Tag Archives: sharing economy

The sharing economy: already saving lives for a decade!

March 11, 2018 407495sg Leave a comment

Nowadays, if the sharing economy and its benefits are discussed, most will raise the matter of an increased socialisation and community growth, a greater focus on sustainability, and the improved utilitarian and cost aspects (Habib et al., 2017). However, a beneficial consequence of the sharing economy that is not discussed often enough is the actual social welfare opportunities it offers in many situations. Take as an example Uber, the ride-sharing service industry leader (MacMillan & Demos 2015). The company has been studied various times in the past in order to establish a link between its service and a decrease in motor vehicle accidents, specifically, fatalities. This relationship has recently also been successfully evaluated by Greenwood and Wattal, whose’ paper “Show Me the Way to Go Home: An Empirical Investigation of Ride-Sharing and Alcohol Related Motor Vehicle Fatalities” will be reviewed in this blog post.

What did they intend to analyse?

Overall, the researchers assessed what the exact impact is of ride-sharing services on alcohol related motor vehicle fatalities over time and the mechanics behind this specific impact. As a result, they split their research question into two hypotheses. The first was influenced by the platform theory, which states that consumers are willing to pay a premium for ride-sharing services, since customers are provided with the certainty of getting a car and knowing when this car will arrive, over the cost of searching for a random taxi and not even knowing whether they will find a taxi. Consequently, the first hypothesis was generated:

Implementation of a premium ride-sharing service will be associated with a negative and significant effect on the rate of alcohol related motor vehicle fatalities.

The second hypothesis followed the rational choice theory, where it is believed that if there is a high availability of ride-sharing vehicles, the inebriated individual might still consider their own car as a better option because the premium of the ride-sharing service is too high. In other words, the cost of hiring a driver might be too steep in their minds compared to the potential criminal cost of driving their own cars. Thus, the effect of a discounted service, which simultaneously increases the ease of use of transportation and decreases the gap between the cost of being punished for DUI and the cost of booking a driver, had to be assessed:

Implementation of a discount ride-sharing service will be associated with a negative and significant effect on the rate of alcohol related motor vehicle fatalities.

Which method was applied?

As a representation of the ride-sharing service, Greenwood and Wattal made use of information on Uber. More specifically, they analyzed Uber’s information between 2009 and 2014 in California and chose Uber X and Uber Black as representative services of a discount- (20%-30% under traditional taxi fares) and premium-service (20%-30% over traditional taxi fares), respectively. With regard to the dataset on motor vehicle fatalities, the researchers took advantage of the sources in the California Highway Patrol’s Statewide Integrated Traffic Report System (SWITRS). After combining both the Uber information with the SWITRS sources, a dataset of 12,420 observations spanning between January 2009 and September 2014 over 540 townships in the state of California, was able to be produced.

A difference in difference estimation was employed on the dataset, since it allowed for an imitation of an experimental design while using observational data, which led to the comparison of the number of fatalities changes after the application of the treatment over time.

What was found?

The results confirm that a discount ride-sharing service (e.g. Uber X) has a significant negative effect on the rate of alcohol related driving fatalities, while premium services (e.g. Uber Black) do not. Consequently, it can be determined that the cause for the decrease in DUI deaths lies in the combination of cost, availability, and ease of use, since consumers are not willing to pay a price premium. Moreover, it was found that the effect was significantly enhanced in larger cities and did not affect the overall fatalities rate. The latter finding disconfirms the common belief that by having introduced Uber and, therefore, more cars on the road, an increase in fatal accidents might have been caused.

These findings were also quantified, in order to increase the paper’s managerial relevance. It was determined that with only Uber X there was already a 3.6% to 5.6% decrease in alcohol related motor vehicle deaths per quarter in California. These percentages represent around 500 saved lives on an annual basis, which creates an additional public welfare of over $1.3 billion for Americans. Consequently, the paper truly confirms the social benefits ride-sharing services and the sharing economy in general generate.

Implications

These findings have implications for various professionals. First of all, it has direct implications for regulators and policy makers, who are currently assessing the legality of ride-sharing services. These results provide the necessary evidence of the sharing economy’s nontrivial effect, such as decreased mortality. This effect also impacts the second group of professionals, namely venture capitalists who can more easily be convinced by the idea of this social benefit and how it can be marketed. Finally, a specific group of professionals who gain a new strategic insight due to this paper’s specific results are restaurateurs, event planners, and nightlife managers. These professionals can use ride-sharing partnerships in order to promote themselves as safe environments after their clients leave their local’s inebriated. Furthermore, it is considered by many to be a sign of prestige to have a ride-sharing partnership, since it comes close to the traditional idea of a chauffeured service.

