Input sound file:
10-17 am Session 1_1005.MP3
Session name: How the Collaborative Consumption Economy has changed E-Commerce and M-Commerce
Thank you, guys. All right, coming up next we have How The Collaborative Consumption Economy Has Changed E-Commerce And M-Commerce. That’s going to be a discussion moderated by Kevin Fitchard, my colleague at GigaOM, and he’s going to be speaking with Aunkur Arya, the GM of Mobile at Braintree, and Mike Curtis, VP of Engineering at Airbnb. Please welcome our collaborative consumption panel.
Kevin Fitchard 00:36
Hello, everybody, and welcome Mike, welcome Aunkur.
Aunkur Arya 00:38
Kevin Fitchard 00:37
Today’s panel is about the new collaborative consumption economy, and to start out, why don’t we explain exactly what we’re talking about. We’re going to be talking about collaborative consumption; what exactly do we mean and how is this changing the face of commerce – E-Commerce and M-Commerce specifically.
Mike Curtis 01:01
Maybe I can start out. Collaborative consumption, the way we define that and talk about it at Airbnb is, we refer to it as the “Sharing Economy”. The idea there is that ordinary people who have extra assets or extra space or extra things that they could potentially share with other people, we provide a way for them to connect with other people, to share those assets, and then maybe earn a little extra money on that which helps them enable a new way of life. Airbnb does that for space, but collaborative consumption – The Sharing Economy – expands into many other different categories; services. You could think of lots of different areas where you could expand into where people can share their capabilities beyond just space.
Aunkur Arya 01:48
Yeah, I would agree with that. It’s a fundamentally efficient allocation of inventory; whether it’s goods – and eBay was the first example of efficient allocation of physical goods – services, peoples’ time, real estate and property – like in the case of Airbnb. We have sort of the benefit of being able to look at a 35,000 level at a bunch of different marketplaces out in the ecosystem that we sort of help power. Airbnb is a great partner of ours, as well as Uber, TaskRabbit. When we look at growth, particularly on mobile, those businesses that are sort of marketplaces and in collaborative consumption are the fastest growing businesses. We’ll talk further about product and how we evolve product. We’re trying to keep up with how fast these guys are growing, and make sure that we’re building the right product.
Mike Curtis 02:38
I think another point I might add on that is that, it’s always represents a shift from this idea of ownership to one of access. So, instead of people going out and consuming and needing to buy new things all the time, they can think about just having access to those things, and more of a sharing mentality than in a “go purchase something new”, which is kind of a more efficient way to think about using resources in general, beyond accommodation to things.
Kevin Fitchard 03:02
Are you guys saying that this is producing a new type of economy? Are these transactions that just would not happen? Are these transactions that just would not happen? Are these experiences that would not happen if you didn’t have these models in place? Or would they just be provided by the big companies, like the direct sale retailer, the travel agent, the taxi company?
Aunkur Arya 03:26
I think most of these transactions would not be happening without folks like Airbnb and Uber and TaskRabbit. If you think of what Airbnb does – how can you have an entity in one country and another country transacting over living space in a home or an apartment? That’s next to impossible to do if these guys weren’t wrapping up trust and support and security and convenience on both ends; I think that transaction would be near impossible. Think about the example of TaskRabbit. TaskRabbit is essentially aggregating peoples’ free time, your neighbor’s free time. I need someone to go pick up dry cleaning for me before I get home; how would I have that interaction without someone like TaskRabbit? I think the majority of those transactions would not be happening unless it was for some of these great start ups.
Mike Curtis 04:14
I agree with that point, but I also think that the behavior is fundamentally human and real. The idea of sharing your space or sharing your things is something that people have been doing forever, but what we do – Airbnb and these other companies in the space – is, we find a way to really scale that behavior in a way that a lot more people can participate in it. So, I agree with the point that the majority of this wouldn’t be happening if it weren’t for companies like this, but the fundamental underlying behavior is very natural for all of us.
Kevin Fitchard 04:48
An easier way of creating that behavior is, we call it a transaction, but really you’re just saying that it’s just basically human interaction that–
Mike Curtis 04:55
Yeah, sharing is as old as time.
Kevin Fitchard 04:57
I don’t want to focus too much about the nitty gritty of payments tech, but I think we should talk about it just a little bit. How have the payments technology and the business models that enable these collaborative consumption companies, how have they had to evolve? How have they had to change? Airbnb is a very good example of a company that has grown incredibly quickly, and you’ve had to build a lot of this infrastructure yourself, but Braintree has the product that’s called Marketplace, or a market that is designed to make these transactions between multiple buyers and multiple sellers easier.
