Airbnb debuts Trips, Karhoo implodes spectacularly, and restaurant margins really suck
|Ali Griswold||Nov 22, 2016|
Airbnb convened the Airbnb Open, its annual conference-slash-homesharing-festival, for three days last week in Los Angeles. A lot of famous people were there, including Ashton Kutcher (he apparently lived in Airbnbs after divorcing Demi Moore), Gwyneth Paltrow (her kids are “great travelers”), Lady Gaga, Maroon 5, and Danny Meyer (of Shake Shack fame). For the main event, Airbnb CEO Brian Chesky unveiled Trips, formerly “Magical Trips,” a new feature that helps guests line up activities from playing with Samurai swords to truffle hunting (yes, these are two real examples). Trips is the first step as Airbnb shifts from being an alternative lodging company to an all-in-one travel service. It’s a transition Chesky and his team have to pull off if they want to prove Airbnb is really worth the $30 billion valuation investors bestowed on it this summer.
Aside from generating some good headlines, Trips may also help Airbnb gain a better foothold in cities where it’s facing regulatory pushback. Airbnb has long argued that homesharing provides an economic boost to local businesses by increasing tourism, but the claim is tricky to quantify. With Trips, Airbnb is getting more people to engage with its platform, and in more varied ways. Someone who maybe had no interest in renting out their home to strangers and didn’t care about the legal status of Airbnb before, for example, might now look to it as a revenue stream for their nature walk. If Airbnb wins over enough of those people using Trips, it could in theory rally their support should local politicians try to further tighten the rules on peer-to-peer rentals. Wouldn’t that be magical.
Is the sharing economy already in decline? Per new data released from the JPMorgan Chase Institute last week, average monthly earnings on “labor” platforms such as Uber peaked in June 2014, and participation on “capital” platforms such as Airbnb among US adults has fallen since the previous year. On both types of online platforms, growth in wages and overall participation has slowed considerably after increasing at triple-digit rates for much of 2014 and 2015.
While I find it unlikely that the shift to gig work is going to collapse, it’s interesting that the slowdown has occurred as the state of the broader US economy has improved. It’s not a coincidence, I think, that many of the original “sharing” or “gig” companies were founded during or soon after the Great Recession. Airbnb (2008), TaskRabbit (2008), and Uber (2009) all got their start at a time when millions of Americans had lost their jobs, homes, and life savings. Renting out a spare room or driving a car offered people a way to get back on their feet even as unemployment remained high and traditional corporate jobs hard to come by. Today, though, the economic landscape is quite different. Unemployment is at 4.9%. Wages are slowly ticking up. People who once turned to Uber out of sheer necessity probably have more job options.
Of course, there are still benefits to working in the gig economy. The jobs are more flexible and can be a good supplement for people who need a little extra cash. Previous work from the JPMorgan Chase Institute found that people who worked for companies like Uber were typically doing so to offset shortfalls in their monthly earnings. But there are also downsides: no employer-provided benefits (e.g., health care) or legal safety nets (e.g., a guaranteed minimum wage). In almost every survey of gig work, respondents tend to rate their jobs pretty favorably and say they are happy to trade those traditional workplace protections for the chance to work flexibly and independently. At the same time, churn in the gig economy is notoriously high, and gets higher as you move up the income ladder.
The turnover trend suggests that, contrary to surveys and a lot of advertising, the thing driving people to gig jobs is necessity more than convenience.
Here is a crazy story from Bloomberg on Karhoo, a would-be Uber challenger that collapsed spectacularly earlier this month, and, I mean, this is the opening paragraph:
When bills for a corporate credit card used by Karhoo Inc. Chief Executive Officer Daniel Ishag arrived, employees in the London office of the car-hailing startup often spotted unusual purchases. There were designer shoes and clothing, along with veterinarian’s bills for a pet dog. The employees flagged the costs as potentially non-business related, but signs of lavishness continued—first-class flights, a blowout in Las Vegas, Cuban cigars.
Oh, but it gets better. “Even by the standards of tech startups that fail more often than not, Karhoo’s demise is extraordinary,” opines Bloomberg. Karhoo last year claimed to have raised $250 million but that was a lie; according to records reviewed by Bloomberg it raised $39 million. Of course, employees didn’t really know that until they were informed earlier this month that Karhoo didn’t have enough money to pay them. Where’d it go? Ha, well, let’s return to Mr. Ishag:
Employees described Ishag as persuasive and said he often talked about “creating a reality” for the company. He also gave himself perks like smoking in the office, flying first class and staying in top hotels, while staff members flew in economy and slept at budget inns.
When his dog, a pug, required a medical procedure, about $6,000 was charged for a veterinarian, two people familiar with his expenses said. In Las Vegas for a technology conference, he threw a party with drinks, exotic dancers and party favors that included Cuban cigars with Karhoo’s logo, two people said.
Karhoo reportedly owes $30 million to creditors, employees, and, you know, a variety of other people.
Another good one from Bloomberg, it’s just that kind of week. This story is about Munchery, a San Francisco startup that cooks, plates, and delivers ready-to-heat meals to hundreds of thousands of customers in US cities. Munchery came out of the food bubble (honestly, who didn’t?) and claimed to have made the logistics of meal delivery work with its served-cold approach. But when high-end meat and produce was routinely on the menu, it wasn’t enough. Munchery “has begged its cooks to bring down the cost of the ingredients,” Bloomberg reports. “That often mean no organic chicken. No wild salmon.” Munchery has lost millions of dollars every month and recently replaced its founder and CEO, Tri Tran. Also, the food waste:
From September 2014 to July 2016, Munchery's San Francisco kitchen made about 653,400 dishes (an entree or a side) that never got sold, according to an internal financial document and interviews with ex-employees, who asked to remain anonymous out of fear of reprisal from their former employer. That's an average of 16 percent of the food the kitchen was producing. The value of that waste exceeded $1.9 million, based on Munchery's $2.96 average per dish food cost over that period, according to the document. Former and current employees said the startup was overproducing food in other kitchens and beyond that time period.
I think this tweet from Mike Isaac says it best:
Self-driving nuTonomy cars will be tested in Boston. Ola launches post-paid service in India. Uber Might Have the Last Laugh Over China. Uber nears another settlement. Uber cuts deals with Houston on background checks. Banned Uber Drivers Can Now Appeal in New York. Lyft trades pink mustache for psychedelic amp. Free carpooling on Gett. HomeAway President Says the Company Needs to Win Back Credibility From Home Owners. Airbnb chases tax deals in 700 cities. Americans Are Not Very Keen on Renting Their Homes Out to Strangers. China’s Tech Unicorns Look Increasingly Cursed. Unicorns brace to go public. Instacart shoppers threaten Thanksgiving strike. Uncertain future for H-1B visa. The Hybrid Model of Vehicle Ownership. Uber gift cards. Uber Compliments. Uber Weddings. Theranos whistleblower.