Strengths

The paper poses a considerable strength when compared to past studies that analysed the link between ride-sharing services and their negative effect on DUI scenarios. Most of these studies were considered as invalid sources of information because they either involved the ride-sharing companies in the data analysis, their studies’ methodological rigor was invalid, or did not solve the presence of cofounding factors. In contrast, Greenwood and Wattal were able to solve these different issues in their paper. A great example of how they went above and beyond in order to validate their methodological rigor was through their several robustness checks, such as count models (e.g. OLS and QMLE), introduction of information of other ride-sharing providers, a coarsened exact match, a different data generation process, and a diagnosis of standard errors. And as if this would not be enough, the researchers covered most of their cofounding factors by performing a empirical extensions section that covered topics from the effect of local populations to a comparison of the alcohol related motor vehicle fatalities to the non-alcoholic ones.

Weakness

A considerable weakness of the paper that was observed is its inability to account for random external causes for the accidents. While the reports of the SWITRS base cover what the cause of the accident was and what type of weather took place during the time of the accident, a lot of other factors were not able to be accounted for during the paper’s analysis. Furthermore, all analyses were not performed in a randomised manner, which decreased measurement validity and measurement reliability considerably.

References

Greenwood, B. N. and Wattal, S. (2017) “Show Me the Way to Go Home: An Empirical Investigation of Ride-Sharing and Alcohol Related Motor Vehicle Fatalities”, MIS Quarterly, 41(1), pp. 163–189.

Habibi, M.R., Davidson, A. and Laroche, M., 2017. What managers should know about the sharing economy. Business Horizons, 60(1), 113-121. Links to an external site.

MacMillan, D. and Demos, T., 2015. “Uber Eyes $50 Billion Valuation in New Funding,” The Wall Street Journal, May 9.

Articles, Business Case

Fon: sharing your Wi-Fi

March 11, 2018 meganschupp Leave a comment

Introduction: the rise of the sharing economy

Nowadays, the sharing economy has become a worldwide phenomenon. It has come in many different forms, in many different industries. One can share, exchange, trade, swap; one can do this with cars, housing, clothing, etc. (Habibi, Davidson & Laroche 2016). Many startups are creative in continually thinking of new ways to participate in the sharing economy. Well-established companies in the sharing economy, such as Airbnb, Uber and Zipcar, can be used as an example by newer startups; either by following them in what has gone well, or by being cautious in what went wrong for them in the past.

Industries that can be innovated in, by utilizing the sharing economy, seem to be endless. As such, a startup called Fon, is a pioneer in Wi-Fi sharing, managing 21 million hotspots globally (Fon Wireless, Ltd., 2018). You might have already seen this name in the past, either consciously or unconsciously, in the list of the Wi-Fi signals on your phone, laptop, tablet, or any other device. Actually, as I am writing this post, there is currently a Fon signal on my laptop.

In the Netherlands, Fon has partnered up with KPN (Fon Wireless, Ltd., 2018). But partnerships are just a part of Fon’s business model. Are you interested in getting to know more about what Fon exactly is? Then continue reading.

Fon: a wireless network

So, what exactly is Fon, and what does it do? Fon is a wireless network, aiming to create a global network of wireless access to Wi-Fi, based on Wi-Fi routers, that members should own and share with one another. There are two separate ‘signals’ coming from Fon’s Wi-Fi router, the Fonera, where one is meant to be used by the owner of the router, and the other is meant to be used by the members of the Fon community, who are in the neighborhood looking for a Wi-Fi signal. Due to these separate signals, privacy issues do not pose a concern. (McGarry, 2013)

One can buy the Wi-Fi router from Fon’s own branded routers, the Fonera, offering free lifetime membership, but most of the hotspots provided by Fon are coming from the partnerships it has with broadband providers. As mentioned earlier, for example in the Netherlands, Fon has partnered up with KPN (Fon Wireless, Ltd., 2018).

The Fon for members app

To enhance convenience for its customers, Fon has also created an app for its members, offering several utilities. This app is not available in all countries, so to partly overcome this issue, Fon has set up other versions of the app for which they collaborate with other brands. On the app, members can, for example, check their own profile, and open a map that shows all available hotspots in the area. (Fon Wireless, Ltd., 2018)

What about its revenue model?