Aunkur Arya 05:30
The first leap the payment space made was that they just made it very easy to integrate payments into your app or your site. I always give the example of, several years ago, if you wanted to build an app, you has iOS. If you you wanted to not have to invest in infrastructure, you had Amazon Web Services, but if you wanted to sell something in your mobile app or on your site, or build an E-Commerce business, you really didn’t have anything. So, the idea behind Braintree was, “Let’s build the OS of payments”. I think that was step one. I think a further step is what you mentioned, which is our Marketplace product. Essentially, it’s just a product that off the shelf lets entities split payments between each other and then the Marketplace can take a piece of that transaction and pay out to other entities. Actually, in our case, it’s fully mobile end to end.
Aunkur Arya 06:15
I’ll give the example of TaskRabbit that uses our Marketplace product. As a consumer, I can use one-touch click with Venmo inside of TaskRabbit to buy a service, and it goes through the TaskRabbit Marketplace, and then it gets paid literally by an e-mail address to the Rabbit. So, there’s no interaction, no one’s writing a check, no one’s taking their wallet out, none of that stuff; it’s a fully end to end marketplace. I think certainly building a Marketplace product that can deal with holding funds and escrow and things like that is very critical.
Aunkur Arya 06:44
I think the two other pieces that don’t get talked about a lot are, for Marketplaces to work, you need a great consumer experience. So, tokenization of payment information is very important for that so that you can do repeat purchases that are seamless, as well as creating a one-click checkout. So, I think those are all the pieces that we’re trying to evolve constantly to keep up with these guys.
Kevin Fitchard 07:06
We were talking a little bit backstage about some of the complexities of these transactions, and I really had no idea how crazy they can get. Mike, can you talk a little bit about how complex these transactions get? It’s not just going to a new country, setting up a back account, and you’re online. You’re dealing not only with different currencies, but culture in many cases.
Mike Curtis 07:27
Yeah, totally. Actually, just to go all the way back to the beginning, it’s a little funny, but when Airbnb first started, we didn’t even handle payments. It was this thing where you would get connected with somebody, you’d go to their house, and then there would be this awkward moment halfway into your stay, or a day into your stay where the host starts going, “Hey man, where’s my money?”
Aunkur Arya 07:49
They were trying to barter.
Mike Curtis 07:48
Yeah, and nobody wants that awkward moment. It actually extends beyond just accommodation or any kind of sharing. One of the things that’s great about having these systems that handle all this stuff is, it takes one of the most awkward parts of sharing out of it and brings it all up front so that it’s handled before you even get to that point.
Mike Curtis 08:09
So, after we had that awkward experience a couple times, we realized we needed to start handling payments. And for us, it’s been a long journey. This was before Braintree had built out a lot of this stuff, so we had to implement much of it ourselves. We started with PayPal. We integrated shortly after with Braintree to handle a lot of U.S. credit card transactions. We did direct bank account transfers and then also with PayPal for the payout side. A lot of our business was based on that for awhile. More recently, we’ve integrated with World Pay; we can collect international credit cards.
Mike Curtis 08:39
There’s some other places that are very unique. Sort of your point, where the expectation the expectation of the host of, “How do I want to get paid in this market” is very different for them than what we would expect here. In some countries they really want a direct bank transfer and in other countries they want to get paid in cash; they want to go somewhere and get cash for what they were being paid for. So, we actually did an integration with Western Union that was targeted specifically in South America because that’s where a lot of people want to get paid that way. What we found is that in the first month, we had already done $100,000 in volume and since then, it’s grown by more 20 times. Some people, when they get paid out, they want to the Western Union and get cash. It’s an interesting kind of problem where every different locale has a different expectation of the payments’ behavior.
Kevin Fitchard 09:23
If you took all the currencies, all the countries, all the different people, all the different payment methods, you could literally have 1,000 different types of transactions going on, right?
Mike Curtis 09:31
Right now, we’re accepting payments in 36 currencies, we’re paying out in 65. As you can imagine, travel is highly international. This is going across borders all the time, so every possible combination there, there’s more than 1,000 different ways that money has to flow through the system.
