What is the sharing economy?

An introduction to the difference between Couchsurfing, Uber, Airbnb, DoorDash, and Etsy

Editor's Note: Our annual Vator Splash Spring 2016 conference is around the corner on May 12, 2016 at the historic Scottish Rite Center in Oakland. Speakers include Nigel Eccles (CEO & Co-founder, FanDuel), Andy Dunn (Founder & CEO, Bonobos), Mitch Kapor (Founder, Kapor Center for Social Impact); Founders of NextDoor, Handy, TubeMogul; Investors from Khosla Ventures, Javelin Venture Partners, Kapor Capital, Greylock, DFJ, IDG, IVP and more. Join us! REGISTER HERE.

The sharing economy: We all have an understanding of it, but describing it is still a challenge.

We’ve also heard it called many things: “sharing economy,” “collaborative consumption,” “peer economy,” “on-demand,” and even “peer-to-peer marketplaces.”

All the companies placed in these categories have similar attributes: they wed supply and demand. Too often, however, we use the phrases interchangeably when there are actually key differences that should be considered in order to understand how these new categories shape our economy.

The phrase “sharing economy”, most similar to “collaborative consumption” and “peer economy,” suggests an economy based on resources, and not on any abstract system of money. For example, one of the most pure representations of the sharing economy would have to be Couchsurfing, which was founded over a decade ago.

As a host on Couchsurfing, you offer a spare bedroom in your home (or even just a couch) to “surfers,” usually foreigners travelling through the area who need a place to crash. In this case, there’s no exchange of money whatsoever, reflecting a true sharing model.

Yet Uber and Airbnb, not Couchsurfing, are considered the biggest “sharing economy” companies out there, most likely because Airbnb and Uber are valued at $25.5 billion and $62.5 billion, respectively. So where’s the sharing? Someone is either hiring an Uber or renting an Airbnb unit. The only “sharing” piece of the resources used is that the cars and the spaces are owned by individuals and are often underused assets, such as a car, space, and in some cases, a person’s time.

But there’s still money being exchanged. Uber and Airbnb would better be described as “peer economy” companies, because “peer-to-peer” is a decentralized system versus a more traditional capitalist system, where a business owner owns the production and hires the labor. In either case, however, money changes hands.  

Further discrepancies arise when you take a closer look at these two peer economy companies. Most obviously, Uber is an “on-demand” service powered by “peer-to-peer labor,” whereas Airbnb is more of a marketplace. One can get a room on-demand, but that’s not a core part of the platform. And there’s no labor component at all.

This differs from Uber, when every Uber call is immediate. It’s an action that demands immediate action.

So what are the other on-demand startups out there that also aggregate labor? Dozens of food delivery companies (e.g. DoorDash and Instacart), household errands and services (e.g. Handy, TaskRabbit), and many others (e.g. Postmates, YourMechanic, Staffly)—these are less “sharing” economy companies, and more “excess labor” companies. In the case of these companies, there are no assets being shared, but services are being provided by a person.

Companies like Breather, WeWork, and Rover, on the other hand, are more like Airbnb, in that they’re marketplaces, with an on-demand component, but not an excess “labor” component.

Finally, there are the peer-to-peer models that are pure marketplaces, including Etsy, Shapeways, Vinted, and Wallapop. For example,  Vinted has no “on-demand” component, but it is a flavor of the peer-to-peer model since individuals are buying, selling, and swapping each other’s clothes. It’s basically Amazon for secondhand clothing.

But across all these companies, consumers are still paying, which is why the Harvard Business Review argues we should be calling Airbnb and all its peers (Uber, Lyft, WeWork, Instacart, Handy, etc.) part of an “access economy,” not a sharing economy:

Sharing is a form of social exchange that takes place among people known to each other, without any profit. Sharing is an established practice, and dominates particular aspects of our life, such as within the family. By sharing and collectively consuming the household space of the home, family members establish a communal identity. When “sharing” is market-mediated — when a company is an intermediary between consumers who don’t know each other — it is no longer sharing at all. Rather, consumers are paying to access someone else’s goods or services for a particular period of time. It is an economic exchange, and consumers are after utilitarian, rather than social, value.

While HBR makes a solid point, however, it doesn’t look like their article (published a little over a year ago) will make any inroads in changing how we speak about this new generation of companies. As a phrase and category, the “sharing economy” is here to stay, and it will continue to be used to describe services as wildly different as Couchsurfing (a website where people host strangers in their home for free), Uber and Lyft (apps where you press a button to hail a ride from a company contractor), and Vinted (an online marketplace where people buy, sell, and swap clothing).

My next pieces will expand on the sharing economy divisions introduced above, and will reveal how even “peer-to-peer” and “on-demand” are broad umbrella categories that don’t always mean the same thing in every case.

Image courtesy of Zach Welty on Flickr.