The No Bullshit Guide To The Collaborative Economy

by · May 20, 20146 comments

AirBnB wants you to stay in someone else’s house. Lyft wants you to order up a ride with someone you don’t know. Relay Rides goes a step further and wants you to borrow cars from people you don’t know or — shudder to think — loan your car to a complete stranger.

There’s collaborative fundraising, food preparation, clothing and other goods. Everything from loans to leftovers has some sort of collaborative app or approach today. Welcome to the collaborative economy.

But how sustainable is it?

The Myth Of Successful Companies

Jeremiah Owyang is one of the analysts (if not the only one thus far) leading the charge in celebrating the collaborative economy. He likens it to social media in 2004 and points to many companies raising ridiculous rounds of funding to show its traction. We spoke recently and I pointed out to him that the rest of the world — the one outside of Sillycon Valley — looks at those points and just laughs.

Social media was about connecting people for social utility. The collaborative economy seems to be focused on talking people into sharing their stuff with absolute strangers. There’s a vast difference there. Crowdsourced funding? Cool. Random peckerhead sleeping on my couch? Not going to happen.

Also, Silicon Valley is well known outside the Bay Area as the one place where a company with no sustainable business model can be valued at or raise infinitely more money than they’ll ever actually be worth. Rounds of funding is money raised. What the rest of the world wants to see is money made. Big difference.

Collaborative Economy Honeycomb

But Owyang points to key market forces of societies desire to connect, a broad mindset of sustainability and the never-ending population increase (Societal Drivers); the post-recession financial climate, a market of untapped and idle resources and heavily funded startups in this space (Economic Drivers) and Technology Enablers of social and mobile networks that fuel the Internet of everything. These three bucket drivers are behind the collaborative economy and while the companies are certainly over-funded and seem to be bubbles waiting to happen, the business model begets the reason.

Most collaborative companies operate on a two-sided market. They take a fee from the buyer for finding the product. They charge a fee to the seller for finding a buyer. They are a service (think Ticketmaster) that doesn’t own either end of the transaction. They only orchestrate it and charge fees for it. There’s no overhead and lots of potential revenue. The gamble is that enough people will use these services in a growing and sustainable way that one day we’ll be bitching about AirBnB’s exorbitant fees to couch surf. Maybe Pearl Jam will protest them, even?

Don’t be fooled however. People are quick to say Craig’s List and Uber are collaborative. Sans Uber’s recent ridesharing off-shoot, it’s a car service with standards and a mobile app. Craig’s List is online classifieds. Always has been. Likely always will be. Don’t fall for the “see, I’m right” argument unless they go deeper than that.

The Myth of Interested Customers

Not all, but most of these collaborative economy companies and ideas stem from Silicon Valley. To borrow a descriptor from a popular standup comedian, the tofu-farting sect is certainly driving the argument for sustainability, thus the collaborative economy. But the neo-hippie movement is as spreadable and sustainable as the off-brand beers they treasure so: Mainstream Americans with money are older and less inclined to drink something that isn’t incrementally better than the piss water with mass distribution its easy to pick up at CostCo.

Why feel earthy and creeped out sleeping on some California engineer’s futon when Embassy Suites has free breakfast and happy hour?

This isn’t to say there aren’t enough self-righteous hipsters out there to sustain these services and companies in pockets. But try talking a 50-year-old accountant in Little Rock to let a 20-year-old with a face tattoo borrow his Lexus while his band is in town playing at Big Whiskey and see how far you get without being punched in the throat.

Owyang and others will tell you they’re on the bleeding edge and always have been. And sure, I could be wrong. But there’s a big difference in sharing pictures of your kids on Facebook and inviting someone to sleep in the guest room across the hall from them.

The Reality of Signals

If anything, however, Owyang and the executives in these companies are showing signs that indicate there is substance to the collaborative economy. When brands like BMW and Toyota are getting into the collaborative ride and car sharing business, you know it’s not a fool’s game. Other big brands at the table with collaborative ideas and initiatives include Walgreens, Marriott, GE and U-Haul.

