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We share.
Who wins?
MAY 2016
AUThors
Heloise Buckland
Esther Val
David Murillo
Unravelling the controversies of the collab...
ISBN 	 978-84-608-7969-5
PART 1:
THE COLLABORATIVE ECONOMY
1.1 SETTING THE SCENE
1.2 Unravelling the controversies
1.3 Market controversies
1.4 Gov...
INTRODUCTION
5
In this fourth edition of the Antenna for Social Innovation, we
discuss one of the most fascinating and con...
The collaborative economy
7
Before delving into the complexities and unravelling the contro-
versies behind the collaborative economy, we take a ste...
We share. Who wins? Unravelling the controversies of the collaborative economy
Advocates of the collaborative economy desc...
9
Figure 2. Collaborative Economy Technology Stack
Shareable Resources Layer Marketplace listings, Digital signals
Device ...
We share. Who wins? Unravelling the controversies of the collaborative economy
Table 2. A potted history of the collaborat...
11
The collaborative economy has seen unprecedented and expo-
nential growth over the past five years, disrupting traditio...
We share. Who wins? Unravelling the controversies of the collaborative economy
1.3	 Market controversies
Estimates of the ...
13
and other costs cheaply (for the platforms), than the feel-good
values of sociability, carbon footprint reduction and e...
We share. Who wins? Unravelling the controversies of the collaborative economy
“The continued, rapid growth of collaborati...
15
The report “How to survive and win in the collaborative economy”
published by Crowd Companies shows that 82% of sharing...
We share. Who wins? Unravelling the controversies of the collaborative economy
Clearly a pragmatic scenario would be a com...
17
Taxation is another thorny issue and research suggests that
government tax revenue will decline as the collaborative ec...
We share. Who wins? Unravelling the controversies of the collaborative economy
Different regulators have reacted in differ...
19
The economic crisis coupled with the phenomenon of the Zero
Marginal Cost Society, where the internet has facilitated a...
We share. Who wins? Unravelling the controversies of the collaborative economy
pay was identified as the main reason for l...
21
“Living and dying on Airbnb”
“It’s only a matter of time until something terrible hap-
pens,” predicted Ron Lieber in h...
We share. Who wins? Unravelling the controversies of the collaborative economy
“As we entrust more and more of our lives t...
23
that consumers are more interested in lower costs and conve-
nience than they are in fostering social relationships wit...
We share. Who wins? Unravelling the controversies of the collaborative economy
One of the few sectors that has been studie...
25
BlaBlaCar
27
“We are learning to use our resources in a smarter way thanks
to new technologies. Driving alone in your car for 300 mi...
We share. Who wins? Unravelling the controversies of the collaborative economy
In Europe, carpooling has also flourished f...
29
The rise of BlaBlaCar
BlaBlaCar was founded with a vision of transforming the world
of mobility to make it more efficie...
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.
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Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.

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In this fourth edition of the Antenna for Social Innovation, we discuss one of the most fascinating and controversial economic transformations: the growth of the collaborative economy. This transformation has been accompanied by a series of events that is destined to revolutionise our societies – namely, the expansion of the Internet, as well as the rise of smartphones, social networks, advances in artificial intelligence, and the capacity to instantly process huge amounts of information at a tiny cost. We talk about societies in a broad sense because the new wave of developments in the digital economy will transform the economic sphere of our lives – as well as the workplace, tax system, educational models, consumption patterns, and communications.

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Antenna for Social Innovation. We Share. Who Wins: unravelling the controversies of the collaborative economy.

  1. 1. We share. Who wins? MAY 2016 AUThors Heloise Buckland Esther Val David Murillo Unravelling the controversies of the collaborative economy
  2. 2. ISBN 978-84-608-7969-5
  3. 3. PART 1: THE COLLABORATIVE ECONOMY 1.1 SETTING THE SCENE 1.2 Unravelling the controversies 1.3 Market controversies 1.4 Government controversies 1.5 Workers’ controversies 1.6 Citizens’ controversies 07 11 12 15 19 22 PART 2: BlaBlaCar 26 PART 3: 10 examples of social innovation from the collaborative economy 3.1 CHEGG 3.2 ETSY 3.3 FREEGLE 3.4 KICKSTARTER 3.5 LA RUCHE QUI DIT OUI 3.6 PEERBY 3.7 REFUGEES WELCOME 3.8 SHARETRIBE 3.9 SOCIALCAR 3.10 VANDEBRON 44 PART 4: Final reflections 66 2.1 social impact 2.2 financial sustainability 2.3 innovation type 2.4 cross-sector collaboration 2.5 scalability and replicability references 32 34 36 38 40 42 46 48 50 52 54 56 58 60 62 64 references Annex 1: Stakeholders interviewed for BlaBlaCar 70 73 05
  4. 4. INTRODUCTION 5 In this fourth edition of the Antenna for Social Innovation, we discuss one of the most fascinating and controversial economic transformations: the growth of the collaborative economy. This transformation has been accompanied by a series of events that is destined to revolutionise our societies – namely, the expan- sion of the Internet, as well as the rise of smartphones, social networks, advances in artificial intelligence, and the capacity to instantly process huge amounts of information at a tiny cost. We talk about societies in a broad sense because the new wave of developments in the digital economy will transform the economic sphere of our lives – as well as the workplace, tax system, ed- ucational models, consumption patterns, and communications. We face profound change. As we are talking about disruptive innovation, and a set of in- novations with similar characteristics, we must also discuss the less friendly side of these innovations. This is the starting point for this Antenna and to which we dedicate considerable space. We note that the early and worthy declarations regarding the collaborative economy emphasised its horizontal, humanist, democratic, and environmentally-friendly character. However, we now see a widening gap between those initial ambitions and subsequent developments. It must be remembered that all of this has happened in just five or six years. It is appropriate that a document that is both academic and informative – such as the Antenna – participates in this discus- sion. We approach current debates on the collaborative econo- my without preconceived ideas or premature assumptions, and intend to determine if the collaborative movement is an ally or an obstacle for the aims of social innovation. We want to es- tablish to what extent the collaborative economy can generate innovations whose ultimate recipient is the whole of society, and aim to convincingly explain the impact from a social perspective. In this Antenna, we revisit this area of innovation with the five variables we used in previous editions. This means focusing on: social impact; economic sustainability; type of collaboration established with other agents operating in the environment; and the characteristics of innovation – such as scalability and replicability. The collaborative economy shows positive results for many of these measurements. However, there are grey ar- eas: particularly when we look at who takes most of the profit of ‘sharing’. The results are also less clear than expected when we analyse the impacts on environment and labour. And when we examine the model of governance, we find the early horizontal and democratic promise is unfulfilled, and that reality reveals an operating structure that is hierarchical, opaque, and seemingly arbitrary. Books by Morozov1 or Slee2 have recently opened our eyes. There are plenty of socially beneficial enterprises being developed as part of the collaborative economy, but the term has also been misused by some; while others have parasitically exploited al- truistic and confidence generating initiatives. The concept has also been cited by those with a purely capitalist interest and no inclination to promote the social good. We start with a reading of the critical and demystifying literature produced around the collaborative economy. We emphasise the progress made, but also the unresolved disputes and debates that should be studied in depth. Our case study features a Eu- ropean company at the spearhead of the collaborative economy, the French BlaBlaCar, a pioneer in the field of new mobility and often mentioned in relevant discussions. Finally, as has been customary in previous Antennas, we pres- ent ten initiatives in the form of mini-cases (some in a nascent state) that offer clues about how the collaborative economy can advance in light of the five variables mentioned. The final point is also where we began: unless the social impact of the analysed innovations is emphasised, the collaborative economy will become increasingly distanced from the initial liberational, horizontal, and ecological promises. If we begin calling things by their name, then perhaps we can still rescue for social innovation the good name of the collaborative economy. Sant Cugat del Vallès May 2016 1 Morozov, E. (2013). To Save Everything, Click Here. The Folly of Technological Solutionism. PublicAffairs. 2 Slee, T. (2015). What’s Yours Is Mine: Against the Sharing Economy. OR Books. New York and London.