Interestingly, Fon is a not for profit company (Schriber, 2018). When purchasing a router, you become a member and you pay the price of the router, after which you are offered free lifetime membership. The Wi-Fi sharing of Fon is enabled by the software it has developed.

Fon is continuously aiming to expand, however this has unfortunately not been easy in every part of the world (Ricknäs, 2015). Its strategy to expand is often via partnering up with local broadband providers. In January 2014, Fon raised $14 million in funding, which it wanted to use for expansion in the United States. However, expansion in the United States did not seem easy for them (Ricknäs, 2015).

One drawback of the service is its limited Wi-Fi signal, making the service better suitable to dense, urbanized areas (Jackson, 2016). As such, have a look at the map below, where it can be seen that the service is much more used in denser countries, such as the Netherlands and the United Kingdom.

Nevertheless, if Fon mostly focuses on denser, more urbanized areas, it can definitely remain a strong player in the market. In current times where data usage is continuously increasing and access to the Internet is almost becoming a hygiene factor in developed countries, Fon can fill a gap in the market, as constant access to Wi-Fi is not yet globally covered.

A factor that Fon has to take into account that could work against them, is the increasing global availability and the reducing costs of data on your phone. For example, roaming within Europe has recently become free of charge (Europa, 2018). This causes less people searching for a Wi-Fi signal, because they might just as well use the data on their phone.

References

Europa. (2018). Roaming in the EU. [online] Available at: https://europa.eu/youreurope/citizens/consumers/internet-telecoms/mobile-roaming-costs/index_en.htm [Accessed 10 Mar. 2018]

Fon Wireless, Ltd. (2018). Fon is the global WiFi network. [online] Available at: https://fon.com [Accessed 10 Mar. 2018]

Habibi, M.R., Davidson, A. and Laroche, M., 2017. What managers should know about the sharing economy. Business Horizons, 60(1), 113-121.

Jackshon, M. (2016). 1 in 3 Home Broadband Routers to Double as Public WiFi Hotspots by 2017. [online] Available at: https://www.ispreview.co.uk/index.php/2016/01/1-in-3-home-broadband-routers-to-double-as-public-wifi-hotspots-by-2017.html [Accessed 11 Mar. 2018]

McGarry, C. (2013). Sharing with strangers: Fon wants to be the Zipcar of Wi-Fi. [online] Available at: https://www.techhive.com/article/2056719/sharing-with-strangers-fon-wants-to-be-the-zipcar-of-wi-fi.html [Accessed 10 Mar. 2018]

Ricknäs, M. (2015). Fon keeps adding WiFi Hotspots but struggles to crack the US. [online] Available at: https://www.pcworld.com/article/2942552/fon-keeps-adding-wifi-hotspots-but-struggles-to-crack-the-us.html [Accessed 11 Mar. 2018]

Schriber, B. (2018). Understanding Fon Wi-Fi Hotspots. [online] Available at: http://internet-access-guide.com/understanding-fon-wi-fi-hotspots/ [Accessed 11 Mar. 2018]

Articles

Why do people engage in collaborative consumption?

March 10, 2018 485772ed Leave a comment

Collaborative consumption is a large scale trend which involves millions of users and constitutes a profitable business model for many companies to invest in (Botsman and Rogers, 2010). It is often associated with the sharing economy and takes place in organized systems or networks, in which participants conduct sharing activities in the form of renting, lending, trading, bartering, and swapping of goods, services, transportation solutions, space, or money (based on Owyang et al., 2014; Belk, 2014; Bardhi and Eckhardt, 2012; Botsman and Rogers, 2010; Chen, 2009).

Despite the rising importance of collaborative consumption, there is not much knowledge on why users engage in collaborative activities nor why many people are still reluctant to participate in this emerging trend. To address this gap, Möhlmann, in his paper “Collaborative Consumption: Determinants of Satisfaction and the Likelihood of Using a Sharing Economy Option Again” (2015), adopts a holistic approach to study the determinants of the usage of collaborative consumption services, providing empirical evidence from both business-to-consumer (B2C) and consumer-to-consumer (C2C) settings. As a matter of fact, collaborative consumption might refer to both B2C services, such as commercial car sharing, or C2C sharing in the form of redistribution markets or collaborative lifestyles (Bardhi and Eckhardt, 2012; Botsman and Rogers, 2010; Mont, 2004), such as accommodation sharing marketplaces. While nowadays users of sharing services can mainly be found among young age groups, the future generation will be growing up with this trend (Möhlmann, 2015).