Owyang’s Crowd Companies already has research on the market. It’s Sharing Is The New Buying report, a collaboration with VisionCritical and a survey of over 90,000 people indicates the following:

  • Those who have bought custom products (from companies like Cafepress) will double their purchase of said products in the next year
  • 46 percent of respondents said they owned pre-owned goods
  • 13 percent said they’d used collaborative places to stay and professional services before and indicated they’d use them twice as much in the next year
  • 10 percent of people surveyed said they had used crowdsourced money lending and would do so at 2X the rate in the future

There are signals. Brands are paying attention.

When you consider Cafepress, the collaborative economy is nothing new. It has connected designers with customers since 1999. But when the competition and market conditions drive the uniqueness of a service like this down, the profits for the makers dwindle. Then you’re left with having to pay too much for good product or settling for less than what the public demands. It forces you to challenge your notion of collaboration.

Who knows? Maybe Cafepress can steer all these companies in good directions 10-15 years from now when they run into that problem.

The bottom line is that a portion of the market out there is less interested in new, polished and fancy. They’re interested in used, tattered and traipsed upon. Maybe it’s because sustainability is their thing. Maybe they need to feel self-righteous about their impact on the world.

Or maybe it’s because their parents spent too little time teaching them the world is a crappy place made up of experiences where you don’t always win. So leather seats, warm towels and room service make up for it.

Either way, there’s a fee to be made from helping them find their minimal carbon footprint options. Let the Idiocracy commence.

**Writer’s Note: There may have been a touch of sarcasm in the above. I have the utmost respect for Owyang, the collaborative movement and what it can be. But the sarcasm was collected from a group of 40-somethings with kids and homes in the midwest, so it was at least collaborative.**

IMAGE: Collaborative Economy Honeycomb by Jeremiah Owyang and Crowd Companies

 

Did you enjoy this blog post? If so, then why not:Leave Comment Below | Subscribe To This Blog | Sign Up For Our Newsletter |

About Jason Falls

Jason Falls

Jason Falls is a leading thinker, speaker and strategist in the world of digital marketing and is co-author of two books, No Bullshit Social Media: The All-Business, No-Hype Guide To Social Media Marketing and The Rebel's Guide To Email Marketing. By day, he leads digital strategy for Elasticity, one of the world's most innovative digital marketing and public relations firms. Follow him on Twitter (@JasonFalls).

Other posts by

Comments & Reactions

Comments Policy

Comments on Social Media Explorer are open to anyone. However, I will remove any comment that is disrespectful and not in the spirit of intelligent discourse. You are welcome to leave links to content relevant to the conversation, but I reserve the right to remove it if I don't see the relevancy. Be nice, have fun. Fair?

  • http://web-strategist.com/blog Jeremiah Owyang

    Jason, thanks for the thoughtful and real review. Your leadership and experience at Cafepress (and more) will be a driving force for those in the Midwest and beyond.

    1) I do want to share a recent conversation I had with an Iowa insurance company. They also told me these concepts were not new, as the midwest has been sharing for hundreds of years, it’s called “being a good neighbor”.

    They reminded me that farmers shared time, tools, crops, and more. Families would support other families in their neighborhood during times of need. I guess what’s old again is new. But there’s one difference: Technology (mobile, social, internet of things) enables us to be –good neighbors to strangers –and that’s the difference.

    2) On a second thought, I’d like to invite you to a Kansas City “Resilient Summit”this fall that I co-host with Ben Smith, perhaps there’s a role on stage you can play and more. We had folks from Memphis, Huntsville, Nashville, Kansas, and more. We did collaborate, and as a group, created this document: http://www.slideshare.net/jeremiah_owyang/resilient-summit-working-manifesto

  • Neal Gorenflo

    Just want to support what Jeremiah is saying. I can see the average Midwestern suburbanite laughing at this, but what’s also true is that the Midwest is the center of the cooperative movement in the United States. That’s where the highest concentration of cooperatives are (electric, telephone, marketing, manufacturing, banking, farm supply, and more). Sharing and helping one another are strong Midwestern values (as well as Christian values). And as Jeremiah shows, while some may laugh, many others are already doing this. It’s becoming common like taking in boarders was during the Great Depression. This isn’t a Silicon Valley thing, it’s a necessity thing happening on a global basis often powered by technology platforms.