  5. 5. The collaborative economy
  6. 6. 7 Before delving into the complexities and unravelling the contro- versies behind the collaborative economy, we take a step back to observe how the definitions of this emerging space have evolved over recent years. We then present a brief history of the collaborative economy from the birth of the term “collaborative consumption” in the 1980s to the current regulatory wrangles we are witnessing in 2016. As a final scene-setter we share a couple of useful frameworks that unpack some of the techy jar- gon that underpins the collaborative economy and help give an overall picture of the different types of activity across sectors. Evolving definitions The collaborative economy is made up of a rich and diverse arena of technologically supported systems, platforms and networks that enable individuals to share access to assets, resources, time and skills, and to exchange services, in ways that are faster and cheaper than ever before, and that today are being executed on an unprecedented scale. For the 40% of the world’s population who have access to the Internet, the collaborative economy represents a radically different set of options for the way we live, work, bank and consume. In 2015 Rachel Botsman described the collaborative economy as “the macro paradigm shift the 21st century will become renowned for” and PWC estimated that by 2025 the five main sectors of the collaborative economy could generate global revenues of $335 billion (with peer-to-peer finance and online staffing growing quickest of all) (PWC 2015).3 In 2015 the European Commission launched the first international consultation on the collaborative economy,4 and in the same year the European Collaborative Economy Forum was formed by a group of collaborative economy companies across Europe to facilitate dialogue between policy makers and business.5 In the US, the Federal Trade Commission has organised workshops to discuss competition, consumer protection and regulation issues arising in this new economic landscape. In 2015 the UK Government set out objectives in the national budget to facilitate a related concept, the sharing economy, with the aim of making Britain the “best place in the world to start, invest in, and grow a business, including through a package of measures to help unlock the potential of the sharing economy” (HM Treasury 2015). There is no doubt: this is big, and actors from across civil society, business and government are all taking part. In the following pages we decipher some of the key evolutions around the terminology and concepts used. From collaborative consumption to the collaborative economy Rachel Botsman’s highly acclaimed book What’s Mine Is Yours6 brought the concept of collaborative consumption into the spot- light in 2010 by outlining three different economic models: 1) redistribution markets for unwanted or underused goods, where Ebay led the way in the 90s; 2) product to service systems where the boom in car-sharing is one of the clearest examples; and 3) collaborative lifestyles which include the exchange of any non-product asset such as time, skills and finance. The idea of idling capacity (the term used to describe the untapped social, economic and environmental value of underused assets) was one of the key underpinning concepts behind collaborative consumption and this has translated into a cultural shift away from ownership to access, particularly popular for millennials. Since the introduction of this early definition, the convergence of in- creased internet and smartphone access with the economic crisis has resulted in a much broader phenomenon that extends to other economic areas, namely production, finance and education—in short, what is now described as the collaborative economy—where disruption of traditional models occurs across the board. Production models are evolving with the proliferation of open- source platforms and collaborative maker’s spaces with 3D printers and other technologies enabling citizens to co-design and co-create independently from large corporations. Collabo- rative finance follows a similar trend, where we observe a shift of power and trust away from large traditional financial institu- tions towards individuals and groups that come together either through online platforms or in person. The global crowdfunding market was estimated to have a value of $34.4 billion in 2015 (Massolution 2015) and peer-to-peer lending platforms have also seen exponential growth in recent years. The education sector is also witnessing major disruption as the increasing popularity of MOOCs and peer-to-peer learning platforms is radically changing access to education. 3 The five key growth sectors are peer-to-peer finance, online staffing, peer-to-peer accommodation, car-sharing and music and video streaming. 4 Public consultation on the regulatory environment for platforms, online intermediaries, data and cloud computing and the collaborative economy, as part of the Digital Agenda for Europe. For more information see: https://ec.europa.eu/digital-agenda 5 For more information see: http://eucolab.delanyco.com/ 6 Concept hailed by TIME Magazine as one of the “10 Ideas that Will Change the World”. Botsman’s TED talks on the topic have been viewed more than two million times. In 2015 she designed the world’s first MBA course on the collaborative economy, which she taught at Oxford University’s Saïd School of Business. 1.1 Setting the scene
  7. 7. We share. Who wins? Unravelling the controversies of the collaborative economy Advocates of the collaborative economy describe it as “systems that unlock value from underused assets by matching ‘needs’ and ‘haves’ in ways that bypass traditional intermediaries and distribution channels” (Botsman 2015) with idle capacity, crit- ical mass, trust, community and the concept of disinterme- diation identified as the key underlying principles (see Figure 1). However, the growing diversity of the sector (from the free, no-money-exchanged systems such as couch surfing to bil- lion-dollar enterprises like Airbnb, Uber, Lyft etc.) means that for some the concept of the collaborative economy is beginning to fall short as a common denominator. Spain’s CEO of Airbnb recently stated that while the term was a good way of describ- ing the sector, “it is now becoming outdated as within this huge playing field there are many niches that now form their own cat- egories. Airbnb is hugely different from Uber or BlaBlacar, both in ways of working and in organisational models” (Serrano 2015). Figure 1. “The complete picture”: Categorizing the collaborative economy. Collaborative Finance Collaborative Consumption (Zopa, Kickstarter, Pave) B2B B2C P2P •Collaborative lifestyles •Product service systems •Redistribution markets (Airbnb, Etsy, Lyft) Collaborative Education Collaborative Production (Coursera, Skillshare, Chegg) (Techshop, Fablabs, Quirky) Source: Adapted from Botsman 2015. The debate on sharing definitions In parallel to the consolidation of the concept of the collaborative economy, the idea of the sharing economy is more popular in certain countries. This is the case for the UK, where the concept has gained political support; “it allows people to share property, resources, time and skills across online platforms (…) to unlock previously unused or underused assets” (Wosskow 2014). As noted above, the UK Government has allocated a budget to the sharing economy with several regulatory adaptations and initiatives already underway to facilitate these activities. These include new rules to allow individuals to sublet rooms and allow local governments to use sharing platforms to book transport and accommodation, the digitalisation of criminal record checks as well as a national platform for sharing government spaces. In addition two pilot initiatives will be carried out in Leeds and Manchester to facilitate sharing across transport, space, health and social care. Sharing economy trade associations are also starting to appear; in the UK and Spain the trade associations use this term to encompass the emerging sector of organised networks where participants rent, lend, trade, barter and swap goods, services, space or money. The concept of sharing has generated both academic interest and criticism Hellwig (2015) has defined two types of sharing: “shar- ing in,” the type of sharing that we do with what he describes as the extended self, i.e. family, close friends and relations; and “sharing out,” which we are happy to do with strangers. He con- cludes that the personal value we assign to different assets will affect sharing behaviour. For example, objects that tend to have a high personal value and attachment, such as a laptop, will only be used for sharing in, whereas a hand drill is more likely to be put onto a sharing out type of platform. In the case of cars and flats, those individuals who have less emotional attachments to these resources are more likely to share them out. Critics of the concept have questioned the use of the concept “sharing” to describe an economic activity. After all, if you’re paying for something, is it really sharing? And more fierce opposition has described the sharing economy as “a triumph of public relations artistry” (Taylor 2015). From the access to on demand economy One of the more pragmatic terms is the access economy, which has been described as “people coordinating the acquisition and distribution of a resource for a fee or other compensation” (Belk 2014). This term has received less criticism as it is void of the ethics associated with sharing and the connotations of living in a global connected village and sharing common resources, which formed part of the discourse of the early advocates of collaborative consumption. The recent disruption in the automo- bile sector is a good example of the access economy, whereby the motivations of established players to acquire relatively new car-sharing services is a clear response to the economic oppor- tunity presented by the efficiency and cost benefits of shifting from ownership to access, “a new age where underutilized assets become peer to peer services for hire” (Cusumano 2015). As economic activity in this space grows, definitions are be- coming more precise and many of the companies operating in this space are simply described as “new software platforms that allow service providers and consumers to interact without costly intermediaries” (Edelman 2015). Edelman describes the key components of these new software platforms as the provision of information about service providers (e.g. taxi drivers) and services offered (e.g. short term rental properties), an online payment system, reputation mechanisms about service providers and users, and finally, assistance with dispute resolution. Figure 2 illustrates the different layers of technology that enable the collaborative economy to function.