Möhlmann (2015) analyzes ten factors that are expected to have an effect on the variable satisfaction with a sharing option, which itself has an effect on the likelihood of choosing a sharing option again. These ten determinants are: community belonging, cost savings, environmental impact, familiarity, internet capability, service quality, smartphone capability, trend affinity, trust, and utility (see Figure 1). The hypotheses of the paper suppose that each determinant has a positive effect on the two dependent variables, with satisfaction with a sharing option also having a positive impact on the likelihood to use a sharing option again. The empirical analysis was conducted on two different collaborative consumption services, specifically the B2C car sharing service car2go (study 1) and the C2C accommodation sharing service Airbnb (study 2). Two independent quantitative online studies were rolled out in July 2014, distributing questionnaires via a mailing list to students of the University of Hamburg (Germany) by a research laboratory.

The findings (see Table 1) show that respondents seem to predominantly be driven by rational reasons, serving their self-benefit, when using collaborative consumption services. Users pay attention to the fact that collaborative consumption helps them to save money and that respective service is characterized by a high utility, in a way that it well substitutes a non-sharing option. In addition, familiarity with a service was found to be an important determinant, probably because it lowers transaction costs of getting to know the specifics of the sharing process (Henning-Thurau et al., 2007). Furthermore, both studies reveal the important role of trust as an essential determinant of the satisfaction with a sharing option. This is an interesting result because trust has not been analyzed in relation to other determinants in the context of collaborative consumption in quantitative studies so far (Möhlmann, 2015). Some differences are also present in the two studies, specifically, in study 1 (B2C car sharing context car2go), two additional determinants with significant effects were identified: community belonging and service quality. While in study 2 (C2C accommodation sharing context Airbnb), a relationship between the satisfaction with a sharing option and the variable likelihood of choosing a sharing option again was estimated. This relationship was not revealed in study 1.

The main strength of this paper is that it is both academically and managerially relevant. Academically speaking, the results of this study contribute to close a research gap and hold valuable implications for researchers. Findings indicate that indeed there are many similarities among the determinants of the use of different collaborative consumption services. However, a detailed analysis might also reveal context or industry specifics, as shown in this paper. While for managers of B2C and C2C collaborative consumption services, the results of this paper offer important and relevant insights for the acquisition but also retention of customers. Managers of B2C and C2C services should adapt their market activities to respond to the fact that rational and self-centred determinants were found to be essential, including utility, cost savings, and familiarity. Furthermore, managers need to make sure that trust building measures are implemented and communicated to respective stakeholders.

This paper is also subject to a number of limitations. Firstly, even though it is true that collaborative consumption services are mainly used by a young age group, the fact that approximately 88% of the respondents were under the age of 30 does not provide true generalizability of the results. Especially considering that collaborative consumption is a growing trend that will soon involve people of any age group, a more heterogeneous sample should have been utilized. Secondly, it is likely that interrelations among determinants exist, which is something that has not been studied here. For example, it seems straightforward that determinants such as cost saving and utility, or familiarity and trend affinity might be correlated. Future research should construct a more comprehensive research model also considering such interdependencies. Thirdly, one of the most significant determinants in the analysis was utility, however, such variable showed low values of Cronbach alpha, respectively 0.57 in study 1 and 0.60 in study 2. Considering that the generally accepted cut-off is that alpha should be 0.70 or higher for a set of items to be considered a scale (Garson, 2012), the internal consistency of such variable is very poor. This undermines the reliability of the significant relationship between utility and the two dependent variables. Future studies should therefore create surveys which construct the utility variable in a different way. Lastly, in this paper, only the likelihood of using a sharing option again was investigated, but not actual behaviour. A more comprehensive and reliable analysis should consider the real behaviour of users. Longitudinal studies or experimental designs can be used in future research in order to address this issue.

To conclude, it can be said that there are without doubt several determinants which can affect satisfaction with collaborative consumption services and the likelihood of choosing such services again. Future studies might consider various additional determinants such as, for example, burden of ownership (ownership is usually associated with responsibility and effort), process risk (sharing can involve procedural risks), or product variety (sharing offers a wide range of different products and services). The list goes on as the relevant causal factors can be numerous. So what other determinants do you believe to be crucial in explaining user engagement in collaborative consumption?

References

Bardhi, F., & Eckhardt, G. M. (2012). Access-based consumption: The case of car sharing. Journal of consumer research, 39(4), 881-898.

