California could crush the gig economy
CLVII
Hello and welcome to Oversharing, a newsletter about the proverbial sharing economy. If you’re returning from before I moved to London, thanks! If you’re new, nice to have you! (Over)share the love and tell your friends to sign up here.
👋 from London, where the grass is green and the weather not nearly as bad as everyone says. Oversharing took an extra week off due to life needs like moving and finding a place to live. I have no idea how people did this before the internet, because my entire move was facilitated by digital services. I took Uber from the airport and found a flat on SpareRoom. The absolute best tip I got on relocating to London, and would relay to anyone looking to do the same, was to set up a digital Monzo account. Multiple people had told me getting a traditional bank account is a real headache in which you need proof of a residential address to get a bank, but you need a bank to get an address… you see the problem. Monzo was easy to set up and works like a charm. My coworker John Detrixhe, who recommended Monzo, writes a weekly newsletter on the future of finance for Quartz, and I recommend signing up so that you too can get his savvy advice and insights.
Contract, or not.
Almost every gig company you can think of works because someone at some point figured out that if you hired workers through an online platform and told them they could be their own boss and set their own schedule, then you could treat them as independent contractors instead of employees. Contractors by some estimates are 30% cheaper to hire than regular employees. They aren’t entitled to a minimum wage, unemployment insurance, health care, sick time, family leave, and other benefits that US labor law affords to employees.
Hiring contractors is the secret to why gig services are so cheap. That these services were cheap made them popular with consumers in the first place, which allowed their companies to raise money from venture capitalists, which helped them attract more customers and sign up more contract workers, and so on, until gig platforms became the de facto place for customers to seek out the services they offered, like rides and food delivery, and for workers to provide them.
Now imagine if those workers weren’t actually contractors, but employees who’d been mislabeled as contractors for the better part of a decade. Imagine if gig companies suddenly had to hire their workers as employees, pay them a minimum wage, and provide them with benefits like health care, unemployment insurance, and family leave. The gig model would rupture at its very core. Gig companies may not survive.
That many gig workers could be found employees is no longer a hypothetical. A bill passed by the California Assembly and now with the state senate would classify workers as employees if they don’t perform work “outside the usual course of the hiring entity’s business.” As written, that standard seems likely to torpedo the contractor argument for companies like Uber and Lyft, whose drivers perform the essential function of driving; food delivery companies like DoorDash and Postmates, whose couriers perform the essential function of delivering food; and plenty of other gig companies that rely on contractors to perform their core operations.
Gig companies are scared, and they have turned to scare tactics. Uber and Lyft are urging drivers to sign in-app petitions to “protect” driver flexibility. “Recent changes to California law could threaten your access to flexible work with Uber,” one warning reads, despite the fact that there is no legal requirement that an employee work a fixed schedule. One driver told CBS San Francisco he feared drivers with limited English skills would sign the in-app petition without understanding what it was. Another driver worried the companies would track whether they signed, and Lyft told CBS San Francisco it can see if a driver completes the petition. (Freedom! Flexibility!)
Uber CEO Dara Khosrowshahi and Lyft co-founders Logan Green and John Zimmer meanwhile took the extraordinary step of co-authoring an op-ed in the San Francisco Chronicle pushing back on the California Assembly’s bill and promising a renewed commitment to job security and work conditions for drivers. Uber, Lyft, and other companies have quietly lobbed California lawmakers since last year to shield them from the “outside the usual course” of business test, which was set out in a ruling by the California Supreme Court in 2018, as Bloomberg’s Josh Eidelson explains in this helpful Twitter thread.
Investors are also taking note. Last week, equity research analysts at Barclays estimated that reclassifying workers could cost Uber and Lyft an additional $3,625 per driver in California. That’s enough to boost Uber’s annual operating loss by more than $500 million and Lyft’s by $290 million. “Any wide-scale reclassification of drivers to employees would be a material negative for ride-hailing and further put into question the long term profitability of the industry,” the analysts wrote.
While the bill is still far from becoming law, that we are even talking about it is a big deal. The current Trump-appointed National Labor Relations Board believes Uber drivers to be independent contractors, but as I’ve said before, local- and state-level efforts could ultimately prove much more powerful than a federal ruling. Just as New York City’s unprecedented pay floor for ride-hail drivers changed the conversation on wage standards for contractors, what happens in California is bound to be watched across the country, if not all over the world.
Fiverr.
Fiverr, an Israel-based startup, is a sort of white-collar TaskRabbit—a freelance platform for services like digital marketing, ghost writing, translation, and video editing that don't require a physical presence. On June 13, Fiverr became the latest gig economy company to go public, following the high-profile debuts of ride-hail companies Uber and Lyft.
Fiverr describes itself as a “Service-as-a-Product” (SaaP) company, an unwelcome riff on the established "Software as a Service" category. Fiverr makes money on service and transaction fees from bookings processed through its platform. It offers more than 200 types of service listings, which it calls “Gigs,” a word it has registered a trademark for. (Other registered word marks include “Gig,” “Fiver,” “Fiverr,” “Fiverr Faces,” and “In Doers We Trust,” the tagline on its infamous subway ad campaign.) Fiverr reported a net loss of $36.1 million on $75.5 of revenue in 2018, nearly double its loss from the previous year.