Kevin Fitchard 09:45
And there’s new payment methods sprouting up everyday. Square just announced cash the other day. Do you have to accept every type of payment? How do you decide what kind of payments to pick? And for Braintree, you have to incorporate a lot of these different types of payment options. How do you make those decisions?
Aunkur Arya 10:02
We’ve really focused and started on credit and debit, the kind of bread and butter. Obviously, as you go market to market, those things change and you have alternative payment methods. So, we definitely endeavor to start to support more of those alternative payment methods in different markets, but it’s very hard to do. The reality is it’s actually very hard to wire that stuff up. So, we are kind of going through the complexity now to do the wiring up so that we can make it easier for companies who want to offer alternative payments. It’s not a matter of deciding which, it’s a matter of how fast can you get it done and offer it to the ecosystem.
Mike Curtis 10:37
I think for us, it’s a little bit of a chicken and egg problem. We might implement a new payment method that actually only represents only a small fraction of our total payment volume, but it might be that by not having that payment method we’re actually capping our growth in a region. So, we have to take those bets a little bit, where we believe that a new payment method is actually going to lift the ceiling and help us push forward and grow in the market. We’ve done a couple things that are smaller integrations right now, but that we think could lead to more down the line with Acculink for China. These are things that allow people to get prepaid debit cards as a form of payment, and then they can go and use that prepaid debit card online or wherever else to make their purchases. It sounds like a novel way to get paid out, but a lot of people, this is really what they want.
Kevin Fitchard 11:28
Let’s take a little look into the future. How far can this collaborative consumption economy go? For instance, if I’m traveling and I’m going to Argentina, I don’t just need a place to stay. I could be working with multiple collaborative consumption companies; someone to arrange my transportation, someone to arrange my meals. Can collaborative consumption companies collaborate, so to speak? Can you build really, really complex models in which I could basically go through one source and book all these various components that have multiple people who are being paid out, and even possibly multiple people doing the paying if I’m going with a group of friends or something?
Mike Curtis 12:08
I think that’s actually one of the most exciting things about the travel space is that there’s so many different parts of the travel experience that you can layer onto core accommodation. I think at the basis of what enable The Sharing Economy, there’s three main pillars that enables scaling it. One is around this concept of identity and trust, and really knowing the people who are transacting between each other. What’s happening is, you’re bringing people together in the offline world that connected in the online world. You have to know that the people going into that know about them and know that they’re invested in it. The second is having this payment platform so it can feel like a native experience. When you’re doing payments, even if you’re transacting with somebody from another country, it feels very local to you. The third is the marketplace, being able to actually connect those guests and hosts together, but maybe other services as well like concierge or rides to the airport; you can think of 1,000 things that could layer on with travel.
Aunkur Arya 13:03
I think this relates really well to this concept of commerce actually becoming context driven and not intent driven. So, if you think about anyone as an Android phone and uses Google Now. Google Now does a great job of predicting the content that I want throughout the day. So, I think you’re going t start to see this wave of companies that are saying, “If I’m Encore, I consume three or four services a day, or seven or eight services a week”. Wouldn’t it be nice to have sort of a streamline flow of consumption across all those things and not have to worry about payment or is the support going to be different, or is this one going to work, is this one going to be secure or not? I think you’re going to see that wave happening. A Google Now type experience will be happening in commerce and I think that will be huge for travel, but also with string together other categories and other verticals outside of travel, with travel frankly.
Kevin Fitchard 13:56
Do you think it’s going to be companies like Braintree that are going to be managing the complexity of that though? Or are other companies going to pop up to–
Aunkur Arya 14:03
I think there will be other companies that will pop up, and frankly, there should be. The more of those companies there are, the better for the entire ecosystem. I think certainly, payment is one element there that you need to just get right, and sort of the authentication of who you are and what your payment instrument is. That’s something that we’ve nailed. So, I think that’s something that will be very core, but I think people will start to build stuff on top of that, and they should.
Mike Curtis 14:23
That’s actually one of the great things about working with companies like Braintree is that, instead of devoting a ton of mind share for us at Airbnb to solving the problem of payments, we can actually focus on another thing, which is solving the problem of sharing and connecting the right people for the right kinds of experiences. A lot of the things that we have to handle for payments, we can have other companies, like Braintree, help solve that for us.