Belk, R. (2014). You are what you can access: Sharing and collaborative consumption online. Journal of Business Research, 67(8), 1595-1600.

Botsman, R., & Rogers, R. (2011). What’s mine is yours: how collaborative consumption is changing the way we live.

Chen, Y. (2008). Possession and access: Consumer desires and value perceptions regarding contemporary art collection and exhibit visits. Journal of Consumer Research, 35(6), 925-940.

Garson, G. D. (2012). Testing statistical assumptions. Asheboro, NC: Statistical Associates Publishing.

Hennig-Thurau, T., Henning, V., & Sattler, H. (2007). Consumer file sharing of motion pictures. Journal of Marketing, 71(4), 1-18.

Möhlmann, M. (2015). Collaborative consumption: determinants of satisfaction and the likelihood of using a sharing economy option again. Journal of Consumer Behaviour, 14(3), 193-207.

Mont, O. (2004). Institutionalisation of sustainable consumption patterns based on shared use. Ecological economics, 50(1-2), 135-153.

Owyang, J., Samuel, A., & Grenville, A. (2014). Sharing is the new buying: How to win in the collaborative economy. Vision Critical/Crowd Companies.

Articles

The Dark Side of the Sharing Economy . . . and How to Lighten It

March 8, 2018 AlvaroFernandezGarcia12 Leave a comment

Two-sided platform business models, such as the emblematic Airbnb and Uber, have shown the upsides of the sharing economy during recent years. By the time the article was published in 2014, the sharing economy was estimated to have a value of $26 billion, and it is expected to have a value of more than $300 billion by 2025 (Wadlow, 2018). Sharing is increasing and customers are receiving additional value, but the new markets are also susceptible to failures and unfair conditions that should not be ignored.

The Dark Side

The authors showed the downsides of the sharing economy with different examples.

Shift to unbalanced markets: Airbnb and other accommodation sharing platforms are often more profitable for landlords than long-term rentals. As a result, there are less houses available for regular long-term rentals and average low-income inhabitants can encounter difficulties to find a place to live at an affordable price.
Honesty and Reputation issues: dishonesty in the sharing economy has led to several rip-offs. Malicious reviews can also damage the reputation of providers and users.
Sharing economy or ‘skimming’ economy?: ride-sharing alternatives can offer better prices than traditional transportation methods because drivers find loopholes to avoid extra licenses, insurances, rules and taxes.
Sharing economy or shared servitude?: activities like ride sharing or micro-outsourcing sometimes provide irrelevant income while taking away job opportunities from the base of the pyramid.
Whose Ox Gets Shared?: legal disputes can arise between a producer and a sharer. Aereo marketed a product to stream and share the content broadcasted in 1 device into other devices (personal or for other people), which was legally banned in the US. Similarly, an app founded in San Francisco was facilitating drivers to auction their public parking spot, also encountering legal confrontations.
Not my responsibility: this is usually the attitude of the sharing economy platforms. For instance, an Uber driver is just a contractor and the company is not liable for any accident. Some companies are benefiting from the sharing economy by taking the profits and transferring the risks to other parties.

Lightening the Dark Side

Take responsibility for risks that benefit the system. Companies like to avoid risks, but the benefits of taking responsibility for a risk can offset the realized costs. For instance, banks were at first opposed to the Fair Credit Reporting Act because it increased their liability for unauthorized transactions. They thought it would encourage fraud and careless behaviors, but it ended up benefiting the banks. Protecting the customers significantly increased credit card usage, which has a greater economic impact than the additional liabilities they now have.
Invest in the consumers. If customers themselves are creating the value, investing on them can significantly increase the revenues of a company. Airbnb invested in educating the renters in order to publish better descriptions and pictures, which in turn resulted in double the revenues.
Drive community self-regulation. Platforms can detect and solve issues quicker than the government or external parties. Users can also be useful with methods like reputation systems.
Tax fairly. A good example is the city of Amsterdam, which implemented a fair tax on sharing economies like car and accommodation sharing to create fair markets.
Set review systems. Consumers rely on reviews in their decision processes when taking part of sharing economies. Everyone should be able to have access to complete and trustworthy information.

Critique

The article provided a good overview of some risks and best practices for business models based on the sharing economy. The authors used plenty and good examples to illustrate these dos and don’ts of the sharing economy. The paper also does well on taking into account all the points of view (companies, customers and other stakeholders) when formulating their arguments.

