RISE OF THE INTERNET MIDDLEMEN
New service industry giants that own next to no inventory, but control the sharing economy.
by Airbnb is now the w world’s largest provider of accommodation with more than one million roo rooms available worldwide worldwide. By comparison, the largest hotel chain in the world, Intercontinental ntal Hotel G Group, has just 700,000 rooms. And yet, Airbnb doesn’t actually own any o of its rooms. Airbnb isn isn’t unique in its success either, Uber doesn’t own a single car and is on track rack to becom become the world’s largest transportation provider, and Alibaba, one of the wo world’s largest retailers, doesn’t own a single warehouse or even any product products. So what do these companies ha have in common? They’re all brokers.
Being the e middleman ha has always been lucrative. But thanks to the Internet, it’s never been mo more lucrative. While the average ge har hard-working real estate broker can arrange deals betweenen dozens of buyers a and sellers every month, Airbnb arranges deals between thousands of buyers and sellers every day. In fact, according to the company’s most recently reported ted statistics, there are aroun around 40,000 bookings made daily.
What ma makes these companies more successful middlemen than others that have come before them? They all have ave excellent user in interfaces. All three have easy-to-navigate websites,b it as well as smartphone apps that make it easy to find what you’re looking for, and easy to pay for. Additionally, all three are really good at making you forget that you’re actually interacting with a broker.
The process of requesting an Uber ride, buying goods from Alibaba, or renting a room from Airbnb is quick, simple and doesn’t come with any obvious service charges or ‘caveats’, so it doesn’t even feel like you’re dealing with a middleman.
All three have also spent considerable time building consumer trust. Airbnb and Uber have handleded this by t tying the transaction n betw between buyer and seller to a user’s real identity (thr (through Facebook ok Connect) and through reviews and referrals, both for buyers and sellers, and with hars harsh repercussions s if that tru trust is broken. Of course, it also helps that all three are generally cheaper heaper th than traditional retailers, like hotel chains and taxi companies. They are able to provide a diverse erse and refreshing take on these traditional services too. E.g., ea each Airbnb home is completely unique,niqu as opposed to a templated hotel room; Uber works orks wi with local businesses inesses to offer ‘perks’ such as on-demand lion dance performances during Chineseinese N New Year, or free su supercar rides stocked with champagne during the recent Formul Formula 1 race weekend in SIngapore.
But being t the middleman man isn’ isn’t without its risks. Without any actual product or inventory, Inter Internet brokersrs are very vulnerableb to competition. Consumers are fickle, and while these three comp companies are firmly entrenched as market leaders, all it takes is a better UI or ch cheaper pricesices fo for consumersers to jump ship. Just look at how fast MySpace collapsed after the e laun launch of Facebook.ceboo Competitors are just one good app away from stealing market share from om yo you, and smallermaller localized companies like MyTeksi can appeal to regional demo demographics s and easily overtake you at a local level while you focus on global markets. So while hile i it’s probably bly sa safe to say that Intercontinental Hotel Group will still be around ten ye years from m now now, it isn’t a sure thing to say the same is true for Airbnb. The barriers to entry forr bui building a globa global hotel chain are exceedingly high, but the barriers to entry for building a better UI? Not as high.g
"All three are really good at making you forget that you’re actually interacting with a broker.”