Kevin Fitchard 14:46
The last question I had was, as a lot of you have probably noticed, the internet of things has been a pretty big theme of this show, but how do the payments industry and how does the internet of things really fit into it? You can almost imagine you have a system in which you– we’re talking about sensor webs, we’re talking about applications, activity trackers, things like that; they’re all communicating with one another. Eventually, they’re going to be sharing their data with one another and applications will take a little bit of data from these set of sensors here and vice versa, and there will have to be billing models attached to it. How do you start attaching payment models to objects? This is particularly interesting for Airbnb, because the internet of things is making its way into the connected home, and you’re basically allowing people to sell their homes temporarily to other people. Can they sell their connected home to other people? There’s really two questions in there. Who would like to start?
Aunkur Arya 15:40
I’ll start. As far as the payment piece is concerned, I think being able to have a cross-context, cross-device payments identity is a crucial first step in that. I think we’ve started to build out of mobile with a product we have called Venmo Touch, which allows you to save your card with one merchant and then it’s always there whenever you’re in another merchant’s app that’s using Braintree. So, I think solving the payment and authentication piece is critical to that. There’s a lot more stuff that needs to happen for all that to work. So, if you give the example of, let’s say my FitBit can tell my mobile device, “Hey, Encore is not doing great, he’s not meeting his goals, he’s got to buy a weight loss supplement”, or something, and can sort of facilitate that transaction. I guess the questions you’re asking is, does FitBit need to have a piece of that transaction. I would say maybe, or maybe not. I think the important point is that maybe it insulates the value that FitBit provides to me because it can do all these things and it can connect and it can sort of predict what I’m going to need to buy or what I’m going to need to do next. So, I think unclear on whether there needs to be a new business model. It’s like a co-op. All the parties that participate, whether it’s the device manufacturer, a merchant, consumer; they’re all going to benefit. So, it’s unclear to me whether there needs to be a different way to cut up the transaction.
Kevin Fitchard 17:01
I was meaning more in the sense that, say the FitBit is communicating. Say it’s talking to an activity planner that’s a subscription service, but in order to work, it needs to get data. So, all these different sensors and devices are communicating data back to that activity tracker. Therefore, it requires a revenue share, so is there just a pool of money that has to be divided up? When you start talking about 50 billion connected devices, the amount of different transactions would just get incredibly complex.
Mike Curtis 17:29
I don’t think about it in terms of, is there a pool of money that needs to be divided up. I think about it in terms of, if there’s a pool of data, everyone will benefit. So, if you’re not contributing to that pool of data, you’re not pulling out of that pool of data, and therefore, you’re irrelevant effectively. So, I think it’s less about the economics behind it and more about is everything connected and is everyone benefiting?
Aunkur Arya 17:54
I think the concept of connected devices and connected things is very interesting in the field of travel, like what we do. One day, we want it to be that you’ve got this connected device in your pocket, travel is this inherently mobile experience, the connected device in your pocket knows all about you. So, at every step along the way on a trip, it can be communicating with environment around you and all the things that it knows to be removing friction from that trip and making it easier for you. You can imagine a world where you walk into a place that you’re going to stay and the lights automatically dim, you walk up to the door and it automatically unlocks. You can think of all these things where, just because your device knows you and knows what you like, it can customize that experience for you, and kind of make it possible for you to feel at home anywhere in the world when you travel on Airbnb. I think the internet of things could really make that possible.
Kevin Fitchard 18:42
You could tell your host ahead of time that you’re doing date night.
Aunkur Arya 18:45
Yeah, you could do that [chuckles].
Mike Curtis 18:45
It’s almost like what hosts do today. Usually get on Airbnb, they’ve got a binder for you full of recommendations. One time we had beer in the fridge when we went to South by Southwest, those sorts of things, but in an automated way would be pretty cool.
Kevin Fitchard 18:58
I’m sorry. I hogged all the panelists’ time. I meant to leave some time for questions, but we are actually out. Could everyone please join me in thanking our panelists for being here?
All right, that’s going to lead us to our first break for the day. Enjoy it; meet with each other, talk, get some work done, network and visit the exhibit areas, the sponsors upstairs and downstairs in the atrium, stop by the GigaOM research table, find out how you can get in on that sweet research action. Break and refreshments are located on this level and you’ll find it. Just find the people, you’ll find the food. The general session will resume at 11:20. Thank you, everybody.
Automated Voice 19:42
Get rid of those pesky dark circles too. Change the color of my eyes if I feel fancy, or try on a whole new look and feel like a cover model. I love that I can share it with my friends. You’ve got to try this out. Get it free from iTunes or Google Play today.