On the negative side, the article does not touch upon all the downsides of the sharing economy and does also not include some important recommendations on how to manage these platforms. For instance, as an additional dark point:

Working for the sharing economy often leads to no traditional job benefits, such as retirement plans or healthcare.

Additional recommendations for sharing economy platforms not touched in this article could be:

Build trust and values within a community and avoid information asymmetries by providing full and good quality information. If customers understand their common needs and feel part of a community they will more likely help each other through value creation.
Lastly, the article does not talk about how important it is for local governments to control and collaborate with local platforms. Local authorities should ensure no unfair market situation arise, and they can also improve the efficiency and welfare of their cities by supporting sharing economy platforms. According to Frey et al. (2018) there are already enough governmental regulations in place, but the authorities just have to make sure that these regulations are met by enforcing more platform transparency and better controls. Governments can also foster a healthy growth of the sharing economy by helping to solve data privacy issues.

Moreover, the article provides a general overview of the issues and best practices of the sharing economy, but it does not provide any empirical evidence of the real impact (both positive and negative) of the sharing economy. According to Petropoulos (2017), there is not enough empirical evidence on the real impact of the sharing economy, and therefore it is not possible to optimize its regulations. This author claims that researcher need to conduct more longitudinal studies with economic and social data to obtain new insights, rather than provide general overviews like it was done in the focal article. Petropoulos (2017) claims the problem is that sharing economy platforms are usually reluctant to provide researchers with the information necessary for good studies, and he calls for a change because all parties can benefit from these studies.

References

Frey, A., Welck, M., Trenz, M. and Veit, D. (2018). A stakeholders’ perspective on the effects of the Sharing Economy in tourism and potential remedies. University of Augsburg, pp.576-587.

Malhotra, A. and Van Alstyne, M. (2014). The dark side of the sharing economy … and how to lighten it. Communications of the ACM, 57(11), pp.24-27.

Petropoulos, G. (2017). An economic review on the collaborative economy.

Wadlow, T. (2018). The sharing economy will be worth $335 billion by 2025. [online] Supplychaindigital.com. Available at: http://www.supplychaindigital.com/logistics/sharing-economy-will-be-worth-335-billion-2025 [Accessed 8 Mar. 2018].

Articles

The Insurance Industry Is Taking Advantage of the Sharing Economy

March 10, 2017 adeschamps93 Leave a comment

The so-called ‘sharing economy’ has benefited numerous consumers through the value it has added to their lives. Companies such as Uber, Airbnb and Lyft, to name just a few, have taken advantage of the digital technologies humans have developed over the years. However, consumers are not the only benefactors of the sharing economy, the insurance industry has developed products and services specifically catered to its unique characteristics, most notably in the ride-sharing sector, where insurance providers have taken advantage of liability concerns occurring in such ‘sharing’ activities (Traum, Vol. 14:511).

One of the first products developed, the “Metronome”, came from a collaboration between Uber and MetroMile. The device tracks the vehicle of a Transport Network Company (TNC) driver, and is embedded in the Uber application (Traum, Vol. 14:511). It only turns on and activates the required insurance plan when drivers are engaged in TNC services. When the driver is not carrying a passenger, or hasn’t accepted a ride, any liabilities arising from an accident are covered by his own insurance. This product considers both the professional and personal roles of Uber drivers. In a similar fashion, a new plan from Farmers Insurance, on offer since May 2015, supplements a TNC driver’s personal plan with a premium of eight percent (Traum, Vol. 14:511). Many insurances providers have begun to offer similar services to the ride-sharing industry.

Furthermore, the use of such digital technologies has expanded to mainstream customers’ insurance plans. Some companies have developed a chip to be installed on the vehicle during production. Similarly to the Metronome, this device tracks if a vehicle is in use and offers full coverage, to the extent of the customer’s plan, in the case of an incident. However, when the vehicle is parked and the engine is off, the insurance company provides a more limited plan. This enables insurance firms to offer their customer with a more suited, and personalised service.

In the case of Airbnb and other home-sharing services, the lack of legislative development with regards to the coverages of issues common to such activities (Traum, Vol. 14:511). However, insurance providers are aware of the risks that may arise but have yet to adapt and respond to liability issues specific to the home-sharing industry. Together with national governments and sharing economy companies, insurance providers have to strive towards addressing consumer needs; such as protection issues. Furthermore, innovations in this industry can be translated to insurance plans for the mainstream customer, taking the advantage of newly available digital technologies.

Traum, Vol. 14:511. Sharing Risk in the Sharing Economy: Insurance Regulation in the Age of Uber. Cardozo Pub. Law, Policy & Ethics J.

