The limits of uberisation: How far can platforms go?

by admin 29/02/2016

Homejoy was slated to become the Uber of domestic cleaning services. It was a platform that allowed customers to summon a cleaner as easily as they could hail a ride. Why did it fail to achieve success?

by admin 29/02/2016

Homejoy CEO Adora Cheung appears on stage at the 2014 TechCrunch Disrupt Europe/London, at The Old Billingsgate on October 21, 2014 in London, England. Image: TechCruch (Flickr)

Platforms that enable users to come together and buy/sell services with confidence, such as Uber, have become remarkably popular, with the companies often transforming the industries they enter. In this blog post the OII’s Vili Lehdonvirta analyses why the domestic cleaning platform Homejoy failed to achieve such success. He argues that when buyer and sellers enter into repeated transactions they can communicate directly, and as such often abandon the platform. Homejoy was slated to become the Uber of domestic cleaning services. It was a platform that allowed customers to summon a cleaner as easily as they could hail a ride. Regular cleanups were just as easy to schedule. Ratings from previous clients attested to the skill and trustworthiness of each cleaner. There was no need to go through a cleaning services agency, or scour local classifieds to find a cleaner directly: the platform made it easy for both customers and people working as cleaners to find each other. Homejoy made its money by taking a cut out of each transaction. Given how incredibly successful Uber and Airbnb had been in applying the same model to their industries, Homejoy was widely expected to become the next big success story. It was to be the next step in the inexorable uberisation of every industry in the economy. On 17 July 2015, Homejoy announced that it was shutting down. Usage had grown slower than expected, revenues remained poor, technical glitches hurt operations, and the company was being hit with lawsuits on contractor misclassification. Investors’ money and patience had finally ran out. Journalists wrote interesting analyses of Homejoy’s demise (Forbes, TechCrunch, Backchannel). The root causes of any major business failure (or indeed success) are complex and hard to pinpoint. However, one of the possible explanations identified in these stories stands out, because it corresponds strongly with what theory on platforms and markets could have predicted. Homejoy wasn’t growing and making money because clients and cleaners were taking their relationships off-platform:…

Economics

Should we love Uber and Airbnb or protest against them?

by admin 30/07/2015

Some theorists suggest that such platforms are making our world more efficient by natural selection. The reality is a little more complicated.

by admin 30/07/2015

How Mexican taxi drivers feel about the sharing economy | YouTube

Reposted from The Conversation. An angry crowd has attacked Uber cars with bars and stones outside Mexico City airport, the latest in a series of worldwide protests against the ride-hailing app. More than 1,000 taxi drivers blocked streets in Rio de Janeiro a few days ago, and the service has been restricted or banned in the likes of France, Germany, Italy and South Korea. Protests have also been staged against Airbnb, the platform for renting short-term accommodation. Neither platform shows any signs of faltering, however. Uber is available in 57 countries and produces hundreds of millions of dollars in revenues. Airbnb is available in more than 190 countries, and boasts more than 1.5 million rooms. Journalists and entrepreneurs have been quick to coin terms that try to capture the social and economic changes associated with such platforms: the sharing economy; the on-demand economy; the peer-to-peer economy; and so on. Each perhaps captures one aspect of the phenomenon, but doesn’t make sense of all its potentials and contradictions, including why some people love it and some would smash it into pieces. Economic sociologists believe markets are always based on an underlying infrastructure that allows people to find out what goods and services are on offer, agree prices and terms, pay, and have a reasonable expectation that the other party will honour the agreement. The oldest example is the personal social network: traders hear what’s on offer through word of mouth and trade only with those they personally know and trust. In the modern world we can do business with strangers, too, because we have developed institutions to make this reliable, like private property, enforceable contracts, standardised weights and measures, and consumer protection. They are part of a long historical continuum, from ancient trade routes with their customs to medieval fairs with codes of conduct to the state-enforced trade laws of the early industrial era. Natural selection Institutional economists and economic historians theorised in the 1980s that these have gradually been evolving towards ever more efficient forms through natural selection. People switch to…

Economics, Governance & Security

Uber and Airbnb make the rules now — but to whose benefit?

by admin 27/07/2015

Outlining a more nuanced theory of institutional change that suggests that platforms’ effects on society will be complex and influence different people in different ways.

by admin 27/07/2015

The "Airbnb Law" was signed by Mayor Ed Lee in October 2014 at San Francisco City Hall, legalising short-term rentals in SF with many conditions. Image of protesters by Kevin Krejci (Flickr).

