods and services among individuals. Shared consumption, gig economy, peer-to-peer, access markets, and barter all attempt to describe a transaction where consumers get what they want from individuals rather than businesses. I like this definition:
“An economic system of decentralized networks and marketplaces that unlock the value of underused assets by matching needs and haves, in ways that bypass traditional institutions.” --Rachel Botsman, Pieter van de Glind and Mia de Villa
Some would argue collaborative economy and other terms are incorrect. Giana Eckhardt and Fleura Bardhi in Harvard Business Review said the proper term should be “access markets” since the participants don’t know each other, the exchange usually involves money, and is facilitated by an intermediary…or online marketplace.
While new terms and the markets that facilitate transactions have emerged in recent years, the concept of sharing has been around for generations in the form of barter, farm co-ops, and communities helping each other. In generations past, the ability to share was limited by geography and communications.
The rise of the sharing economy was probably inevitable. Altimeter Group chalked it up to factors like rising population density, consumer desire to gain financial flexibility, the acceptance of access over ownership along with social networks and technology that easily connect capacity with demand.
Consumers have certainly demonstrated a huge appetite to try new services. Airbnb tallied 155 million guest nights, 22% more than Hilton, in 2014. Uber operates in hundreds of cities and has a market cap bigger than many airlines. Perhaps the success of these services is a reflection of the fact that many consumers now view ownership as a burden, 43% in a PwC study.
The sharing economy isn’t only about large scale operations. TaskRabbit, while large, is very much a micro business as the platform is decentralized and connects locals. I believe that for consumers, the evolution of the shared economy will be a little like the evolution of media, with growing choices tailored to particular interests. The large scale operations will be chipped away at by competitors who offer similar services but to a specific market segment. Or, the major players will see the writing on the wall and diversify to speak to an array of interests.
The technology facilitates not only access but also specificity and that may be key going forward. Think about MySpace and Facebook. MySpace was first and took a shotgun approach, open to everyone. Facebook was next and invited college students only. Facebook’s specificity and exclusivity fueled user interest and allowed it to flourish while MySpace’s wide open strategy failed. In the years since, as Facebook opened up broadly, the consumer evolution continued as younger people migrated away from Facebook and onto other social media forms better aligned with their interests.
“The sharing economy isn’t only about large scale operations. And I believe that for consumers, the evolution of the shared economy will be a little like the evolution of media with growing choices tailored to particular interests.”
Is Airbnb putting hotels out of business? Absolutely, not. Is Uber putting taxi cabs out of business. It's on its way. Are these models upending traditional markets, signaling a major shift in consumer behavior? Unequivocally. Clearly, these models are having a profound impact on established businesses. If your existing business is under threat from the shared marketplace, these elements should be part of your strategy conversation:
- Refresh your understanding of your existing business.
- Who is your most important customer segment now?
- If it’s older people, you may not be threatened as much. In the long run, you'll still need to attract younger consumers. Now might be a good time to consider how.
- If you cater specifically to younger consumers and you aren’t leveraging a sharing platform, are you giving them an incentive to stay?
- What is your value proposition to those customers? How do they see it?
- Which customers are turning away? Why?
- Are there under-served but valuable segments within your customer base?
- Understand the evolving competitive landscape.
- Which competitive offerings are most appealing to your customers? Why?
- How is the competition positioning to your target consumers?
- If you were competing with you, how would you do it?
- Reshape (or reinforce) your value proposition to your target customers.
- What are your organization’s unique capabilities? How can you line those up in new ways to serve your most important consumers?
- What are the most common customer concerns about your existing offering? How can you address those in visible ways? Fix it. And show them.
- Use every customer touch point as an opportunity to deliver value, show appreciation, and build on why they buy from you.
- How can you incorporate a shared model into your business?
On the other hand, if you’re looking to start a crowd company, here are a few elements that should be part of your strategy conversation. Let’s assume that you’ve already got a product concept and a solid idea how you will bring it to market.
- Fully understand the market you’re considering.
- Do the market mapping to place competition and consumers relative to each other.
- What’s the current narrative? How will you change it?
- Since you can’t own or control inventory or delivery of services, how will you build supply?
- Do the marketing work now.
- Consumer segmentation
- Define your target consumers in detail. Who they are, what they do, why they buy, what they buy now, why they would buy from you.
- Position your offering to your target consumers.
- Differentiate. With more than 9,000 new companies in the space and as Jeremiah Owyang put it, “Too many startups doing the same damn thing,” you need to offer something unique.
- Define the capabilities and resources you need to compete effectively. Consider how you’ll get them. Clearly articulate what skills your team brings to the business. What sort of relationships or affiliations can help you accelerate progress to market?
- Create a testable prototype. Proof of concept or market test can deliver important learning and also serve to attract talent and investors. How can you test your business before attempting to scale?
Answering these questions is by no means a guarantee of success, but it starts companies down the right path. And, as mentioned earlier, there are going to be many more paths based on consumers' interests.
The sharing economy connects individuals around their specific interests. Here’s one company leveraging that capability. Advntur is a new online platform that connects sports enthusiasts for lodging, equipment, and guidance. It’s sort of like a marriage of Airbnb, equipment rental, and tour guide but with the option to customize the transaction. While many platforms facilitate transactions, a big difference for Advntur is that they facilitate shared experiences. They differentiate as an athlete-to-athlete travel marketplace.
“Consumers who use sharing economy business models are often more comfortable with transactions that involve deeper social interactions than traditional methods of exchange…” -- PwC study
The business platforms most likely to succeed going forward are the ones that build those consumer connections particularly for transactions that last longer than a cab ride. The next Airbnb may not be the next Airbnb, after all. With their recent announcement, Airbnb is evolving as well.
Mike Irwin is an advisor, mentor, operator, and strategist. Drawing from his past as a startup co-founder/President, executive officer of a $1+ billion market cap company (WD-40), public company CFO, VP Marketing, global chief strategy officer, head of sales, and board member, Mike uses his diverse background to help companies grow sales, improve profitability, and scale up. He serves as an advisor, consultant, fractional or interim CEO/GM/MD, and on boards of directors. Follow him at BottleRocketAdvisors.com, get in touch at firstname.lastname@example.org or connect on LinkedIn.