  8. 8. 9 Figure 2. Collaborative Economy Technology Stack Shareable Resources Layer Marketplace listings, Digital signals Device and Application Layer Apps, Smart devices, Digital payments Developer Layer Data formats, Software Development Kids (SDK), Application Programming Interface (API) Trust Layer Reputation, Ratings, Social logins Data Layer Customer relationship management, Big data analytics, Cloud computing, Inventory management Source: Adapted from Collaborative Economy Technology Stack Version 1.0 (Crowdcompanies) As the software platforms providing peer-to-peer services grow exponentially and smartphones become ever more sophisticat- ed, we are now witnessing a very different kind of interaction between users of the collaborative economy. A far cry from the community sharing philosophy behind lending your neighbour a hand drill or participating in a local time bank, the on-demand economy which instantly matches buyers and sellers to deliv- er goods and services immediately describes the fast, profes- sional, app-based services to deliver holiday rentals, transport, micro-tasks or goods. “Mobile-enabled, on-demand, customised products and services are becoming the new normal” (Owyang & Samuel 2015). In this context it is no longer so relevant to have a personal connection with the person with whom you are exchanging access to an asset, but rather how much it costs, how convenient the delivery service is and the brand of the plat- form. To support the on-demand economy there is a subcategory described as the gig economy where traditional company jobs are broken up into individual gigs where independent workers are paid to do a specific task. Given the fast pace of technological growth and the breadth of activity that spans the realm of peer-to-peer services, new software platforms, the Maker movement, crowdfunding, peer lending and collaborative education it is unsurprising that there is little consensus around the definitions except for widespread agreement that they will continue to evolve. In this publication we have chosen to use the term collaborative economy for sev- eral reasons. Firstly, it is the most established term to date both from advocates and critics, it does not bring up the ethical questions the shared economy faces and it is not restricted to one particular type of activity such as the access or on-demand economy (which excludes some of the more community oriented, long-term service-based platforms). As a final scene setter, in Table 1 we illustrate the sectors with most activity, namely transport, space and finance followed by goods, learning, services, and logistics. Today there are 17 companies valued at a billion dollars or more operating in this space, 8 of which are based in California and 12 in the US. To date there are no billion-dollar companies operating in the fields of health, food, corporate, utilities and municipal sectors which are the remainder of the 12 categories described in the honey- comb model, a visual interpretation of the sector categorised into families, classes and startup organisations (Owyang 2015). Table 1. The 10 Unicorns of the Collaborative Economy Sector Billion dollar companies7 Transport Lyft ($2.5B), Uber ($40B), Ola ($1B), Kuaidi Dache ($8,8B) Space Airbnb ($10B), HomeAway , Wework ($5B) Trust Layer Transferwise ($1B), Lending Club, Prosper ($1.7B), Funding Circle ($1B), Data Layer Etsy, Trademe, Ebay Learning Chegg Services Freelancer Logistics Instacart Source: Adapted from Owyang 2015. A potted history While the past five years have witnessed the most growth of the collaborative economy, we illustrate in Table 2 some of the key phases between the time when the term collaborative consump- tion was first coined in 1980 and 2015 when share economy and ride share entered the Oxford dictionary. It is interesting to note recent developments in two key areas of technology: smartphones and global Internet access. 7 The 10 Unicorns of the collaborative economy are those billion dollar companies that are still private.
  9. 9. We share. Who wins? Unravelling the controversies of the collaborative economy Table 2. A potted history of the collaborative economy and enabling technologies Year(s) Key phases in collaborative economy Investment Smartphone usage Smartphone technologies Internet traffic Internet access 1980 Concepts develop: Edgar Cahn creates time banking. Arcus Felson and Jose Speath coin the term collaborative consumption. 15GB/mo8 (1984) 1990-2000 Redistribution markets: Ebay and Craigslist are launched. Napster starts “pirate” culture in the music industry movement. Ownership gives way to streaming services. 50,000 units of Simon Personal Communicator sold (1993) IBM’s Simon Perso- nal Communicator (1992) Nokia 9000 (1996) Ericsson GS88 (1997) 150,500 GB/mo (1995) 1% of world population have access 2000-2005 Peer-to-peer platforms: Freecycle (2003), couchsurfing (2004) and Zopa (2005). Zopa raises 1$m in venture capital in 2005 738 million mobi- le phone users ITunes launched 1 billion GB/ mo (2005) 1 billion have access 2005-2009 Cloud culture emerges: Economic crisis sees the explosion of cloud and pirate culture and peer-to- peer platforms. Airbnb and Uber launched (2008). Airbnb secures $600.000 invest- ment in 2009 Only 10% of mo- bile phones sold are smartphones Nokia, first colour screen (2000), Blackberry (2002), First iPhone (2007), First Android (2008). Apple Store launched 9 billion GB/ mo (2009) 2010-2011 Growth in shared access platforms: Rachel Botsman advocates a new economy where reputation, community and shared access are key values. Airbnb reaches 10 million stays. Airbnb raises $7.2m and Uber $1.25m. $2.700m raised in crowdfunding sector 9,6% of world population with smartphone, 50% of phones sold are smar- tphones Mobile data traffic is 3 times the size of the entire internet (2011) 20 billion GB/mo (2011) 2 billion have access 2012 Car-sharing goes global: Myteksi launched in Malaysia, EasyTaxi in Latin America, Olacabs in Mumbai, Lyft in the US. 8 million car-share users in Europe. 15,7% of world population with smartphone (more than 1 billion users) More than 100,000 apps in Windows Phone Marketpla- ce with 36 billion downloaded in 2012. iPhone 5 launched 26 billion GB/mo 2013 Big money - big business: Forbes estimates the sector at $3.500m. Boat bound (Airbnb for boats) is launched. Avis buys Lyft for $500m. Lyft secures $60m, Airbnb gets $200m 19,8% of world population with smartphone 33 billion GB/mo 2014 Backlash begins: 30.000 taxi driver strikes against Uber across Europe, NYC state attorney claims 72% of Airbnb stays illegal. European Commission states Uber should meet taxi regulations. BlaBlacar 20m users. BlaBlacar receives $100m investment 24,5% of world population with smartphone Smartphones overtake desktop as primary source of di- gital communication 42 billion GB/mo (2.7 billion times higher than in 1984) 3 billion with access in 2010 (40% of world population) 2015 Regulation debate heats up: Lyft loses bid for lawsuit to treat drivers as employees, European Commission launches public consultation on regulatory issues of collaborative economy. Uber launches in its 300th city. Uber secures $2.8bn, in March Lyft secures $530m and $150m in May 28,2% of world population with smartphone (almost 2 billion users) Iphone 6 launched 3,25 billion with access. (48% Asia, 22% Ame- ricas, 20% Europe, 10% Africa) Source: Authors and various sources (Bloomberg, CISCO, Mitchell, InternetLiveS). 8 Gigabytes per month.
  10. 10. 11 The collaborative economy has seen unprecedented and expo- nential growth over the past five years, disrupting traditional consumption, production, education and finance models on a global scale. These rapid changes have caused backlashes from traditional sectors that struggle to compete with the new players. Governments, consumer associations and citizens alike have also raised concerns. Should Uber operate under the same rules as existing taxi services, should Airbnb hosts pay hotel tax, should TaskRabbit workers receive a minimum wage? Regulatory, fiscal and labour issues are some of the key controversies on the table, however there is also increasing debate about the value distribution of this new billion dollar industry, as well as issues of liability, trust and data protection. Last but not least, and what concerns us most, is whether the collaborative economy is generating a positive social and environmental impact. In this section we unravel some of the controversies that are emerging behind the glamour of this shift from the “me” to “we” heralded at the outset of this new economic era. The aforementioned controversies are not just hot topics in the press, but are also being examined by governments, consumer associations and international institutions alike. The European Commission is currently undertaking a public consultation on the regulatory environment for software platforms, online in- termediaries, data and cloud computing and the collaborative economy to better understand the social and economic role of these interrelated sectors, emerging market trends, dynamics and business models and will produce a series of guidelines for regulators in 2016. Likewise the UK government commissioned an independent study on the share economy in 2014 and has since proposed actions to deal with issues of trust and identity, insurance, digital inclusion as well as industry representation, proposing a European-wide trade association for the share econ- omy as well as a kite mark for responsible sharing. Finally, in PWC’s recent analysis of the economic potential of the sector two key hurdles were identified: “first, major regulatory and fiscal issues need to be resolved; and second, in scaling up, sharing companies face challenges in maintaining their uniqueness and authenticity” (PWC 2014). The debate as to whether the collaborative economy is generating positive social value is also ripe from the advocates of this new space, as expressed by the founder of the Ouishare platform: “Often the narrative behind innovation is disruption for the sake of disruption, transformation for the sake of transformation, but there a social vision of these changes is lacking.” In the following pages we explore some of the controversies that have attracted considerable debate from four different perspec- tives. Firstly, who gets the money in this growing market? What is the value distribution and governance of the software platforms that generate value on the back of the social capital generated by their users? Secondly, we open the Pandora’s box of regulatory and fiscal issues considering the dilemmas around if, how and when to regulate innovation. Thirdly, we look at the emerging precarious labour market of the micro-entrepreneurs who make the collaborative economy tick, who have been described as “employee-serfs” forgoing security, insurance and protection to serve a transaction based, on-demand economy. We then consider the consumer and the implications of living in an era of hyper-accountability and explore some recent controversies highlighted about the motivations of taking part in the collabo- rative economy. Finally we pose the question as to whether the overall environmental impact is positive or not. 1.2 Unravelling the controversies Market 1.Who gets the money? 2. Do the users get a slice of the cake? 3.Traditional companies: share or die? Government 4. In the new “DIY culture”:will the state retreat? 5. Is sharing “fair” for existing companies? 6.Taxation and regulation: what should governments do? Workers 7. Does it create more jobs? 8. Micro-entrepreneur or shared-serf? 9.Who pays the bill when something goes wrong? Consumers & the Environment 10.A community of trust or privacy for sale? 11. Idealists or pragmatists: do sharers really care? 12. Is sharing good for the planet?
