Is the growth of Airbnb sustainable?

4

October

2016

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The rise of the sharing economy was introduced by several e-commerce, not so much anymore start-, ups. The peer-to-peer markets have replaced the traditional markets. The peer-to-peer markets introduce a business model formally unknown to the traditional markets. The markets no longer maintain their own resources to among other things decrease the costs of operating, but this also increases the risk that the growth of the company cannot be sustained. The intermediaries in the peer-to-peer market have an increasing stake in both sides of the supply and demand side of the market.  An example is Airbnb influencing the revenue made by hotels. The impact it has on the hotel market is yet not identifiable. The causal impact of this phenomenon on the market revenue created by hotels is unidentifiable because of the non-uniformly distributed impact it has on the consumers. (Zervas et al., 2016)

The rising of Airbnb
The company has outgrown the united states into a global company. The growth of the company into the European market and Asian market is facilitated by government guidelines. The European Commission is supporting the growth of a sharing economy as an opportunity for entrepreneurs and the overall economy (Taylor, 2016). The stated goal by Airbnb of 10 billion dollars of revenue by 2020 compared to the current revenue of 900 million dollars in 2015 also supports the opportunistic expected growth (Taylor, 2016; Kokalitcheva, 2015).

But is the growth sustainable
Several problems arise with the growth of such sharing economies. The rating of Uber drivers is often described as biased, with opinions influenced by among other things by racism (Harman, 2014). And, it seems that a similar effect is occurring within Airbnb. Research shows that members are able to among other things, charge more than other up to 12% because of their physical appearance. When members have increasing concerns about discrimination caused by the members despite the current policies by Airbnb against racism. It then might be justified to wonder such a sharing economy is economically sustainable. (Harman, 2014).

So at the end could the growing business model to exclude their own stock be sustainable or to secure the growth should sharing economies maintain their own stock for operations?

http://papers.ssrn.com/sol3/papers.cfm?abstract-id=2366898
http://www.cnbc.com/2016/06/01/how-airbnb-is-growing-a-far-flung-global-empire.htmlhttp://fortune.com/2015/06/17/airbnb-valuation-revenue/
https://www.theguardian.com/sustainable-business/2014/nov/12/algorithms-race-discrimination-uber-lyft-airbnb-peer

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The rise of the Platform Economy

27

September

2016

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Technological enterprises and companies that started in the digital age, such as Google, Alibaba, and Amazon have understood the power of digital technologies. However, most of these companies’ disruptive innovations are not services or products, they are in fact the platforms that form the foundation for these products and service. This is called a platform-based business model and it changes the way how companies can do business. It results in a system that does much of the work to grow the company (quickly) by itself.

The three main reasons for the success of these platform-based business models are:

  1. Network effects: This exists when two user groups (in most cases, consumer, and producer) generate network value for each other, resulting in joint benefits that increase demand-side economies of scale. The network effects of these platforms, with increasing connected transactions and users, push value creation.
  2. Distribution power law: Platform business models enable a much larger scale. This is done by allowing third parties to sell products in the long tail, avoiding diminishing returns usually associated with these products. E.g. Amazon is able to offer books very specifically tailored for a niche market that would never be sold in regular book shops.
  3. Asymmetric growth: This is the principle of driving demand for their core market through complementary markets, by subsidizing these, or even offering them for free, to users. An example of this is Adobe offering their PDF readers for free to its users. Because of the resulting increased use of Adobe’s pdf reader, producers are willing to pay more to be able to distribute PDF files.

Accenture’s Technology Vision 2016 names platform economy as one of the key trends to watch. It mentions that every company will, eventually, need a platform strategy. They will need such a strategy not only for the growth of their business, but also to be able to fight off the platform-based competition.

 

Sources:

Technology Trends 2016 – Accenture Technology Vision. Retrieved September 26, 2016, from https://www.accenture.com/us-en/insight-technology-trends-2016

 

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