Airbnb and Uber Are Just the Beginning. What's Next for the Sharing Economy.

Airbnb and Uber Are Just the Beginning. What's Next for the Sharing Economy.
Image credit: Monica Dipres

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Managing partner at Karlin Ventures
4 min read
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If you look at Uber’s financials, you might not realize that 2014 was a rough year for the company’s image. Despite being less than six years old, Uber is projected to earn $10 billion in gross revenue this year, and the company was recently valued at $40 billion.

This success certainly doesn’t reflect the company’s ability to foster love from drivers and local governments. It reinforces the fact that, despite Uber’s PR nightmares, the company’s business model is incredibly solid. The ride-sharing marketplace has not only managed to turn the transportation industry on its head, but it’s also become a shining example of the sharing economy.

Globally, the sharing economy’s size in five key sectors was approximately $15 billion in 2014. It’s projected to reach $335 billion by 2025. The success of Uber, Airbnb and TaskRabbit isn’t a fad -- it’s a new way of doing business.

Related: Borrow These 8 Lessons From a New Entrant in the Sharing Economy

A new normal

The idea behind the sharing economy isn’t new. Napster, eBay and Craigslist were all built on its basic tenets. But companies such as Uber and Airbnb have taken collaborative consumption to a new level.

These pioneering companies created affordable solutions for cash-strapped consumers during the Great Recession, and they offered unique income streams for people who needed extra money or flexible work schedules. Airbnb, for instance, was born from its CEO’s idea to help pay rent, while Uber enabled people to turn their vehicles into sources of profit rather than financial burdens.

These benefits made people more willing to take risks -- riding in a stranger’s car or trusting vacationers with their homes -- and created a generation of sharers. With the sharing economy’s first explorers finding success, the next evolution is just around the corner.

Where it's headed

The sharing economy’s story doesn’t end with taxis and vacation rentals. It’s expanding to touch consumers and companies, employees and employers.

As consumers share and recycle their belongings, overall product demand might decrease. Rather than compete with other first-time sellers, companies will compete with millions of consumers willing to rent the same product for a fraction of the cost. This will drive down prices for “owned” things, cutting into business's margins.

Related: Who Exactly Are Uber's Drivers?

Employment will become increasingly uncoupled as more opportunities for flexible part-time work become available. “Unemployment” will be redefined because people can work varied full-time hours in the sharing economy in place of -- or in addition to -- more traditional jobs.

In the immediate future, we’ll see increased marketplace efficiency and consolidation. Just as multichannel networks were built on top of YouTube, new tools and services will spring up to support the sharing economy.

Services such as Zen99, which helps 1099 workers handle their taxes, and Checkr, which provides automated background checks, are softening the rough edges of this new industry and building the groundwork for the next phase.

The sharing economy’s next layer will be a hub-and-spoke model of services. This model will only be possible once these marketplaces have APIs to integrate with each other. Consumers will visit one marketplace to book all the services they need. For instance, people might use OpenTable to not only get a dinner reservation, but to also order a Lyft, buy flowers and book an overnight stay. Integrating these services will create a more seamless user experience and generate new business for sharers.

There will also be opportunities for vertical-specific services within marketplaces. For instance, Laurel & Wolf, one of our portfolio companies, acts as a 99designs for interior designers. By targeting this market, it’s addressing a very specific pain point while simultaneously building tools to boost designers’ efficiency. The total market might be smaller, but the pain point is deeper and accompanied by a greater intent to purchase.

In a few years, we’ll no longer debate the merits and dangers of the sharing economy. it will simply be a fact of life. Traditional businesses can fight it, but doing so means setting themselves up for a loss. There will be growing pains along the way -- and more horror stories, no doubt -- but the sharing economy is here to stay.

Related: Shuddle, the Ridesharing Service for Kiddos and Grandparents, Raises $10 Million

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