  11. 11. We share. Who wins? Unravelling the controversies of the collaborative economy 1.3 Market controversies Estimates of the current value of the collaborative economy and predictions for future growth are starting to emerge. While the figures may not be unified across the board, the overall mes- sage is clear: it has generated considerable interest from the investment community. According to market analyst VB Profiles, this economy today includes 17 billion-dollar companies (12 of them based in the US) with 60,000 employees. The sector has received $15 billion in venture capital, which amounts to more than twice what has been invested in social networks to date, however recent research by Crowd Companies and Vision Critical9 reveals that this has been channelled to just a few dominant players. More than half of the activity in each sharing category is owned by one company; Kickstarter is responsible for 57% of crowdfunding transactions, Craigslist for 65% of professional services, Uber for 86% of ridesharing and Etsy for 91% of the custom products marketplace. “The one percent clearly own the sharing start-ups, which means this is continued capitalism — not idealistic socialism” (Owyang 2015). The secret to the success of these “unicorns”10 is “the financial- ization of the everyday version 3.0 (….) companies like Uber and Airbnb are enjoying their Andy Warhol moment, their $15 billion of fame. In the absence of any physical infrastructure of their own they are running on your car, apartment, labour and importantly, time” (Scholz 2015). 1 / Uber, the world’s largest taxi company, owns no cars; 2 / Airbnb, the world’s largest accommodation provider, owns no real estate; 3 / Alibaba, the world’s most valu- able retailer, owns no inventory; 4 / Facebook, the world’s most popular content platform, owns no content.11 In addition to lack of equality at the macro level, inequality of value distribution has also been observed at the individual platform level. For example, collaborative economy critic Tom Slee has challenged Airbnb’s claim that its users are single individuals earning small amounts of extra money, finding that half the revenue generated in New York City accrues to hosts with multiple listings (Schor 2014). At the heart of the business model of new software platforms are the low transaction costs where companies effectively act as middlemen between those who have the asset or service, and those who want access to it. This matching of haves to needs is part of the discourse of collaborative economy advocates, whereby efficiency and trust are heralded as the key ingredients to facilitat- ing this exchange. However, from a purely economic perspective, the shift towards a “Zero Marginal Cost Society,”12 a term coined by Jeremy Rifkin to describe an economy based on software and intellectual property (rather than physical goods), may be a way of achieving even higher returns on capital than before. At the other end of the spectrum, grassroots organisations within the collaborative economy sector (such as Freecycle and Couchsurfing) are becoming more commercially oriented. The UK-based free reuse platform Freegle is a good example of this. It was formed by 200 volunteers who left the US-based platform Freecycle in 2009 as they felt its ethos was being eroded; Freegle now has 1,9 million members. As it grew in membership Freegle went through a process of formalizing internal policies, creating a new cooperative structure, centralizing activities and finally establishing income streams to support its new professional- ized structure. By 2014 Freegle had become a limited company (Martin el al. 2015). 2. Do the users get a slice of the cake? The great fallacy behind the software platforms business model is that the very users who build the social capital and provide the assets and services required for the platforms to operate are eventually taken advantage of as external investors demand ever higher returns. “Thanks to users unpaid labour of friending and posting, tech companies can employ far fewer people, and extract five to ten times more profit per employee than business- es in other industries. Fiduciary responsibility to their investors requires that they turn on the people who made them successful” (Schneider 2014). Schneider goes on to explain how platforms entice users into their online communities as an apparently free and open commons, “only to gradually enclose it by tweaking terms of service, diluting privacy, or charging fees for essential features.” Other authors note similar patterns. Shor observes that business-to-consumer software platforms are more about maximising financial return than sharing values: “increasingly they’re about earning money (for providers) and managing labour 9 The new rules of the collaborative economy, a report published by Crowd Companies and Vision Critical. 10 Unicorns are companies that have soared to a $1 billion valuation or higher, based on fundraising. 11 Tweet by Ted Nash @Nashy 2015. 12 This concept was coined by Jeremy Rifkin in his book of the same title published in July 2015. 1. Who gets the money?
  12. 12. 13 and other costs cheaply (for the platforms), than the feel-good values of sociability, carbon footprint reduction and efficiency many platforms emphasized when they started out” (Shor 2015). While of course the platforms do generate collaboration between users, when it comes to value distribution, ownership and gover- nance, the collaborative economy is built on age-old capitalism techniques: reduce marginal costs, invest, grow fast, sell and move on. Now that the collaborative way has been paved by the pioneers (notably Uber and Airbnb), the sector is fertile for this kind of quick “growth and sell” model. Take Lyft, for example, which was launched in 2012 and within just two years was bought by Avis for $500 million (along with its competitor Zipcar for the same amount). Advocates for a fairer distribution of the wealth generated by the collaborative economy claim that the value should be shared with the users who have helped create it. In this vein Gansky argues that “collaborative economy companies should share more with the people who generate value for them” (Gansky 2015). Others have taken an even more critical stance, asserting that “the sharing economy is truly neoliberalism on steroids” where everyone is encouraged to be an entrepreneur and take part, yet the power lies in the hands of the few companies who control the data (Morozov 2014). The network effects of new software platforms (where the value of their service is dependent on the number of people using them) exacerbates this inequality. This is because network effects reinforce market power for the already dominant companies as more users attract still more users, dominant networks attract developers and networks at- tract advertisers (Data Justice 2015). As the sector grows, so do the disparities between the different types of approach, with an increasing gap between the not-for-profit platforms that offer genuine sharing of assets without any money changing hands such as Freecycle and Couchsurfing, LandShare and Yerdle, and the commercially oriented profit-making multi- nationals such as TaskRabbit, Airbnb, Uber and Lyft. There is a widening gap between the gift-giving models and those founded on market-based exchange; “some are genuinely collaborative and communal, while others are hotly competitive and profit-driven” (Nadeem 2015). Given the concern around this disparity, new concepts are emerging such as that of “we washing” – disguising purely profit-driven operations as open commons platforms. In light of the controversy around value distribution and platform governance there is an emerging debate from collaborative econ- omy advocates on the potential for decentralised platforms. This concept is built on the idea that individuals would be able to share their assets, time, and money without going through an intermedi- ary, externally managed software platform. Sharetribe. which has developed an open-source software to enable independent sharing communities to achieve this, is highlighted later in this publication. A recent sign that the collaborative economy has disrupted busi- ness models across the board is the adoption of collaborative services by traditional companies. Should we therefore consider BMW’s car-sharing service part of the collaborative economy? Is Avis’ purchase of Lyft and Zipcar an example of “sharing”? The collaborative space now offers a broad range of responses to the disruption of the mobility sector from traditional automobile manufacturers offering car-share services (e.g. BMW’s Drive Now, Peugeot “Moi voiture” etc.), to independent car-sharing companies (e.g. Lyft, Avancar), ridesharing systems (e.g. BlaB- laCar) and peer-to-peer rental (e.g. Socialcar). The economic crisis, mobility saturation in cities and young people’s interest in access over ownership are all factors that have paved the way for these innovations. Traditional companies in the tourism sector are also adapting their models to the collaborative culture. Marriot has recently partnered with the international co-working company LiquidSpace to offer co-working in their under-used lobbies and common spac- es, which represents a new revenue stream and also brings po- tentially new customers through their doors. Fang Roe, Marriott’s chief sales and marketing officer for Asia and Pacific explains, “It wasn’t just revenue generation, it was also about changing consumer perceptions of our hotels and becoming more relevant to how people live and work today” (Botsman 2014). The new hybrid business Be(Mate) combining the facilities of a hotel with the culture of Airbnb is another example. While the big players have the resources to adapt to the collaborative economy, the reality of the small hotels is very different, with many being threatened by the competition of cheaper Airbnb rentals. Recent research shows that in Austin and Boston, local hotel revenues have dropped by 8-10% as a result of Airbnb (Zervas 2015). There is extensive literature on the emerging trend of traditional companies adapting their business models to the collaborative culture (Martin 2015, Owyang 2015); the UK government’s re- view of the sharing economy also points to this as a key growth sector: “we will see more of is traditional businesses starting to use sharing models to complement their existing services” (De- partment for Innovation and Skills 2014). Other UK examples include B&Q’s skill- and tool-sharing platform Streetclub and Marks & Spencers’ secondhand clothes service. Table 3 out- lines some of the different approaches traditional companies are taking to adapt to the trends of the collaborative economy, from the lowest-risk strategy of partnerships (sometimes criti- cised as simple marketing ploys) to the integration of entirely new business models. 3. Traditional companies: share or die?
