Hello and welcome to Oversharing, a newsletter about the proverbial sharing economy. If you're returning from last week, thanks! If you're new, nice to have you! (Over)share the love and tell your friends to sign up here.
Walt Hickey and I talked scooters, first- and last-mile transit, and the 2019 IPO rush for the weekend edition of his very excellent newsletter, Numlock News. Walt also gifted me my favorite-ever Secret Santa present, a theme song for Oversharing he commissioned from a freelancer on Fiverr.
Here is a story in The Verge on how Bird could spread the scooter gospel without going bankrupt. It’s called “Bird Platform,” a franchise-like setup through which Bird plans to sell scooters and license its technology to people outside the US and Europe. Those “entrepreneurs” would buy scooters from Bird and then pay it a 20% fee on each ride to use its technology. They would also shoulder all the costs of operating their mini-fleet of scooters, like charging and maintenance, which so far total around $2.75 per trip. In other words, Bird wants to Uber-ify scooters with the sort of “asset-light” business model that was all the rage in 2014.
“It came out of a brainstorm around how do we take the mission to the world,” says Bird CEO Travis VanderZanden of Bird Platform, who I can only imagine was so overcome at the mere thought of convincing folks to become entrepreneurs by buying scooters from Bird and then also paying it a fee to absorb all the operating costs that he forgot to fully formulate his sentence. Bird plans to test out this platform arrangement initially in New Zealand, Canada, and Latin America, and to all aspiring entrepreneurs there I can say only please read this first.
Passing upfront device and operating costs along to other people should help Bird’s unit economics which, as we’ve discussed, are quite bad. The lifespan of a scooter, for example, stops being Bird’s problem if the company simply, er, flips that Bird to someone else at cost. My guess is Bird is also hoping the platform setup helps it avoid burdensome regulatory costs, as it could argue the “entrepreneur” is the local operator and therefore responsible for things like a daily operating fee charged by the city.
Elsewhere in scooters, Wired reports that several companies—including Spin, Bird, and Lime—are starting to hire part- and full-time employees instead of independent contractors for their operational needs like charging and mechanical repairs in the US:
Spin is taking a different approach to scooter operations, at least in Los Angeles: Instead of contract workers, it's hiring employees to collect, charge, fix, and redeploy its scooters every day. Those who work more than 30 hours a week are entitled to full benefits: paid time off, health and dental insurance, and commuter benefits. They’ll get a W-2 form come tax season. If the experiment works in LA, where the company has hired 45 people so far, Spin says it expects to hire more workers in other markets as well.
Shifting to W-2 workers could make sense as scooter companies introduce vehicles with batteries that can be swapped out when depleted, instead of the entire device needing to be taken somewhere and charged. This swappable battery model is what a number of companies are moving toward, including Lyft, Bolt, and a company called VeoRide. When you can switch out the battery instead of the entire scooter, it makes sense to have a team of workers with a van full of fresh batteries traveling around a city and swapping them out as needed, and might be cheaper than paying contractors ad hoc. And since those battery-swapping workers might need to operate along pre-determined routes on fixed schedules, and receive some training, it’s logical to hire them as W-2 workers, with health and dental insurance.
The Atlantic built a spreadsheet of 105 Uber-for-X companies that received a collective $7.4 billion in venture capital, and tried to track what became of them. (Note that Uber and other ride-hail companies are excluded from this list.) It found about 18% were acquired, 52% are still in business, 26% vanished, and 4% achieved unicorn status, meaning a valuation of $1 billion or more. A few of these companies got started around 2010, but most of the Uber-inspired boom happened from 2012 to 2014, a golden era of venture-capital subsidies. These included six alcohol delivery startups, five laundry-washing services, and four on-demand massage providers.
Meanwhile, over at Medium, Susie Cagle declares the sharing economy “was always a scam,” and a “Trojan horse for a precarious economic future”:
For years, the sharing economy was pitched as an altruistic form of capitalism — an answer to consumption run amok. Why own your own car or power tools or copies of The Life-Changing Magic of Tidying Up if each sat idle for most of its life? The sharing economy would let strangers around the world maximize the utility of every possession to the benefit of all.
This strikes me as a selective history. One reason we have such a hodgepodge of names for the “sharing” economy—gig economy, platform economy, networked economy, on-demand economy, peer economy, Uber economy, collaborative economy, etc.—is because people realized fairly fast that “sharing” was a misnomer for what was really going on. Even the government figured this out and in 2016 proposed rebranding these companies as “digital matching firms.” Arun Sundararajan, a professor at NYU Stern who wrote a book on the sharing economy, favors the phrase “crowd-based capitalism.” In the beginning there were a few true sharing platforms, like Couchsurfing, but it quickly became apparent that most were transactional. Cagle seems mad the “sharing” economy didn’t live up to the ideals preached by its biggest acolytes, but does anything ever?
Back at The Atlantic, Alexis Madrigal puts it better:
The basic economics of moving human beings and stuff around the physical world at the touch of a button is not an obviously profitable enterprise. And even when venture capitalists are willing to buy growth for these companies, they still tend to pay their workers close to minimum wage—especially after considering expenses—and generally don’t provide the nominal security of an actual job.
The problem isn’t that the “sharing” economy didn’t share, it’s that it was a massive experiment in convenience made possible by smartphones, venture capital, and contract labor from regular people who tended to get screwed over when the venture funding went away and the company realized it didn’t have a sustainable business.
