Becoming the world’s biggest taxi company without owning even one single car. This was Uber’s promise, and accompanied by Airbnb they unfolded like textbook cases for exponential scalable growth of the platform economy over the last years. Growing by facilitation, without carrying the risk of the traded assets. It provided Uber 12 billion Dollar investment money and a corporate valuation of roughly 70 billion Dollar.
This success story soon started to show its first cracks, with the leave of Uber founder Travis Kalanick last month being a highlight. Not only has the exponentially growing company, with a momentary corporate value of about 70 billion, a cultural problem. It also becomes clearer by the day that, while the customers are satisfied with Uber’s user experience and their prices, the drivers are being neglected in many ways. The question rises more and more frequently: What would be the alternative?
Within the platform economy, social media companies like Facebook, Youtube, and LinkedIn have been around for a long time. Now there appear organizations that don’t own anything, but have started successful businesses by taking on a facilitating role.
The platform economy is a sector in which online platforms facilitate individuals to share assets and to make transactions.
Until 2009 these transactions only took place in the digital domain. And as we live in a growingly internationally operating world, it was expectable that for each segment one dominant platform would surface. Everybody being on Facebook, requires every newcomer to go there where everybody is: on Facebook. This so-called ‘network effect’ results in entire markets being governed by only one player, and makes almost impossible for another (new) player to claim this position.
From when the sharing economy (Airbnb, Peerby, Snappcar) and gig economy (Uber, Helpling, Werkspot) arose, it soon became clear that this game has a different dynamic. Although the matchmaking processes of these kinds of platforms are executed in the digital domain, yet they are followed by a real world physical transaction.
One example: the client ordering a cab through the Uber platform is connected with a driver, and meets him physically. Which implies a good chance that they live in each others proximity, as there surely is no added value for the driver in driving hours to the spot where he can pick up his clients.
By keeping the transactions local, the competitive advantage of one single international player to whom everyone is connected is a whole lot smaller. What remains is the advantage of a strong –but fragile– brand and the fact that building a software solution is a costly matter. And exactly that is the solution provided by the Finish company Sharetribe. Sufficient reason for me to hit the road to Helsinki and meet up with founder and chairman Juho Makkonen.
WORDPRESS FOR MARKETPLACES
Sharetribe was birthed in 2013, when entrepreneur Juho and his co-founder failed twice in building there own marketplace. Juho, “We realized that we, as well as our fellow entrepreneurs, spend far and beyond the most money on building our own software solutions. And software, however an important part of the solutions we built, wasn’t the key to our success.”
The idea arises to build a WordPress-like model for online marketplace software, to enable everyone to realize their own (local) Airbnb or Uber. At this point it is possible to launch a state of the art marketplace with Sharetribe, without having any technical skills. This enables the initiator to fully focus on engaging and activating the community, which by using your solution turns the concept into a success.
SPACE FOR AND FOCUS ON LOCAL NICHES
Juho confirms my previous assumption that it is hard to build or offer a universal broadly applicable solution. And states, “When taking a look at the growth of a platform like Uber, we see they expand by taking city by city. Each city houses completely different citizens. Of course, the renown of a brand and past experiences are an advantage, but still you start every city from scratch. Having about a 1,000 drivers in one city, doesn’t help you a bit in the next city. The American gig platform Taskrabbit took an even more extreme approach: they grew ZiIP code by ZIP code.” This challenging growth strategy makes clear that the promise of platforms to lower transaction costs becomes very precarious, a second assumption Juho confirms during our conversation.
Juho continues, “A second challenge for platforms is that they can only be successful at the time they focus on a specific ‘vertical’. The booking flow for the sharing of a car is entirely different from the process of sharing accommodations. This, however, seems to be a similar process to the outside world, yet in fact it is very distinct. It is virtually impossible to be a successful platform, when you could share ‘anything’. In many verticals it is, given the current pattern of expenses, nearly impossible to start a healthy business. Especially when taking into account the profits needed to attract Venture Capital investors. The only option left is a drastic cut in the expenses. And especially that is what we are providing. Amazon’s Jeff Bezos put it clear by stating that, ‘Your margin is my opportunity.’”
Currently 40.000+ persons have created a test account on the platform and about 700 members own a paid subscription. They originate from over 50 different countries. Does that make Sharetribe a success? Juho: “When we launched our platform, we discovered that the greatest challenge of our clients isn’t only in the building of an online market place, but the building of a successful one. From the time one has developed their website, things have just started. Ultimately, a successful marketplace is a marketplace where supply and demand meets each other. This reaches far beyond technology”. The success of an Airbnb isn’t so much their technology, as an in-depth study would show that it isn’t overly unique. It’s all about the execution strategy.
To help their clients to be successful, Sharetribe started their own ‘academy’ last year. An online course based on experiences of successful marketplace entrepreneurs helping users successfully building and expanding their model.
“We bring along 10 years of experience in building successful marketplaces, but have also gathered a lot of data about cases that worked and that didn’t work. In the years to come, I can imagine myself using these data to help clients become successful.” This, moreover, would be a great addition to our current business model, facilitating hosting.
The discussions about platforms like Airbnb and Uber have definitely not passed Juho’s attention. “The current platform model pulls much value from the society and her users, without taking– the responsibility involved. Personally, I advocate models that combine ‘profit’ and ‘purpose’. In my opinion, we’re moving more and more to solutions which deliver on the promise of a more democratic internet.” Sharetribe being launched as an open source solution from day one, shows that Juho walks the talk.
His ambitions reach beyond, “Right now we are relatively traditionally structured as an organization. Though, I believe in a future where platform organizations will shift to a model of ownership and governance by users themselves.” Currently the rise of platform cooperatives –platforms which are being owned and governed by their respective owners– is significant in America. In Denver, CO, 800 taxi drivers invested 2.000 USD each to launch there own cooperation and the building of their own app, gaining them a current market share of 34 percent within their own region. Juho: “That is the real future to me: the transition away from global to local platforms, niche platforms owned by users. This is my every day motivation to invest my time and energy in my company; making this ambition become reality.”
The original blog and interview was posted on Intrapreneur.nl