Airbnb, Peerby, Snapcar, Uber, a list that seems to grow day by day. All these companies have something big in common, their business models are based on the principles of trust. But in a time where suspicion, mistrust and fear overrule faith, hope and believe, how can these companies thrive?
The current decade has shown us that people have lost their trust in companies, governments, NGO’s and other institutions. (The Trust barometer Global report, 2017) The most recent and painful occurrence that marks this era was the decision of the United Kingdom to leave the European Union. While on one side we seem to lose faith in the power of governments and institutions, we have arrived in a worldwide where companies thrive on the fundaments of sharing. One of the companies that absolutely shook the world upside down with a business model based on the principles of the sharing economy is Airbnb. Joe Gebbia Co founder of Airbnb pitched the following idea to his investors:
“We want to build a website where people publicly post pictures of their most intimate spaces, their bedrooms, the bathrooms — the kinds of rooms you usually keep closed when people come over. And then, over the Internet, they’re going to invite complete strangers to come sleep in their homes. It’s going to be huge!” – Joe Gebbia
After his pitch he was disappointed to hear no one was interested. But no wonder the investors were not interested, this was so new, so risky and so not like anything else. Luckily Joe Gebbia did not give up on his idea. Now an average of 425000 people use Airbnb every night worldwide. Airbnb is one of the biggest ‘hotels’ in the world, without physically owning a single hotel. It is currently valued at $31 billion, almost twice the value of the 98-year old Hilton which does own actual real estate. (Overfelt, 2017)
Now the question remains, why does it work? How come people felt this idea was idiotic and ridiculous back in 2008 and are now happy to share their car, drill or even their home?
The key principle according to Joe Gebbia is “The connection beyond transaction”. (Gebbia, 2016). The foundation of the business model is still is based on the economic transaction made, regardless the nature of this trade. And the connection made is more than just a bonus. It means you actually share a part of yourself with this stranger, which in some cases even leads to a real friendship. However, you also bear a responsibility with you since the renter trusts you with his or her personal belongings. The fact that all these business models work so well is that people can step out of their comfort zone but at the same time a safety net is provided by means of a review and reputation system. In all business models the review aspect is at the center of success.
According to a recent study by PWC on the sharing economy, 89% of consumer panelists agreed that the sharing-economy marketplace is based on trust between providers and users, and 69% said they would not trust a sharing-economy company unless recommended by someone they personally trust. (PWC, 2015)
This emphasizes the bridge that people have to build in order to participate and engage in the sharing economy. People need a confirmation that the stranger they are about to do business with is indeed a trustworthy person. Bias is something that we can’t ignore and will always be present. One of the strongest biasness we have is that we tend to trust people based on their similarity only, which is called homophile. However, a good rating and review system can help to counteract as shown by a study from Stanford University. If a person has more than 10 positive reviews, the perception will change and reputation is seen as more important than similarity. (Gebbia, 2016) This shows that their is a way to break through the ceiling of bias.
That the sharing economy is booming is well known, and it has been flourishing by promising new technologies. Especially the ease at which individuals can connect and exchange information and goods is ground-breaking. However, one must not forget that these platforms and business models can only truly thrive when supported by a good, well-established political and societal context.(PWC, 2015) Especially legislation and governance has not proven to be ready for these transformational companies.
Sources
Edelman. 2017. The 2017 Trust Barometer Global Report, I [online]. Available at: https://www.edelman.com/global-results/ (Accessed: 12/10/2017)
Gebbia, Joe. 2016. Ted Talks. How Airbnb designs for trust. [online].https://www.youtube.com/watch?v=16cM-RFid9U (Accessed: 12/10/2017)
Overfelt. M May 2017. It’s been a trip to $31 billion. Now Airbnb wants to remake the entire industry. [online] Available at: https://www.cnbc.com/2017/05/15/its-been-a-fantastic-voyage-to-31-billion-what-airbnbs-next-big-trip-isnt-booked.html (Accessed 7/10/2017)
Stein, J. January 2015. Sharing Economy: Baby, You Can Drive My Car, and Do My Errands, and Rent My Stuff… [online] available at: http://time.com/3687305/testing-the-sharing-economy/ (Accessed 8/10/2017)
Price Waterhouse Coopers C. 2015. The Sharing Economy Consumer Intelligence Series. [online] available at: http://www.pwc.com/CISsharing (Accessed 9/10/2017)
