What do Amazon, LinkedIn, and Expedia have in common? In the past month, they have all made strategic moves into the Sharing/On-Demand Economy. This is a wake-up call for CEOs that still operate in the Traditional Era of Scarcity.
A month ago, I had the opportunity to share insights from my new in-depth research report “The New Era of Economic Abundance” at the Collaborative Economy Conference in San Francisco.After spending over a year doing heads-down research, it was great to finally get out and talk with people and share my research. The Sharing/On-Demand Economy offers exciting potential for aspiring entrepreneurs (and especially rebels with a cause with social missions revolving around accessibility, sustainability, and community) as the capital continues to flow, with $15.5 billion having been raised by the top 75 companies.
But what I’ve realized since is that this new form of commerce creates an even bigger opportunity for traditional companies that are now able to uncover new sources of value by leveraging their under-utilized tangible physical and human capital through innovative new Sharing/On-Demand Economy business models.
A perfect example is Amazon, which launched Amazon Flex at the end of September, its new On-Demand delivery service. This Goods Delivery platform will enable Amazon to cost-effectively build a long tail of delivery drivers for its 1-hour Amazon Prime Now service while creating opportunities for people to easily monetize their under-utilized human capital by using their own vehicles and Amazon’s routing app.
And less than two weeks later, Amazon entered the Trades Services vertical with the launch of Handmade, a rival to Etsy, featuring over 800,000 factory-free and handmade products from 5,000 sellers. Although Etsy‘s social mission “to re-imagine commerce in ways that build a more fulfilling and lasting world” is admirable, the company must now be questioning its October 2013 strategic decision to broaden its definition of handmade. Although opening its platform to sellers using employees and manufacturing partners enabled it to scale its supply base, it created an opportunity for Amazon to leverage its structural asset base, and attack the artisan marketplace. I actually researched Etsy back in the summer thinking it might be a good potential investment but when I heard about Amazon’s pending entry into the space I decided not to. It is a good thing as Etsy’s stock price has fallen by half since then.
Back on July 31, 2014, I wrote an article titled “Could LinkedIn Become the Uber for Professionals?” The answer is finally YES! On October 19th, LinkedIn quietly launched LinkedIn ProFinder, its Professional Services platform. LinkedIn is piloting it in San Francisco with three categories in the Professional Services vertical (accounting, graphic design, writing and editing). To quickly scale supply and demand, LinkedIn is offering its platform for free but within a year I am guessing it should be in the position to start taking a cut.
On October 26th, Airbnb announced the test launch of Journeys – a fully managed travel service. This strategic move has the potential to expand Airbnb’s Total Addressable Market (TAM) beyond the traditional category of accommodation by creating new blue oceans of demand in the Travel Service market. This hints at Brian Chesky’s ambition to evolve Airbnb into a full-blown hospitality brand that provides a re-imagined end-to-end seamless travel experience.
Ironically, just a week later, on November 4th, online travel company, Expedia, entered the Sharing Economy with its $3.9 billion acquisition of HomeAway. As we mentioned in our report, HomeAway was a pioneer in the Personal Asset Sharing vertical as it launched pre-recession (in 1Q05) and raised a total of $505 million in venture capital financing prior to going public at a $2.15 billion valuation in June 2011. Although the stock rose by over 75% from its $27 IPO price to peak at $47 in late February 2014, it fell back to its IPO price over concern of increasing competition from Airbnb. The acquisition makes strategic sense for Expedia as in October 2013, the two companies entered into a partnership to surface HomeAway’s rental properties on Expedia.com. While this acquisition fulfills HomeAway’s mission “to make every vacation rental available to every traveler in the world“, my money is on Airbnb given its strategic community-focused aspiration “to imagine a world where you can belong anywhere“.
And speaking of Personal Asset Sharing, RelayRides, a companybuilding a long tail in vehicle sharing, just re-branded as Turo with the new tagline “Rent the Car. Own the Adventure“. Although it is not abandoning its accessibility-focused social mission “to connect vehicle owners whose cars would otherwise be idle w/ people who need a car“, this is a strategic shift to position it more mainstream as a high fidelity alternative to renting a car. And with its Series C raise of $47 million (bringing its total raise to $95 million), it will be interesting to watch how it starts to disrupt the car rental companies.
The bottom-line is that just as the democratization of content in the past decade led to structural disruption in media-related sectors (just ask the former executives of Blockbuster, Yellow Pages, Kodak!), the emerging democratization of physical and human capital by Sharing/On-Demand Economy companies will lead to a radical transformation of the corporate landscape. And we are starting to see this as market-leaders like Amazon, LinkedIn, and Expedia seize the opportunity to start shifting their business models from the Traditional Era of Scarcity to the New Era of Economic Abundance.
Disclosure: I have a LONG position in LinkedIn Corporation (LNKD-NYSE).