Financial results are only part of the story, though. To test the platform out, I hired three Fiverr sellers to write about Fiverr’s IPO for Quartz, for $5, $10, and $15, respectively.
You get what you pay for. Two of the stories I received were rife with plagiarism, detected with a quick Google search. A third fell through after the seller said I didn’t provide enough information, and asked me to cancel the order. Fiverr bills itself as a time-saver for busy professionals, but it took me far longer to find sellers, provide instructions, wait for the deliveries, and check the work for plagiarism and errors than it would have to simply write about the IPO myself.
(A sample of the $5 story we commissioned.)
This is hardly surprising. It would be unreasonable to expect to be able to buy high-quality work in 24 hours for $5, a rate below the US minimum wage if the worker spent more than 40 minutes on the task. Fiverr doesn’t disclose where its workers are based—its regulatory documents note they live in more than 160 countries—but I’m willing to bet that many of them are located in places where the prevailing wages are much lower than in the US and Western Europe.
What Fiverr does share is that 70% of its revenue in the past two years came from buyers in the US, UK, Canada, Australia, and New Zealand. It’s clear the company’s business depends largely on its ability to put sellers in front of buyers where their services are priced below the market. Fiverr sells the idea that such a platform is a win for buyers and sellers—facilitated by technology!—when in reality it may not be to the liking of either party.
Scooters!
Uber pulled its Jump bikes and scooters from San Antonio, Texas, last week after the city proposed changes that would cut its fleet in half. San Antonio has asked (pdf) seven companies currently operating there to apply for one of three permits as a dockless vehicle operator. The city plans to cap the number of dockless vehicles on its streets at 5,000—there is currently no cap and about 16,100 vehicles—and has proposed new fees of $100 per vehicle and an annual fee for scooter racks and corrals. An Uber spokesman told Texas Public Radio the new rules weren’t why Uber decided to leave. According to survey results (pdf) released by the city in May, about 80% of respondents felt dockless vehicles could look cluttered, 64% said e-scooters were often parked in their way, and 60% said they’d like to see fewer dockless vehicles.
Over in Paris, which I hear now has more scooters than people, mayor Anne Hidalgo says the city needs “order and rules to assure road safety and to calm the streets, pavements, and neighborhoods.” Paris was shaken June 10 by its first reported death of an e-scooter rider, 25, who was struck by a truck. The week before, an 81-year-old man reportedly died outside of Paris days after being knocked over by an e-scooter. Paris had already banned riding scooters on the sidewalk, and planned to limit speeds to 20 km per hour (12 miles per hour) and 8 km/hr (5mph) in pedestrian-heavy areas. The city also plans to whittle its 12 scooter operators down to three and to establish a cap on vehicles, which currently number around 20,000. The city levies fines of €135 ($152) for riding on the sidewalks and €35 ($39) for blocking the sidewalk when parked.
Elsewhere in scooters, Bird bought Scoot, Uber previewed an updated fire-engine-red Jump scooter, Lyft unveiled a scooter with pink wheels, Xiaomi released a bigger bulkier scooter, and a handful of scooter startups launched service in Berlin, making my new home of London the last major European city where e-scooters aren’t legal.
Adventures.
First Airbnb had homes and then trips and magical trips, so why not also adventures? The home-sharing company recently unveiled Airbnb Adventures, described as “Hosted journeys to extraordinary places,” because god forbid someone go to an ordinary place. An adventure in Airbnb vernacular seems to be a multi-day trip, which to me sounds pretty magical, maybe they should call them magical adventures. Sample Adventures on Airbnb include “Around the world in 80 days” (poor Jules Verne), “Hike a Sacred Mountain with Warriors,” and “Island hopping & villages in Indonesia.” Should you live in San Francisco and feel like an adventure, er, experience, closer to home, Airbnb also offers tours of its global headquarters for a mere $24.
This time last year (extended edition).
Bird is the fastest startup ever to become a unicorn
Everything we thought we knew about the gig economy is wrong
San Francisco got rid of the scooters
Other stuff.
World’s top bicycle maker says “made in China” is over. Korean hotel platform Yanolja raises $180 million at $1 billion valuation. Why Airbnb’s IPO Will Outdo Uber’s and Lyft’s. Thumbtack raising $120 million at flat valuation. India’s Bounce raises $72 million for electric scooters. Getaway raises $23 million for “mindful escapes to tiny cabins.” Chinese funding slows to US startups. Grab discussed buying Asia payments startup 2C2P. Uber CEO blames Trump trade war for lackluster IPO. New York City to extend ride-hailing cap. Uber partners with Fair on cheaper cars for drivers. Uber to deliver McDonald’s by drone in San Diego. Kango expands Uber-for-kids service. Aurora buys lidar company Blackmore. Volkswagen drops Aurora. US Postal Service testing self-driving trucks. US House judiciary committee launches antitrust probe of big tech. Walmart adds unlimited grocery delivery. Uber, Bird lose bid for tariff relief on Chinese bikes and scooters. Criminal “gig economy” on rise in the UK. Airbnb Tony Stark’s Avengers: Endgame cabin. Uber Copter. Bird Cruiser. San Francisco median rent hits new highs. Why London Is Better Than New York.
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Send tips, comments, and Fiverr requests to @alisongriswold on Twitter, or oversharingstuff@gmail.com.