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Summary:

As the world’s cities get ever more crowded, the web sharing economy emerged into the mainstream this year. Next stop, booming cities in developing nations.

Airbnb

Three years ago the world reached a societal turning point: more than half of the planet’s population were living in cities. That shift will continue to the point where six out of 10 people will be living in cities by 2030, and seven out of 10 will be living in cities by 2050. What this means is that life for the majority of the world will be marked by smaller urban spaces and increasingly shared and limited resources. As this decades-long population shift and resource crunch occurs, 2013 could stand out as the year that the web sharing economy became oh-so-very mainstream.

Most of us have heard of collaborative consumption, and the web sharing economy. Companies have emerged in recent years — like alternative home renting company Airbnb and on demand driver company Lyft — to create platforms for peer-to-peer services around physical goods and places. A variety of books have been written on the subject, and startups continue to launch increasingly niche-focused sites. All of these big and small networks run on the back of ubiquitous mobile computing, wireless broadband, and a trust-based economy created through transparent user feedback paved by sites like Yelp.

airbnb tampa

But 2013 can be seen as a moment when the web based sharing economy hit a real inflection point. Airbnb has now had 10 million guest stays since it launched in fits and starts over 2007 and 2008. It took Airbnb four years to reach 4 million guests, and then another year to reach the 10 million mark — that’s hockey-stick growth.

Airbnb is such a force these days that it’s now being taken very seriously by cities like New York, which have powerful hotel lobby groups and want Airbnb to pay hotel taxes. As Om has put it before, “the challenges of the connected future are less technical and more legislative, political and philosophical.”

Lyft is another company that used 2013 to break out into a hockey-stick growth pattern. The on demand ride-service with the fugly pink mustaches says it is seeing a 20X annual growth rate, and it has hit the 1 million rides point this year. As Lyft grows, it too is facing legal issues, both from its own drivers but also from taxi companies that fear the competition.

Moderated by: Katie Fehrenbacher — Senior Writer, Gigaom Speaker: Joe Gebbia — Co-Founder and Chief Product Officer, Airbnb

Joe Gebbia — Co-Founder and Chief Product Officer, Airbnb

Both of these companies are strong uses of the web sharing economy. Housing and transportation in many cities — particularly San Francisco, New York and European cities — is very constrained and Airbnb and Lyft offer a way to use housing and transportation much more efficiently. The internet, mobile apps and wireless broadband are able to uniquely manage both housing and transportation needs by breaking them into incremental units over time. The owners of the resource — the apartment or the car — can make money from it in the sharing economy and the user can have more options in a limited ecosystem.

The web sharing ecosystem works best when the resource is expensive and constrained; i.e., housing and cars. It doesn’t work so great when the resource is plentiful and cheap — see some of the less successful sites that focus on sharing smaller objects.

It’s not surprising that Airbnb and car and ride sharing services are growing steadily in cities in Europe where space is limited for both cars and housing. Paris has its own home-grown startups in this ecosystem, though Airbnb is growing swiftly there, too. Airbnb’s Olivier Gremillon told me this summer that Paris is the company’s top city in Europe, and the second largest community in the world in terms of number of housing listings and number of guests.

En attendant le feu d'artifice du 14 juillet 2012 depuis la terr

But what will be really interesting to see is if Airbnb and Lyft — or domestic versions of these sites — do well in developing economies in the coming years. Most of the world’s urban population growth will occur in developing economies in Asia, India, Latin America and Africa. Urban population growth will be a lot less strong in the U.S. and Europe.

I predict that U.S. and European cities are a barometer to the success of web sharing in developing cities. These are the areas that will need these services — bigger growth, and more constrained resources. By 2030 when there are six out of 10 people living in cities in the world, there will be some massive web sharing services that will be dominating some large “underground” economies.

Sao Paulo

That’s one reason why investors and entrepreneurs are so interested in Brazil’s web startups, because it’s a market that could see some of these breakouts. It’s rapidly developing, its population is getting wealthier and it’s quickly becoming connected with the web and cell phones. It also has massive traffic and housing problems in its big cities. Already Brazil is seeing sizable growth on Airbnb, and Airbnb CEO Brian Chesky recently said it could be a massive market — the world’s largest — for them some day.

But it took the past couple of years for Airbnb to break out initially in a mainstream way. In the years to come these web sharing economies in developing economies could look back to this year as the one that primed the way for a massive worldwide shift: from buying and owning goods to participating in a service-based economy, and from a centralized economy of housing and transportation to a decentralized one.

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  1. The sharing economy exists in rural areas too, in similar ways. Why tie it to urban living?

  2. Randall Scott White Monday, December 30, 2013

    Good question, Un Suburbaned. Often in rural areas the Sharing Economy operates without the condensed urban situation, and neighbors may know each other / have established trust more than fast-moving apartment dwellers, for instance. While software can serve both (www.brightneighbor.com – a plug, yes!), there is something to be said about face-to-face trust for shared items rather than online profiles rated by others.

    1. Randall, I agree, but sharing is also far simpler with population density…much more likelihood of person X desiring what person Y is offering within a workable distance.

  3. Katie, are you so sure about this? “It doesn’t work so great when the resource is plentiful and cheap — see some of the less successful sites that focus on sharing smaller objects.” If you could share some of those sites it would be helpful in understanding what you mean.

    Might it just need a change to the model to work for more plentiful and less expensive?

  4. Awesome to see the evolution of collaborative consumption patterns across different developed and developing country markets. That regulators, tax collectors and big companies in the world’s largest economies are now sniffing around this economic model that has been embraced by millions is a measure of its value and growth potential.

    We took a leap of faith when we recently launched SleepOut.com with the intention of providing a horizontal accommodation marketplace to “Occupy Empty Beds” throughout Africa and the Middle East. Rather than launching a tried and tested B2B and B2C Hotel Portal/OTA we kept it sufficiently broad with a focus on user-generated content and C2C. The site was based on a pilot project we started on a small island in the Indian Ocean (Lamu, Kenya) but our growth in recent months now with Hosts and Guests in 38 countries has been surprising.

    The online trust that new eCommerce platforms and marketplaces are building in Latin America, Asia and Africa should also create incredible value given the central role of social capital and trust in developing emerging economies. The P2P marketplaces that are able to effectively transcend existing trust barriers while leap-frogging traditional payment technologies (e.g. mobile money) are likely to experience an incredible upside.

    Conveniently, the sharing economy is all about building reputation and as these trustworthy individual and brand reputations emerge in developing markets, I think we are going to see big changes in the way buying online is perceived and the rate at which eCommerce evolves.

    I’m genuinely excited to see how the power of technology will disrupt these fast growing markets to improve efficiency in the value chain, provide users with an overall better experience while building much needed reputation capital.

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