  13. 13. We share. Who wins? Unravelling the controversies of the collaborative economy “The continued, rapid growth of collaboration means every busi- ness needs to think about how to combat, complement or compete in this space” (Owyang 2015).13 “These new upstarts are changing the rules of the game, and forcing everyone else to play along or disappear from existence” (Owyang and Samuel 2015). Table 3. How traditional companies adapt to the collaborative economy Approach Company activity Examples Sponsorship and partnership Pay for co-branding or create partnerships for an integrated service provision • Walgreens pharmacy, PepsiCo and GE partnerships with TaskRabbit including TaskRabbit buttons on their apps for deliveries • Vodafone sponsors Bicing, Barclays sponsors “BorisBikes” in London, Citibank sponsors bike-sharing in France • Marriot Hotels partners with LiquidSpace to offer co-working spaces in hotels • Whole Foods partners with Instacart for one-hour deliveries • Nordstorm resells maker goods from Etsy in retail stores Investment Purchase equity in established collaborative economy companies • Google invests $125 in Lending Club (P2P lending) • GE invests $30m in Quirky (crowdsourcing ideas) • General Motors invests $3m in RelayRides • BMW’s iVentures invests in Parkatmyhouse (driveway rental) and Chargeatmyhouse (EV charging) • Hyatt invests in OneFineStay (homesharing platform) Acquisitions Buy new software platforms, usually maintaining the original brand • In 2013 Avis buys Lyft for $500m and Zipcar for $500m, and maintains the two competing brands • In 2013 SNCF (the publically run French railway) car-sharing platform www.123voiture.com • In 2015 Expedia bought Airbnb rival, HomeAway for $3.9 billion and Priceline has bought booking.com New hybrid business models Develop new business models adpating to collaborative trends • DHL’s new App “Myways” to connect senders and recipients with people willing to transport parcels • Hotel chain Room Mate launched “Be Mate” (tourist apartment platform) • BMW’s “Drive Now,” Peugot’s “Mu”, Ford’s “GetAround” carsharing services and Ford’s “GoDrive” for low emission vehicle hire • Decathlon’s “Trocathlon” and for selling 2nd hand products, Wallmart’s “Trade In” to sell back phones & electronics in stores • Insurance companies (USAA, Geico, Farmer’s Insurance) offer special packages for ridesharing Source: Author, Cusumano (2015) and Botsman (2014). 13 For more information see: http://www.triplepundit.com/2015/10/collaborative-economy-opportunities-companies/
  14. 14. 15 The report “How to survive and win in the collaborative economy” published by Crowd Companies shows that 82% of sharing trans- actions are at least partially motivated by price. Convenience is the second most popular reason people choose sharing services and branding is very relevant with trust in known brands as a key factor. The report recommends that companies focus on these three aspects (price, convenience and brand) when driving their consumers and traditional buyers towards sharing. Take-aways To round up our exploration of the market-based controversies, we offer three take-aways. Firstly, the majority of the collaborative economy is controlled (like so many other parts of the economy) by just a handful of external investors and driven by tradition- al capitalistic principles. Secondly, the value created by these companies is based on assets they don´t actually own with the “sharers” getting no share of this value. Thirdly, while there is great diversity across the sector from the genuine collaborative platforms offering shared access to common resources to the profit-driven low-marginal-cost intermediary platforms, there is a growing tendency for traditional companies to sponsor, invest in and acquire new software platforms as well as adapting their own models to compete in this new arena. 4. In the new “DIY culture”: will the state retreat? “The proliferation of Do-It-Yourself (DIY) culture in all aspects of citizen life (education, professional, labour, health etc.), appears to be the perfect legitimization for the progressive dismantling of the state” (Sunyer 2015). That the emerging context of profitable private companies with the help of collaborative citizens can create efficient ways of providing “public” services, such as transport or waste man- agement, and achieve significant environmental gains, is poten- tially great news for governments. Many collaborative economy platforms are achieving major efficiencies in terms of a more intensive use of underutilised resources that has not been possible to achieve from public initiatives alone. The massive uptake of private car-sharing initiatives (BlaBlaCar alone has 20 million registered users) is a clear example of this and research shows that this translates into reductions in C02 emissions (Martin & Shaheen 2011). However, the flip side of this issue is that the car-sharing trend could result in the state having fewer potential passengers to provide for through public transport, and hence legitimizing reductions in those services. This could leave those who lack access to such software platforms with poorer access to transport. The global phenomenon of Open Education (OpenCourseWare, MOOCs, TED, Wikiversity, aaaaarg, et al.) is another area of major disruption; it is radically changing the landscape of higher education in terms of technological-pedagogic practices, busi- ness models, ownership and institutional structures. In this case public education provision is being turned on its head by private market-oriented solutions, again posing a question for governments as to the future of public education provision. “Many venture and multinational capital-backed Open Education start-ups are consciously aimed at disrupting the institutional structures of higher education in order to open up what to date has largely been a public institution to the penetration of their marketised solutions” (Broekman et al. 2014). A potential outcome for the collaborative economy is that it creates a similar situation to that of the UK’s Big Society, where social costs are offloaded onto the realm of households and “empowered” communities and as a result more profit making initiatives engage with social provision resulting in more, not less, inequality. Critics have argued that in the case of the Big Society this created “further financialisation and a deepening of capitalist disciplinary logics into the social fabric” (Dowling 2014). 1.4 Governmentcontroversies
  15. 15. We share. Who wins? Unravelling the controversies of the collaborative economy Clearly a pragmatic scenario would be a combined effort be- tween private software platforms and public institutions where- by the platforms focus on achieving resource efficiencies and widening access to new services while the public sector di- verts potential financial savings to the social priorities that the collaborative economy may not reach, such as the elderly or other groups with limited internet access. To safeguard public services and citizens, Morozov, author of Net Delusion: The Dark Side of Internet Freedom, has put forward a more radical solution. To ensure that citizens are not crushed by the increasing power of software platforms whereby the majority of day-to-day services end up being controlled by a small handful of large private companies in an “emerging data-centric cap- italism,” he advocates ensuring that the driving force of this new capitalism (i.e. the data itself) remains within public hands (Morozov 2013). 5. Is sharing “fair” for existing companies? Companies operating within the collaborative economy benefit from a variety of economic advantages (Edelman 2015). A major advantage is bypassing the financial burden of owning stock as the physical assets being exchanged (e.g. cars, houses and tools) belong to platform users. There are also significant cost reductions through decentralization, where no central physical resources are required to operate the platforms. In turn, the decentralization of production and distribution enables a far more efficient matching between the haves and wants of cus- tomers, which is described as preference-matching. The ability to balance supply and demand more efficiently through dynamic pricing models such as Uber’s “surge pricing” algorithm is another advantage for companies. This model raises prices in times of peak demand and in response users shift from peak to lower demand periods, thus self-regulating supply and demand. Likewise Airbnb has started to use a variable pricing model where hosts can set a maximum and minimum and let the algorithm calculate the best price according to demand.14 BlaBlaCar provides price recommendations through a series of algorithms based on location, popularity and seasonal tempera- tures to ensure hosts are accurately adjusted to the market. Given that many new software platforms provide services that are unregulated, an additional economic advantage is not having to pay for a license to operate. Furthermore, in some cases li- censes are simply not available, as in the case of taxis in Madrid or touristic apartments in Barcelona. Finally, organisations can operate without needing to comply with local health and safety regulations and standards or, in some cases, to pay local taxes. As a result of these economic advantages, it is unsurprising that there is considerable backlash from the traditional service providers and we are witnessing as “constant and continuing battles occur between incumbents, lobbyist and governments” (Allen & Berg 2014). Incumbents claim that their new soft- ware-based counterparts enjoy unfair competition and empirical evidence is starting to emerge that the sharing economy is making inroads by successfully competing with, and acquiring market share from, incumbent firms (Zervas et al. 2015). Unfair competition is a growing concern amongst trade associations, governments and international institutions, which take the view that “to assure sharing will grow up, we need to avoid market and regulatory failures that allow parts of the market to gain unfair advantage over others” (Malhotra 2015). In response to disgruntled lobbies from the hotel and taxi industry, Spain’s National Commission for Markets and Compe- tition (CNMC) has undertaken a consultation on the legalities of the collaborative economy and whether it breaches rules around fair competition, although it has already advanced that no regulation may be the best kind of regulation. This approach has gained support recently in the Spanish press: “If there is no economic reason for the activity not to take place, why should the individual freedom of the businessman or consum- er be restricted? Why defend the interest of a single group?” (Villarejo 2015). To counteract the pressure from incumbents, some collaborative economy groups have organized their own counter-lobbying; Airbnb funded the “Fair to Share” campaign in San Francisco and has hired “community organisers” to amplify the voice of home-sharing supporters in Barcelona to allow for short-term rentals. A curious phenomenon is that this kind of activity has been described as the “uberisation of activism” (Boudrou 2015). 14 “Airbnb Modifies Its Pricing Model” Accessed 13 November 2015 at http://www.pymnts.com/
