Uber, Airbnb and the ‘shar­ing econ­omy’

Financial Mirror (Cyprus) - - FRONT PAGE -

New tech­nolo­gies have made it pos­si­ble to find ei­ther a quick ride, or a place to sleep for the night, in to­tally new ways. While some say these ser­vices are mak­ing the world a bet­ter place, these trends also have a down­side. As Uber and Airbnb face a new wave of law­suits, they will have to adapt their busi­ness model to match so­ci­ety’s needs.

The shar­ing econ­omy is based on a very sim­ple premise. Peo­ple have things to share, such as a ride ‘ from A to B’, or an empty room in their apart­ment. The new “shar­ing” apps al­low them to get the word out, while em­pow­er­ing strangers to easily make con­tact, and pay for the ser­vice, with ease.

Airbnb’s founder, Brian Ch­esky, wisely notes that the sys­tem is based off of trust. Strangers must be will­ing to open up their apart­ments to peo­ple they’ve never met be­fore. Tourists, in the mean­time, must trust that their host will de­liver what they ad­ver­tise. While Airbnb is cre­at­ing a new wave of en­trepreneurs who can make some side-cash by rent­ing out va­cant space, the ef­fects are not all pos­i­tive.

In San Fran­cisco, land­lords have been evict­ing for­merly long-term res­i­dents, hop­ing to make more money from short-term Airbnb visi­tors look­ing for a place to stay for a night or two. Mean­while, due to the de­crease in apart­ments avail­able for those who live and work in the area, the price of long-term rent has been in­creas­ing.

Uber is fac­ing sim­i­lar crit­i­cism from


driv­ers. The ser­vice al­lows peo­ple to find a taxi, or car ser­vice, by sim­ply click­ing a but­ton on their smart­phone. When a driver con­nects with a pas­sen­ger via the app, Uber typ­i­cally charges the driver be­tween 20 and 25% of the trans­ac­tion fee. As taxi driv­ers com­pete to find pas­sen­gers, the Uber ser­vice has em­pow­ered them to find new cus­tomers faster. That be­ing said, shar­ing a piece of the pie with Uber is be­com­ing a real strain for driv­ers.

In a re­cent labour rul­ing in Cal­i­for­nia, the state de­cided that Uber driv­ers should be en­ti­tled to more rights. The heart of the Cal­i­for­nia Labour Com­mis­sion’s de­ci­sion stated that Uber driv­ers should be treated as em­ploy­ees, and not merely as in­de­pen­dent con­trac­tors. While Uber has stated that the Com­mis­sion’s rul­ing could sig­nif­i­cantly hurt its busi­ness model, the com­pany still seems to be ex­pand­ing rapidly into China.

Reuel Schiller, a law pro­fes­sor at UC Hast­ings, be­lieves Uber’s le­gal trou­bles could in­ten­sify should their driv­ers unite.

“Does Uber mind pay­ing out $4,000 a cou­ple of times a month to the driv­ers who have the re­sources and time to bring these in­di­vid­ual cases?” asked Schiller. “I don’t know, but we both know they have that kind of money… The class-ac­tion mech­a­nism is a more po­tent mech­a­nism to gen­er­ate a re­sponse.”

If Uber and Airbnb want to face this back­lash of crit­i­cisms, and con­tinue grow­ing suc­cess­ful en­ter­prises, it seems that they will have no choice but to adapt and ac­com­mo­date the needs of all the play­ers in the shar­ing econ­omy.

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