  • Kyros

    I
    don’t entirely agree with what the author believes may be people’s
    motives for being attracted to the collaborative economy concept. He’s
    missing a couple of things, such as:
    - the shrinking income of the average employee (in any country)
    - the inability of governments to provide solutions to all sorts of problems
    - breakthroughs that relate to technology and the internet (such as GPS on mobile phones, and fast internet connections)

    These are the main reasons why people are now forced (and able) to take action and help each other.

    Attributing
    the popularity of the sharing economy to “environmental consciousness”
    and a spoilt childhood seems over-simplified and quite shallow in my
    opinion. Indicates a person with no contact with the real world
    whatsoever, who has solved all his problems and is looking for catchy
    stories to write about.

  • Storewars News

    Nice read! Very informative. Did you know that ASIA Pacific will
    surpass North America in e-commerce spending. Full story here: http://bit.ly/1od4Gy7.

  • http://www.spindows.com/ Clay Hebert

    Jason – a great read. Thank you.

    You make some good points but the early adopters will always be in Silicon Valley and New York. Twitter and Instagram eventually got to the Midwest (where I grew up) as well, albeit in smaller numbers.

    Julia and I used to rent out our NYC apartment on Airbnb. It typically went like this… a couple from Europe was coming to NYC for a week and didn’t want to pay $350-$450 per night to stay at the Marriott Times Square. So they happily rented our place for $280 / night. We took the $280 x 7 and booked tickets to go see family in the Midwest or visit friends in San Francisco. One time we went to see Justin Levy. We didn’t pocket much profit (after our own travel expenses) but that wasn’t the point. We had some fun travel that was paid for by our Airbnb guests. And they were happy and left us 5-star reviews and nice notes. This happened six or seven times until eventually, our building asked us to stop, and we did.

    When I spoke at The Lean Startup Conference in San Francisco, we were staying at a friend’s place out in Cole Valley. No cabs nearby and the train would have required a inconvenient transfer out of my way. I opened the Lyft app, clicked “pick me up” and in 5 minutes, a nice young woman with a Toyota Prius with a huge pink mustache picked me up. I sat in the front and we had a great conversation while she dropped me off at the venue just like a friend would. And it was even cheaper than a cab.

    Is it for everyone? Of course not. Nothing is.

    If you don’t want a stranger to stay on your couch, that’s fine. That doesn’t mean a lot of people don’t. A big part of it is cultural. In Europe, “B&B”s are more popular and they have fewer massive hotel chains like we have in America.

    See the chart below. Because they don’t own the underlying real estate, Couchsurfing and Airbnb have grown faster and bigger and more global than the largest hotel groups in the world. Couchsurfing never had a solid business model but Airbnb does.

    I always enjoy reading you and I appreciate your insight and sense of humor (and sarcasm). But I think your skepticism here may be similar to people who didn’t “get” social because they hadn’t tried it yet. Twitter and Instagram still aren’t for everyone but there were plenty of “who cares what you had for lunch” criticisms of Twitter early on. You had seen the value of social and have built a nice career around teaching others about it.

    And just because it would be fun and we both like whiskey, if you’re up for it, let’s figure out some sort of “long bet” on this collaborative economy stuff. Like, “in ten years….” That way we can both make a prediction and put our money (or bottle of whiskey) where our mouth is. Plus, it would give us an excuse to get together and drink some whiskey. :)

    Hope you’re well, my friend.

  • pgillin

    I love this post, Jason, and I can’t help but be struck by the contrast between your perspective from the Kentucky heartland and Jeremiah’s from the anything-goes Bay Area. I have great respect for both of you and I think you’re both right.

    Much as the collaborative economy excites me, there are innate behaviors that these services defy, and I expect that acceptance will depend on the situation, the geography and the culture. A lot of these services are popular with young, cost-conscious consumers who are more daring about trusting strangers and taking risks if the value is good enough. I don’t expect 50-somethings to be car-sharing their BMWs in my lifetime, but values do change over time. Sustainability and economic issues can change behaviors, and who knows what would happen if the government started making tax breaks available for using collaboration services?

    Two narratives worth reading are “The Secret Life of an Obsessive Airbnb Host” (http://narrative.ly/couch-surfing-capers/secret-life-obsessive-airbnb-host/) and “Creeped Out by Couchsurfing” (http://narrative.ly/couch-surfing-capers/creeped-out-by-couchsurfing/). They show both the yin and the yang of the collaboration economy and demonstrate the the freedom that these services bring do come with a price.