  16. 16. 17 Taxation is another thorny issue and research suggests that government tax revenue will decline as the collaborative econ- omy grows. “Ridesharing can exploit loopholes to avoid rules and taxes. When this occurs, the sharing economy becomes the skimming economy” (Malhotra & Alstyne 2015). Where cloud companies’ fiscal duty lies is unclear. As in many other sectors, the company headquarters are often established in countries with low corporate tax regimes; Airbnb has joined social media giants such as Google, Facebook, LinkedIn and others in that it pays corporate tax in Ireland. For local tax, certain city councils and governments have taken a proactive stance to enforce collaborative companies to make a contribution. For example, Airbnb now facilitates local tax collection from users in 16 cities across the world (of the 190 where it operates) (see Table 4). Table 4. Airbnb tax collection across the world City/Country Tax Policy Amsterdam 5% of total revenue to host Enforced by City Council, applied to all length stays Phoenix, Arizona (US) 5% of total revenue to host Several cities operate under this tariff New York City (US) 5,875% of total revenue to host Equivalent to hotel room occupancy tax San Francisco (US) 14% of total revenue to host Equivalent to hotel tax, valid for stays of up to 29 days District of Colombia (US) 14,5% of total revenue to host For all stays up to 90 days India 14% of total listing price Includes any cleaning fee Paris and other French cities 0,83€ per person / per night This amount includes the city- imposed tourist tax and the administrative district tax It is clear that the debate on tax and the collaborative economy will continue to evolve as governments become more engaged in this space. In this light, the UK government is developing an online tax calculator to help users work out how much tax they should pay. However, this is only part of the larger debate as to how to regulate the collaborative economy. Innovation is hard to regulate per se and the dilemmas that arise are whether the new software platforms should be classified as innovation and therefore protected, or should be subject to the same rules as existing commercial operations. “Regulators are at crossroads: on the one hand, innovation in sharing economy should not be stifled by excessive and outdat- ed regulation; on the other, there is a real need to protect the users of these services from fraud, liability and unskilled service providers” (Ranchordás 2015). The debate over regulation versus innovation hinges on wheth- er experimentation with new technologies and business models should be permitted by default or whether the precautionary prin- ciple should be applied, or perhaps something in between. Some authors suggest that regulation is stifling innovation and support the concept of permissionless innovation: “Unless a compelling case can be made that a new invention will bring serious harm to society, innovation should be allowed to continue unabated and problems, if they develop at all, can be addressed later” (Thierer 2015). Thierer is not alone, and others argue that the rapid growth of the collaborative economy “alleviates the need for much of this top-down regulation, with these recent innovations likely to do a better job of serving consumer needs” (Koopman 2015). US Federal Trade Commissioner Maureen Ohlhausen also ar- gues for a similar “innovate first - fix later” policy; in 2013 she called for “a dose of regulatory humility (…) and if harms do arise, consider whether existing laws and regulations are sufficient to address them, before assuming that new rules are required.”15 However, later in 2015 she made it clear that the regulatory debate for the collaborative economy is far more complex: “How should regulators appropriately respond to a highly dynamic market where the business models of today may be completely transformed tomorrow?” 16 15 Comments from her speech “Internet of Things: When Things Talk Among Themselves” from the FTC Internet of Things Workshop held on 19th November 2013. 16 Sharing Some Thoughts on the “Sharing” Economy. Prepared Remarks of Commissioner Maureen K. Ohlhausen, “Sharing” Economy Workshop June 9, 2015. 6. Taxation and regulation: what should governments do?
  17. 17. We share. Who wins? Unravelling the controversies of the collaborative economy Different regulators have reacted in different ways so far. Uber, for example, has been banned in 10 countries, suspended in 6 cities and seen one of its managers in Paris face prosecu- tion. Although Uber has received considerable bad press for these incidents, its growth seems unaffected and it is currently opening operations in its 300th city. Other regulatory responses include California’s Public Utilities Commission regulation of car-sharing, with obligatory vehicle checks, insurance coverage and police checks for drivers. Australia, Singapore and India also require drivers to have professional insurance. In response to this, Uber and Lyft have changed their policy to oblige driv- ers to have such insurance that covers their driving at least in “period 1” (i.e. the time they are on the way to pick up a passenger). Other countries have taken a stricter stance, as is the case in France, where the “Loi Thévenoud” was passed in 2014 to protect taxi incumbents. This law states that taxi providers cannot be geolocalised before they are hired, and that they must return to a central base before their next call, as well as inform of their price at the time of booking. Later in 2015 a new “15-minute rule” was passed to prohibit taxis picking up passengers unless 15 minutes had passed from soliciting the ride. This regulation attempt, however, has been unpopular from incumbents (who ask for a longer wait time) and ignored by the ridesharing sector. Edelman observes that policing such extra regulation (such as drug testing, vehicle inspections, waiting times etc.) implies an additional cost for the public sector, and in many cases there is no evidence of the benefits of such requirements. However, in the case of the collaborative economy the self-regulation mechanisms built into most software platforms cost the public sector nothing and could be more effective. For example, it is more likely that a user will give a driver a poor rating on their phone than take the time to go to the police station to file a complaint. Take-aways We conclude with three reflections on the role of governments in the collaborative economy. Firstly, a proactive engagement from regulators with new software platforms could help identify where government can best contribute to ensure that citizens and the environment are protected and social needs met. Secondly, in terms of creating level playing fields between collaborative companies and traditional counterparts, the jury is still out. Regulators will as always struggle to keep up with the fast pace of innovation. Finally, the issue of local tax seems relatively straightforward with several cities already acting on this, how- ever for other types of regulation it make sense for regulators to take advantage of the self-regulation mechanisms built into software platforms and integrate this into their policies. The debate around regulation of the collaborative economy is set to continue, and authors argue for an updated regulatory framework that takes into consideration the following advantag- es of the sector: increased efficiencies through reduced trans- action costs, improved allocation of resources, sophisticated reputation and accountability systems and pricing efficiencies (Edelman 2015).
  18. 18. 19 The economic crisis coupled with the phenomenon of the Zero Marginal Cost Society, where the internet has facilitated a shift from markets to collaborative commons with transactions costs close to zero, has had profound implications on labour markets across the world. “Nowhere is the zero marginal cost phenomenon having more impact than the labour market, where workerless factories and offices, virtual retailing and automated logistics and transport networks are becoming more prevalent. Not surprisingly, the new employment opportunities lie in the collaborative commons in fields that tend to be non-profit and strengthen social infrastruc- ture” (Rifkin 2014). One of the results of this disruption of entire sectors of the global economy is a shift away from contract employment with traditional companies to more short-term, freelance work. For a sector which has received $15 billion in investment, the fact that only 60,000 jobs have been created is evidence of this shift. The Freelancers Union currently estimates that one third of the US workforce is freelance,17 and the EU Affairs Freelancers Association18 claims one quarter in Europe. The Bureau of Labour Statistics19 estimates are that by 2020 50% of workers in the US will be freelance. There are several ways of looking at this changing global em- ployment landscape. On the one hand, the flexible forms of employment that the collaborative economy provides are a great opportunity in times of economic crisis. “These plat- forms are expanding people’s options with an increasing array of work migrating to on-demand arrangements fuelled by ever more sophisticated algorithms that match available and quali- fied workers with the work that suits them, when they want it” (Boudrou 2015). In the UK the government claims the route to self-employment has never been easier and the UK government celebrates the fact that individuals are “empowered to make money from assets and skills they already own” (Wosskow 2014). In the context of the Zero Marginal Cost Society, Rifkin foresees a positive future for workers, where many needs are satisfied through a highly efficient and highly automated collaborative commons: “our grandchildren are likely to look back at the era of mass employment in the market with the same sense of utter disbelief as we look upon slavery and serfdom in former times. The very idea that a human being’s worth was measured almost exclusively by his or her productive output of goods and services and material wealth will seem primitive, even barbaric” (Rifkin 2015). The flip side, however, is that the rights, benefits and fair pay of the emerging sector of freelancers is under threat. Uber drivers can be held liable for accidents on the job, TaskRabbit workers don´t receive a pension and workers looking for health insurance or job stability are unlikely to find it in the collabora- tive economy. Micro-task sites have been accused of stripping opportunities from the bottom of the pyramid as jobs move from traditional manufacturing to services and micro-services with software platforms facing fierce competition. Ideological opponents have used terms such as “shared serfdom,” and “employee-serfs” to describe collaborative economy workers, observing that “collaborative companies can shed overhead but mortgage the future by covering only marginal costs and leaving nothing for new skills, health care or retirement” (Malhotra 2015). 8. Micro-entrepreneur or shared-serf? “As start-ups and their wealthy investors increase their valuation into the millions and billions, sharing companies create a new kind of digital economy feudalism” (Owyang and Samuel 2015). In 2015 a comprehensive study of freelancers in the US work- ing in the collaborative space (ridesharers, micro-taskers etc.) was carried out and results published in the 1099 Economy Workforce Report.20 The report provides a fairly bleak picture for the micro-entrepreneur. “It’s dominated by the Ubers and Homejoys of the world, companies that use low-cost contract workers to serve customers at high volume and take a cut. This is also known as the 1099 economy, since contract workers fill out 1099 tax forms used to report income other than regular wages and salary” (Benner, 2015). The report shows that workers do not rely on this kind of work as a primary source of income. Around 60% of workers claim to use the collaborative economy for less than 50% of their household income and one third said that they can´t see them- selves as an independent contractor for the rest of their life and would like to leave after a maximum of three years. Insufficient 1.5 Workers’controversies 7. Does it create more jobs? 17 For more information see: http://www.freelancersunion.org. 18 For more information see: http://www.euro-freelancers.eu/eu-affairs-freelancers-association. 19 For more information see: http://www.bls.gov 20 The RFS 1099 Economy Workforce Report published by Requests for Startups.