Ride-hailing app Uber is close to replacing government-licensed taxis in some cities, while Airbnb’s accommodation rental platform has become a serious competitor to government-regulated hotel markets. Many other apps and platforms are trying to do the same in other sectors of the economy. In my previous post, I argued that platforms can be viewed in social science terms as economic institutions that provide infrastructures necessary for markets to thrive. I explained how the natural selection theory of institutional change suggests that people are migrating from state institutions to these new code-based institutions because they provide a more efficient environment for doing business. In this article, I will discuss some of the problems with this theory, and outline a more nuanced theory of institutional change that suggests that platforms’ effects on society will be complex and influence different people in different ways. Economic sociologists like Neil Fligstein have pointed out that not everyone is as free to choose the means through which they conduct their trade. For example, if buyers in a market switch to new institutions, sellers may have little choice but to follow, even if the new institutions leave them worse off than the old ones did. Even if taxi drivers don’t like Uber’s rules, they may find that there is little business to be had outside the platform, and switch anyway. In the end, the choice of institutions can boil down to power. Economists have shown that even a small group of participants with enough market power—like corporate buyers—may be able to force a whole market to tip in favour of particular institutions. Uber offers a special solution for corporate clients, though I don’t know if this has played any part in the platform’s success. Even when everyone participates in an institutional arrangement willingly, we still can’t assume that it will contribute to the social good. Cambridge economic historian Sheilagh Ogilvie has pointed out that an institution that…

Economics, Governance & Security, Politics & Government

Why are citizens migrating to Uber and Airbnb, and what should governments do about it?

by admin 27/07/2015

What if we dug into existing social science theory to see what it has to say about economic transformation and the emergence of markets?

by admin 27/07/2015

Protest for fair taxi laws in Portland; organisers want city leaders to make ride-sharing companies play by the same rules as cabs and Town cars. Image: Aaron Parecki (Flickr).

Cars were smashed and tires burned in France last month in protests against the ride hailing app Uber. Less violent protests have also been staged against Airbnb, a platform for renting short-term accommodation. Despite the protests, neither platform shows any signs of faltering. Uber says it has a million users in France, and is available in 57 countries. Airbnb is available in over 190 countries, and boasts over a million rooms, more than hotel giants like Hilton and Marriott. Policy makers at the highest levels are starting to notice the rise of these and similar platforms. An EU Commission flagship strategy paper notes that “online platforms are playing an ever more central role in social and economic life,” while the Federal Trade Commission recently held a workshop on the topic in Washington. Journalists and entrepreneurs have been quick to coin terms that try to capture the essence of the social and economic changes associated with online platforms: the sharing economy; the on-demand economy; the peer-to-peer economy; and so on. Each perhaps captures one aspect of the phenomenon, but doesn’t go very far in helping us make sense of all its potentials and contradictions, including why some people love it and some would like to smash it into pieces. Instead of starting from the assumption that everything we see today is new and unprecedented, what if we dug into existing social science theory to see what it has to say about economic transformation and the emergence of markets? Economic sociologists are adamant that markets don’t just emerge by themselves: they are always based on some kind of an underlying infrastructure that allows people to find out what goods and services are on offer, agree on prices and terms, pay, and have a reasonable expectation that the other party will honour the agreement. The oldest market infrastructure is the personal social network: traders hear what’s on offer through word of mouth and…