How to leverage the web-sharing economy now

1Executive Summary

Owning “stuff” has always been the primary way to keep up with the Joneses. But due to a weakened economy, an interest in finding greener options and a new wave of Internet startups, the next generation of consumers will be far more comfortable using goods as a service — from cars to tools to apartments. And these new types of consumers will rely on the Internet and cell phones to manage those services.

This emerging web-sharing movement, which includes startups like Airbnb, RelayRides and ThredUP, has its roots in the maturing way that people use the Internet and cell phones, and the future of the web-sharing economy will rise around location, niche groups and capital-intensive, underutilized and time-sensitive objects. Here is a primer on both the past and future of this movement, as well as five tips for entrepreneurs looking to start a web-sharing startup now.

The origins of the web-sharing movement

The ubiquity of the Internet itself and its unique ability to be able to connect people and help them organize goods and their daily lives has led to the rise of the web-sharing economy, which some call collaborative consumption and others call the Mesh. Older Internet pioneers like eBay and Amazon have paved the way for this movement by creating tools to maintain online trust and reputation — a key element of this movement. Feeling comfortable with allowing people in your neighborhood to share your car (like with RelayRides, Spride Share and GetAround) is a crucial part of the web-sharing economy. (For more on this issue, see “The web-sharing economy and its biggest risk.”)

Car sharing hit the big time in 2011 with the smash-hit success of Zipcar’s IPO, and Zipcar counted around 560,000 members as of March. Researchers have found that the rise of car sharing has acted as a sort of gateway service to the overall movement. A report released late last year from the research firm Latitude found that those who test out car-sharing services are more likely to join other web-based sharing services, and they are willing to share significantly more across categories (housing, food, objects, information and media, etc.) than people who don’t participate in car sharing.

The maturation of mobile apps has also contributed to the rise of web sharing, since a lot of these services can be managed on the fly over the mobile web. Airbnb’s iPhone app enables you to rent an Airbnb pad from, say, the airport, and Zipcar’s mobile app is crucial for helping its users extend car rentals, find nearby cars for spontaneous trips and report problems with cars in the fleet.

The rise of the web-sharing industry is also partly due to the weakened economy of the past few years. A market has opened up for Airbnb’s apartment rental service, thanks to people looking for less-expensive accommodations in pricey cities like New York, as well as a way for owners of high-priced apartments to recoup part of their investments faster.

Managing resource constraint is another trend behind the web-sharing economy. There will be 9 billion people on the planet by 2050, and energy, space, food and water are limited commodities. In cities, dwellers with cramped apartments don’t have the storage space to buy and keep a large tool that they’ll only use once. Many car sharers give up their cars because free and convenient parking spots in cities are unavailable. In that sense, the web-sharing economy and car-sharing services can reduce fuel usage and carbon emissions.

Where is the web-sharing economy going?

Web-sharing services are proving to be the most successful when they are focused on a good or service that is really expensive and that is underutilized. A car is a perfect example. Car-sharing companies point out that privately owned vehicles are used about 8 percent of the time (the rest of the time they are idle), and as we all know, buying a car is oftentimes one of the largest purchases a consumer will make.

Web-sharing sites are starting to grow around specific, niche demographics to offer focused services. For instance, ThredUP and Toygaroo enable parents to rent baby clothing and toys, respectively. Narrowing down the group of users is a good way to find loyal users, in contrast to similar opportunities on a larger site. For example, you could find a parking space at someone’s house to rent by digging through Craigslist submissions, or you could go to the focused community site Park At My House, which is a peer-to-peer parking-space-rental site.

Baby clothes are also a good example of products that make a good sharing service, because they’re time sensitive. The user needs these goods at one point in time but soon doesn’t need them anymore. Babies quickly grow out of new clothes and rapidly tire of toys. Thus ownership of these time-sensitive goods is inefficient.

Finally, geographic areas are fodder for web-sharing economies. Older sites like Craigslist were founded on the principle that the localized web can be an online extension of a neighborhood and provide a valuable web tool for that community. Web-sharing sites have emerged around location to serve neighborhoods — for example, NeighborGoods and TaskRabbit.

So you want to build a web-sharing company . . .

Now that I’ve given you some of the background and key requirements to the emergence of the web-sharing economy, perhaps you’re thinking this would be a good business to build. Here are five tips to remember.

1. Funding is still prevalent. It’s probably one of the best times around to raise money for these types of sites: They might be considered part of the social-media-movement bubble, but they’re also piggybacking on the desire of the American consumer to spend less.

Benchmark Capital finally made out well in its Zipcar investment — which it made a decade ago — after Zipcar went public. Cleantech investor Sunil Paul, the founder of Spring Ventures, is a strong supporter of these types of companies and thinks they will be the future of a low-cost cleantech. If you need any more convincing that these sites are hot, check this out: Airbnb has been rumored to be valued at $1 billion.

2. Mobile will become even more important. The sites that have gained popularity have chiefly grown their users around traditional websites. But many of the future services from the web-sharing economy will likely come out of the mobile environment. A company like Uber, which uses mobile to manage independent car owners who compete with taxi drivers, couldn’t exist without the cell phone. Other mobile-centric services will no doubt emerge as well.

3. Corporations are taking notice. The future of these web-sharing services isn’t just about startups. If the business models work out, the industries that are being disrupted will evolve. For example, traditional rental-car company Enterprise is experimenting with car sharing, and independent hotels will have to find some way to compete with Airbnb.

4. Creating a web-sharing service is low-cost. The value of the service is in the community that grows around the economy. Websites can be launched for very cheap to act as the middleman in an emerging economy, but it’s the users that will be both offering up and renting the products.

5. Security and privacy will be crucial. Despite these services being cheap to build, security and privacy should be taken very seriously. Case in point, the nightmares going on for Airbnb right now. If there is a problem with privacy or security (see all the controversies on Craigslist) for a site, it can be a community killer. Trust is fundamental to these sites’ success.

So now that you have all the background, tips and tools you need, what are you going to focus your web-sharing idea around?

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