  19. 19. We share. Who wins? Unravelling the controversies of the collaborative economy pay was identified as the main reason for leaving this type of work (43%) and not finding enough work was the main cause of dissatisfaction (49%) with understanding tax and legal issues as a close second (36%). According to SherpaShare21 Uber and Lyft drivers earn between $10 and $15 per trip across the US (with the exception of New York, where they earn double but are highly regulated). The costs incurred by drivers, such as fuel, insurance, upkeep are not yet measured across the board so drivers’ net income is difficult to estimate. In some cases the precariousness of collaborative economy jobs has been the source of lawsuits, with contract workers suing Uber, Lyft, Postmates and Instacart with demands to be recognized as employees (Benner 2015). Dissatisfaction has also been expressed by employees of traditional companies, who value security over flexibility and feel threatened by the new wave of on-demand micro-task platforms such as TaskRabbit and Amazon’s Mechanical Turk (Buttonwood 2015). Airbnb fig- ures, however, tell a different story, with the claim that “more than 50% of Airbnb hosts depend on it to pay their rent or mort- gage today” (Friedman 2013). There is still a major information gap around the economic reality of the new micro-entrepreneur given the complexities of measuring employment status, labour force participation and wages earned; in addition, of course, much of the collaborative economy is not accounted for by traditional GDP metrics. Economist Guy Standing named a new type of freelance worker in 2011 as “the precariat (...) characterised by chronic uncer- tainty and insecurity.” These workers move in and out of jobs with no secure role in the market, no occupational identity and little future perspective. Although this emerging class fuels the collaborative economy, Standing is now considering the phe- nomenon as a potential source of social change, advocating that “the precariat needs to move beyond the primitive rebel stage manifested in 2011 and become enough of a class-for- itself to be a power for change” (Standing 2015). According to the aforementioned 1099 workforce report, inves- tors welcome regulatory intervention to address worker precar- iousness in the collaborative economy. As stated by Joanne Yuan from Cowboy Ventures, “regulatory change will be extremely impactful in this space.” In the same report Mar Hershenson from Pejman Mar Ventures comments, “the government will become more involved and eventually set clear guidelines for classifying the workers and determining their benefits (….) employers them- selves will have to reconsider HR practices (…) how to recruit, how to train, how much to train them, what type of compensation and benefits, how much integration into the company culture etc.” A poignant issue for people working in the collaborative space is the lack of insurance coverage whilst on the job, as com- panies typically offload the risk to their workers with little or no insurance to help reduce transaction costs. In the past couple of years liability issues have become more common, as illustrated by the two following examples. “Uber driver held liable for death of six-year-old pedestrian” In 2013 in San Francisco, an Uber driver struck a mother and two children; the six-year-old daughter, Sofia Liu, was killed. The family sued both Uber and the driver, claim- ing that the driver was looking at the Uber app on his phone during the accident. Uber immediately deactivated the driver’s account and did not accept responsibility, claiming the driver was not working for them at the time since he had no passenger in his car. Uber subsequently changed their policy to insure drivers from the time they have the app activated, even though they may not be carrying a passenger. The family lawyers claimed that this insurance policy is too weak, consid- ering that the coverage was not applicable to cover the medical expenses Sofia’s mother and brother incurred in the accident. Eventually, in July 2015, an out-of-court settlement was made between Uber and the family and the driver was charged with misdemeanour vehicular manslaughter. Source: Constine 2014 and Bradshaw 2015. 21 Sherpashare is a smartphone app that helps rideshare drivers track their mileage and tax deductions, and is based on over 10,000 drivers taking more than 1 million trips from January to May of 2015. 9. Who pays the bill when something goes wrong?
  20. 20. 21 “Living and dying on Airbnb” “It’s only a matter of time until something terrible hap- pens,” predicted Ron Lieber in his article on liability issues of Airbnb for the New York Times in 2012.20 That very same year, news of the first Airbnb guest to die hit the press. Whilst staying at a property in Texas, an Airbnb guest was hit on the head by a branch above the garden swing. He was rendered unconscious immedi- ately and, due to the subsequent and irreversible brain damage, his family later made the decision to take him off a life-support machine. As a journalist and keen to spread the inconvenient truth of Airbnb, the deceased’s son Zak Stone did not accept the typical out-of-court settlement that would have prevented him from writing about the situation. He has since been researching liability issues for guests and hosts of Airbnb around the world. The findings are several: firstly, the company’s insurance policy for dam- age to property has increased (after a host had their property burnt down and heirlooms stolen); secondly, integrating safety measures is simply not good business for Airbnb (imagine the costs of inspection and com- pliance); and, finally, his father’s death is not the only story of its kind, as similar accidents have happened in Taiwan and Canada, though the details were covered up. Source: Stone 2015. Liability issues are complex and fast evolving. Companies like Uber and Airbnb have taken a reactive stance, adapting their policies as incidents occur, though whenever possible they avoid paying for any damages. The British Insurance Brokers’ Association has taken a more proactive stance and issued a new guide to insurance and the sharing economy (BIBA 2014). This guide suggests that collaborative economy companies should to pool their resources to jointly negotiate insurance coverage, which would best be achieved through the creation of a trade body to represent the sharing economy sector. Another potential measure would be to enable users (as producers) to provide reviews of the platforms they are operating under, an issue which was recently discussed at the Economy Forum of Le Havre by Catalan collaborative economy expert Albert Cañigueral and other collaborative economy advocates. Take-aways The controversies around the future of work in the collaborative economy are a growing concern and we summarise the current debate with the following take-aways. First and foremost, there are more opportunities than ever to earn money through sharing out assets, skills and time. The dark side of this reality is that there is an increasing dissatisfaction being voiced from the new breed of micro-entrepreneur in terms of low pay, lack of benefits and stability. This situation is likely to be regulated in the future. Finally, liability issues are hitting the press as workers are left exposed by the low marginal cost platforms and insurance companies are beginning to respond to the emerging needs for different types of coverage in this sector.