Also in retrospection, Uber will pay $20 million to settle a worker classification lawsuit that once seemed like the greatest challenge to its business model. The suit, which at one point encompassed as many as 385,000 drivers in California and Massachusetts, alleged that drivers had been misclassified as independent contractors when they were in fact employees. The chance that drivers could be deemed employees, forcing Uber to pay them benefits and a minimum wage, has hung over the company even as it has pushed toward an initial public offering. The settlement still requires approval by a judge (the judge tossed a previous $100 million settlement). It seems safe to say Uber will be glad to have this one wrapped up.
Airbnb paid more than $400 million to acquire HotelTonight, a site that curates listings from boutique hotels and the occasional hotel chain. HotelTonight is popular among the millennial crowd for its mobile app, which offers “ephemeral” deals designed to help travelers avoid decision paralysis. It makes money by taking a cut of bookings generated through its site.
My coworker Rosie Spinks, who has written a good bit about HotelTonight, is interested in what the acquisition will do for Airbnb’s messy booking experience:
HotelTonight is also quite different from Airbnb’s booking experience—which, in step with the company’s impressive and dizzying transformation, has become increasingly complex. Once you get past whether you want to book a restaurant, “experience,” or accommodation, and you’ve entered your dates, destination, and number of travelers, you are then presented with four different categories for “home type” (entire place, private room, hotel room, shared room) and then, in another set of filters a couple clicks away, 15 different property types to choose from (ranging from boutique hotels and chalets to lofts and cabins). One of the perils of providing an “end to end” travel experience, it seems, is that you need the booking experience to keep up with it.
As someone who has personally become overwhelmed browsing inventory on Airbnb, I second this description. Airbnb is working to add more professional and curated listings—more hotel-like, you might say—to its site before it goes public. Such listings make it easier for customers with last-minute travel plans, which can be difficult for Airbnb hosts renting out a home or spare room to accommodate. They could also be easier to navigate than the dizzying array of home listings where you need to read a critical mass of guest reviews before feeling confident enough to book. In January, Airbnb said the number of rooms available on its site that hosts classified as hotels, bed and breakfasts, hostels, or resorts increased 152% over the previous year, though it didn’t provide the underlying numbers on that inventory.
The deal could reassure investors as Airbnb eyes a public offering. Risks to Airbnb’s business likely include competition from major online travel booking platforms like Expedia and Booking.com (Airbnb recently bragged that it had more listings than Booking.com, at 6 million compared to 5.7 million). The company also continues to do battle with cities over how its short-term home rentals should be regulated, putting the business at risk in some of its biggest and more important markets, like New York City, Paris, and Barcelona.
Blue Apron might be a penny stock, but in-store meal kits are a boon to groceries, according to a recent survey by Nielsen. The market-research firm reports that 14.3 million US households purchased meal kits in the second half of 2018, up 36% from the same period in 2017. Nielsen counted 187 new meal kits as being added to retail stores during 2018, and said in-store sales of meal kits totaled $93 million for the year. This “meal kit mania” remains limited to wealthy consumers with income of $100,000 a year or more. Online, they are declining in popularity among middle income consumers ($50,000 to $70,000) who seem to have decided that they don’t want to pay a premium to get their recipe ingredients shipped together in a box. Meal kits are growing fastest among those ages 35 to 44, and after that with millennials.
Also popular among consumers is restaurant and grocery delivery, which remains a hellish endeavor for restaurants and grocers. The Wall Street Journal reports that the average cost of delivering an order for a supermarket is $10, but most stores recoup only $8 from customers because they fear alienating shoppers with higher fees. Only 1% of nearly 3,000 consumers surveyed by consulting firm Capgemini said they would pay the full cost of grocery delivery, a statistic that is both shocking and unsurprising.
Why unsurprising? Years of venture-capital spending on the food delivery space, plus Amazon’s free Prime shipping, have taught consumers to expect stuff—including meals and groceries—to be delivered practically for free at the touch of a button. That is hardly realistic. Recall Alexis Madrigal on the basic economics of moving stuff around the physical world not being an obviously profitable enterprise; recall Shawn Cook and his $94 cough medicine; recall why Maple took away the cookies. But once consumers expect to pay very little, it can be very hard to get them to pay more.
The problem isn’t limited to boutique grocers or mom-and-pop restaurants or Travis Kalanick’s cloud kitchens. Panera, Kroger, Target, and Walmart are all feeling financial pressure from their delivery efforts. Amazon has yet to crack it. Instacart, the leading grocery delivery startup in the US, “continues to lose money on orders, according to people familiar with the metrics,” the Journal reported. Let me repeat that: Instacart—a company founded in 2012 that has raised $2 billion in financing, is valued at nearly $8 billion, and may go public this year—still loses money on the basic thing it does.
This time last year.
Oversharing took a break while I was in Singapore! Two years ago instead: Travis apologizes, Uber #greyballs, and absurd receipts from Postmates and Instacart
Grab Confirms $1.46 Billion Investment from Softbank’s Vision Fund. Softbank launches $5 billion fund for Latin American tech. Softbank plans $500 million fund for early-stage investments. Remix raises $15 million to help cities plan transit. Court drops Paris lawsuit against Airbnb for illegal listings. Mobike retreats to China. Ritual raises $25 million for subscription vitamins for women. Italian co-working startup raises €44 million. “Don’t worry about making money right now.” Lyft-Udacity scholarships. Kakao launches e-bike sharing in South Korea. Amazon spent $14.2 million on lobbying in 2018. Walmart leads at grocery pickup. Move Fast and Build Solidarity. Cannabis companies see older women as a growing customer base. Boeing CEO predicts the Jetsons in a decade. Austin builds a mini Silicon Valley. Bolt nabs Bolt. “Capped profit.” Silicon Valley wants to build a monument to itself. How Sim City Inspired a Generation of City Planners.
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