Business Case, News

Airbnb Trips – The Next Move Towards Conquering the World

March 8, 2017 jillbue Leave a comment

“The stuff that matters in life is no longer stuff. It’s other people. It’s relationships. It’s experience.” – Brian Chesky, Co-Founder and CEO of Airbnb

What is your purpose of travel? Is it food? Is it fun? Is it meeting new, inspiring people? Is it getting to know new cultures? Travel is about meaningful moments, experiences you make that you will never forget. But how do you find those places for magical experiences? On TripAdvisor? Go to TripAdvisor and search for “Things to Do” in your home town: Hop-on-Hop-off buses, overpriced boat tours, Madame Tussaud’s… Have you as a local, ever done one of those activities? Most likely you will say: “That’s just something tourists do.”

To prevent travelers from stepping into tourist traps, Airbnb recently presented its’ new offering – the world of trips:

Airbnb knows what travelers want – the ultimate local experience. The previous, successful years resulted in a platform offering millions of homes around the entire world to tourists that no longer want to stay in anonymous hotels. But CEO Brian Chesky realized that homes are just one single part of a great journey. A great journey lets you immerse in and join the local community. With the new product Airbnb Trips, also experiences and places will all be available in the app. So, what are those new features?

Experiences: The offered activities are not just organized by city, but also by passion, for example Sports, Nature, Social Impact, or Food. The available experiences can take from a couple of hours up to multiple days. Every offered experience is presented in a short video. About half of the trips are offered at a price below $200 (Airbnb: Experiences, 2017).
Places: Within this function, local legends list their top things to do in an “insider guidebook”. Additionally, also audio walks and meet-ups are featured.

Business Model Evaluation

What is the value added for the three main parties involved in Airbnb’s business model?

Consumers (travelers) – For travelers, the extension of Airbnb’s offerings provides a great value added, because the platform becomes a One-Stop-Shop for your entire travel. This will reduce the time necessary to prepare trips and give you new local insights during your holidays. Of course, this comes at high costs: 55€ for a sunset bike ride in Tokyo or 98€ for a 3h-cocktail workshop in San Francisco can not be afforded by budget travelers.

Providers (guides) – From now on, you can also become a host for activities. When deciding to become a host, you have to apply and Airbnb checks the experience for certain quality standards. The best experiences offer guests access participation, and perspective (see Figure 1). Next to monetary profit, the benefits are also non-financial: get more exposure for what you love, promote your brand, and meet locals like you (Airbnb: Become A Host, 2017).

Bildschirmfoto 2017-03-07 um 11.46.39 — **Figure 1.** Assessed Quality Standards for Experiences (Airbnb: Quality Standards for Experiences, 2017)

Platform (Airbnb) – With this business model extension, Airbnb wants to become the platform for your entire trip. By embedding new features like restaurant recommendations and an integrated reservation system, Airbnb seems to aim at replacing existing platforms like TripAdvisor and Yelp. Motivation of this move clearly is Airbnb’s transition from a website for booking accommodation to a full-service travel company, which comes along with increasing its user-base and revenue. For Experiences, Airbnb brokers the payment from the user to the guide and takes a commission, similar to how its home-booking service works. For Places, the company has some revenue-sharing deals in place, like a partnership with Resy to book restaurant reservations. Also, the market for travel activities is still underserved and promises large potential. So far, only small vendors like Klook, I Like Local, Peek and Viator offer a comparable service. However, their offerings are very “touristy” and generic. Additionally, Airbnb can leverage its popularity to quickly establish its offering.

Feasibility of Required Reallocations

Internal Arrangements – Airbnb Trips is more or less an extension from providing accommodation to additionally providing activities and tours. However, this requires further administrative effort, especially related to the quality standards assessment. This assessment is necessary to assure a local and personalized experience, so that Airbnb can clearly differentiate from competitors. Also, videos for every experience have to be created.

External Environment – Airbnb already radically disrupted the global hotel industry by applying the principle of the sharing economy (Zervas, Prosperito & Byers, 2014). With its business, the platform did not only antagonize hotels, but also governments that try to proceed against housing shortage (Jefferson-Jones, 2014; Lee, 2016), coming along with several law-suits in major cities like Berlin, New York and San Francisco. The extension of its offering will most certainly not reduce Airbnb’s number of critics. For example, the ‘ownership of an experience’ is very difficult to assess. Who should get the money, when a guide shows you around a market? Don’t the market traders also deserve a proportion for being essential for the experience? Next to legal conflicts, a discussion about the social impact can be initiated. The commercialization of local experiences may destroy the original selling point of unique, original travel impressions.

All in all, Airbnb Trips moves the platform beyond its’ couch-surfing origins. The offering is clearly targeting the “emotionalization” of travel experiences, a next step in the service economy. This is a great possibility for travelers (who have the budget) to make unique memories. However, it comes at the cost of commercializing the local charm for the sake of profits. Airbnb should be careful and hold up high quality standards (e.g. small groups, special experiences) so that it does not destroy it’s newly designed value proposition.

References

Airbnb: Become A Host. Retrieved March 7, 2017 from https://www.airbnb.com/host/experiences?locale=en

Airbnb: Experiences. Retrieved March 7, 2017 from https://www.airbnb.de/experiences/

Airbnb: New. Retrieved March 7, 2017 from https://de.airbnb.com/new

Airbnb: Quality Standards for Experiences. Retrieved March 7, 2017 from https://www.airbnb.com/help/article/1451/what-are-the-quality-standards-for-experiences?locale=en

Jefferson-Jones, J. (2014). Airbnb and the housing segment of the modern sharing economy: Are short-term rental restrictions an unconstitutional taking. Hastings Const. LQ, 42, 557.

Lee, D. (2016). How Airbnb Short-Term Rentals Exacerbate Los Angeles’s Affordable Housing Crisis: Analysis and Policy Recommendations. Harv. L. & Pol’y Rev., 10, 229.

Zervas, G., Proserpio, D., & Byers, J. W. (2014). The rise of the sharing economy: Estimating the impact of Airbnb on the hotel industry. Journal of Marketing Research.

Business Case, Videos

Hey neighbour, can I rent your drone?

March 5, 2017 quirinepaauwe Leave a comment

Drones are becoming increasingly popular, cities are filmed from above with drones, drones can send packages and drones are even used in the army (drones.nl, 2017). More and more companies and individuals are interested in using drones, but what to do when you do not own a drone or in contrary, when you have a drone, but you do not use it that often? The sharing economy is already present in various aspects of society and this is exactly where the new peer-to-peer drone rental marketplace Up Sonder responds to.

Up Sonder
Just like renting a room through AirBnB, it is now possible to rent a drone. Up Sonder is a free platform and takes only a 5% provider service fee as revenue and on top of that, a small portion of the revenue is donated to help deliver access to clean drinking water to Africa (zdnet.com, 2017).

Everyone who owns a drone can create a free profile and list their drone at their own price to become a provider and certified FAA remote drone pilots can also list themselves by adding their service. On the other hand, companies and individuals are able to filter and rent different kinds of drones and/or services in their direct area. The platform is easy to use and providers can manage and accept bookings from within the platform. Also, they are able to access payments, scheduling, inventory management, customer messaging and sales through the online portal. The renters on the other hand can schedule and make their payments quickly. Up Sonder collaborates with UberRUSH that picks up and drops of the drones when the rent is scheduled (upsonder.com, 2017).

Efficiency Criteria
The utility for the consumers of the platform, the renters, is the fact that the platform is simple and fast and can be used anywhere at anytime. It is free to sign up and create a profile. Renters will switch to Up Sonder, because they do not have to buy a drone themselves, so they save money, and providers will switch to Up Sonder, because they can still make money of (unused) drones at their own price in an easy way. Besides that, the renters and providers become part of a larger community, which is fun and in which they do not have to exchange the money and drone themselves. It saves them money and time and maximizes the joint profitability.

On the other hand Up Sonder is feasible, because the platform takes care of several institutional arrangements. Firstly, to make the platform more reliable, etiquettes are present. The renters and providers can see photos of each other on their profiles and afterwards, both parties are able to write a review. At the same time, providers are protected by the platform from damage with insurance up to 2,500 dollars and renters are offered a refund policy with three different cancellation policies. Additionally, Up Sonder has a non-discrimination policy to make sure that people from all backgrounds are treated equally. The platform takes also care of the institutional environment. When providers earn more than 600 dollars in a tax year they have to fill in a tax form and payments are made by means of established methods.

Up Sonder meets several efficiency criteria and is rapidly growing. Having a drone and using its services is made available for everyone!

References
http://www.zdnet.com/article/drone-rental-marketplace-up-sonder-goes-national/
https://www.upsonder.com
https://www.drones.nl/nieuws/2014/08/drones-wat-kun-je-er-mee