  21. 21. We share. Who wins? Unravelling the controversies of the collaborative economy “As we entrust more and more of our lives to connected devices and smartphone apps, we must ask what happens if a critical device fails? What are innovators doing to safeguard critical functions? And what happens to all the data generated by this sharing activity?“ (Gobble 2015). Trust was been heralded as one of the cornerstones of the collaborative economy (Botsman 2010) and online reputation mechanisms, whereby users and consumers self-police the plat- forms, have been considered as an alternative to regulation. Lior Strahilevitz in his essay in the recent book The Reputation Economy espouses this concept: “imagine if every plumber, manu- factured product, cell phone provider, home builder, professor, hair stylist, accountant, attorney, golf pro, and taxi driver were rated… In such a world, there would be diminished need for regulatory oversight and legal remedies because consumers would police misconduct themselves” (Fertik 2013). Trust in brands is there- fore crucial for collaborative companies. Many of the top sharing companies such as Etsy, BlaBlaCar and Kickstarter have hugely popular reputations (Owyang and Samuel 2015) and these are maintained by a sophisticated system of mechanisms, algorithms and finely tuned feedback systems for users. There is, however, an ethical debate around the increasing penetration of user feedback mechanisms: “How do we feel about living in an environment of hyper-accountability?” (Tanz 2014). The question it raises is, what happens if the big data captured through the multiple software platforms gets into the wrong hands? The organisation Data Justice alerts us to the danger of our digital identities being increasingly controlled by just a few players (namely Google and Facebook). They warn against the potential for these big data platforms becoming the gateways to all types of service from education to health, energy to transportation.22 Increasing, services such as the messenger service Telegram are being used to protect users’ identity; they are heavily en- crypted to avoid sharing location and identity. A step further in this direction is the increasing activity on the Darknet and as- sociated anonymity networks enabling peer-to-peer connections, which conceal individuals’ identity and location. Tor, currently the most popular free software for enabling this anonymous communication, has an estimated 2,5 million users daily, often associated with Bitcoin and other crypto currency transactions.23 An additional controversial aspect of online reputation issues is the potential for fraud and bias. “Biases can mislead, ostracise, shill unearned praise, and damn worthy competitors. A recent study found 16% of Yelp reviews are not genuine” (Zervas 2015). Zervas’ later article “Fake it till you make it” explores the eco- nomic incentives behind the business decision to leave fake reviews. In response to potential fraud, initiatives have been developed such as Trustcloud, a trust and safety service for platforms, users and consumers. From the public sector the UK government has developed the identity verification system Verify. Online reputation aggregators are also new mechanisms to enable people to collect and share their ratings across multiple sharing platforms; for example, eRated enables users to transfer their eBay rating to build trust on Etsy. Veridu and Jumio offer similar services. Helping to build consumer trust in online transactions is crucial for the future development of the sector, and public sector collaboration in this aspect has been highlighted as important in the UK government’s review of the sharing economy. “The Disclosure and Barring Service should fully digitise criminal records checks, so they can be (...) integrated into third party services such as sharing economy platforms” (Wosskow 2014). 11. Idealists or pragmatists: do sharers really care? Given the unprecedented market reach of the collaborative economy, there is increasing market research activity to support companies in creating more targeted and effective marketing strategies to reach the new breed of collaborative consumer (Hellwig 2015; Mohlmann 2015). It has been estimated that 51% of the US population take part in the collaborative economy (PWC 2014) and this facet of the economy sees continued growth across all sectors including goods, services, money, transportation, space, learning and cryptocurrencies. In terms of a sharer’s profile, Millenials are more likely to share (33% of 18- to 34-year-olds already do so) with those over 55 less inclined to take part (27%). Notably, if the price reduction is 25% or more, sharers are unlikely to ever switch back to the traditional companies (Owyang & Samuel 2015). Crowd Companies and Vision Critical recently carried out a study of 50,000 North American consumers which showed that price, convenience and brand were the three most significant factors in choosing a collaborative economy option. “It implies 1.6 Citizens’controversies 10. A community of trust or privacy for sale? 22 For more information see: http://www.datajustice.org/site/network-effects-lock-market-power-big-data-platforms 23 For more information see Jamie Bartlett’s recent book The DarkNet: Inside the Digital Underworld
  22. 22. 23 that consumers are more interested in lower costs and conve- nience than they are in fostering social relationships with the company or other consumers” (Eckhartd 2015). Findings were similar for research carried out across users of Car2go and Airbnb, which revealed that cost savings, familiarity, service quality, trust and utility had the most influence on the level of satisfaction of using a sharing option (Mohlmann 2015). This is not the case for all platforms, of course. For example, an analysis of the motivations for joining the no-money-transfer land access platform Landshare showed that people joined this platform predominantly for the social need of belonging, politics and ethics, but also for adventure and self-development, financial benefits and improved health (McArthur 2015). The above research shows that different people share for dif- ferent reasons and it appears the decision to share is not based purely on demographic variables but rather on personal mindset and psychological disposition. According to a study of Swiss and German consumers, some of the influencing factors include the significance of the shared item to its owner. The more relevant the item to one’s “personal extended self,” the less likely it is to be shared. Other factors are personal philos- ophy around reciprocity, level of generosity and whom they are sharing with. On the whole crafts, recipes and knowledge are much easier to share than personal items and on the whole women and younger generations share slightly more than men and older adults (Hellwig et al. 2015). Hellwig’s study identifies four different types of sharers, as described in Table 5, and suggests targeted marketing strategies for each. Table 5. Four sharing clusters 1. Idealists – largely women who work part time, are homemakers and believe sharing is a good thing for their community and the planet. “Sharing idealists are best targeted by sharing offers emphasising the idealistic and emotional value of sharing (rooted in intrinsic motivation, prosocial ideals, hedonic value, and social relationships).” 2. Opponents - slightly more men, tend to be entrepre- neurs, managers or retired and negators of social media. This group is basically sharing averse. 3. Pragmatists – tend to be male, full-time workers who share as they perceive it is the logical and fair thing to do. “Sharing pragmatists are best targeted by emphasizing the functional value of sharing (functionality, efficiency, utility value).” 4. Normatives - share because it’s seen as socially desirable. This group is likely to be the most active group on social media. “Sharing normatives are best targeted by sharing offers emphasizing the signalling value of sharing (sharing to signal that I am an ethical, responsible and social person).” Source: Hellwig 2015. 12. Is sharing good for the planet? It depends of course, on whom you ask. Zipcar will tell you that each car club car removes 14 privately owned cars from the roads and estimates that London alone will have 1 million car-sharers by 2020.24 Lyft paints a similar picture and is now working with city councils to collaborate on reduced emissions plans. Likewise, Airbnb will tell you that home sharing is anoth- er way to save the planet. In 2015 the company published an environmental report25 claiming that in Europe Airbnb guests consume 78% less energy than their hotel guest counterparts (and 63% less in the US), as well as achieving significant reductions in waste production and water consumption and practicing greener travel habits. Airbnb has since been accused of greenwashing, however, and the full results of the survey across 8,000 guests are not publicly available. Many platforms present sharing as a way to reduce users’ carbon footprint and there is a general assumption that sharing is less resource in- tensive than traditional ways of accessing goods and facilities, particularly when considering the entire life cycle of a product. This said, there are some controversies around the environmen- tal implications of the collaborative economy. Does it overall generate more resource use through a potential “boomerang effect” whereby lower prices enable more transactions? What are the transport implications of decentralised systems? On the whole there is limited data available to answer such questions. 24 For more information see: http://www.zipcar.co.uk/car-lite-london-reports 25 For more information see: http://blog.airbnb.com/environmental-impacts-of-home-sharing/
  23. 23. We share. Who wins? Unravelling the controversies of the collaborative economy One of the few sectors that has been studied in more detail, albeit with varying indicators, is the collaborative economy’s disruption of mobility and its environmental implications. For example, the change in car culture has been measured through the decline in applications for driving licenses (particularly in 16- to 29-year-olds) over the past decade with data for several countries including the US, France, UK, Germany and Austra- lia.26 There is also a wealth of statistics around reduced city congestion (London claims 30% less traffic over the past ten years), increased multi-modality and of course bike-sharing and car-sharing. “Mobility as a service” is the emerging trend, with digital information as the fuel of mobility. Gilles Vesco, the politician responsible for sustainable transport in Lyon, France, has gone so far as to predict the car will become an accessory to the smartphone (Moss 2015). In terms of emissions reductions from this new mobility, com- prehensive data is still limited. One exception is the research on greenhouse gas (GHG) emission impacts from car-sharing. A US-based survey of users of the major car-sharing organisations showed that while individuals may increase emissions due to better access to cars, these small increases outweigh the de- creases from those who are sharing vehicles and driving less. The collective emissions reductions outweighed the collective increase, implying that car-sharing does reduce emissions as a whole. The study showed a mean reduction of −0.58 t GHG per year per household and 27 kilometres less driven per year (Martin & Shaheen 2011). Research in Korea showed similar results with car-sharing reducing the total C02 emissions in a small town by 62,07 t GHG/year with the car-sharing location as a key influencing factor (Lee et al. 2014). In terms of the environmental impact of the on-demand economy where goods are delivered directly to the consumer, it is useful to consider the environmental analysis of e-commerce more broadly. A comprehensive review of 56 scientific research pa- pers27 revealed that the ecological footprint of B2C e-commerce is significantly greater than conventional shopping (Mangiaricina et al. 2015). Several influencing factors were noted: increased use of less efficient delivery vans, failed home deliveries caus- ing further travel, consumers tending to purchase from different sites each requiring independent deliveries, warehouse oper- ations becoming more complex with larger numbers of small deliveries and consumer returns, and finally greater packaging needed for individual item delivery. Take-aways To sum up our exploration of the controversies that affect citizens, we suggest the following take-aways. Firstly, in an era of hyper-accountability, the risks to privacy loss and data manipulation are increasing. Secondly, the response to this situation ranges from one extreme to another, from the gen- eration of online reputation aggregators to anonymous peer- to-peer networks. Thirdly, different people share for different reasons, and there are interesting reflections on how to best market a collaborative service depending on the type of sharer one is targeting. Last but definitely not least, the claim that the collaborative economy is the key to unlocking significant carbon reductions and resource efficiencies cannot be taken at face value. Of course, more rigorous research is need, but given that the collaborative economy has resulted in an overall increase in economic activity, whether it be through production, consumption, education or finance, it is possible that the overall increase in environmental impact far outweighs the reduced impact of each individual transaction. 26 See the study “The reasons for the recent decline in young driver licensing in the US” by the University of Michigan, US PIRG Education Fund’s report “21st Century Transportation” and Charting Transport in Australia as examples. 27 This review analysed 56 scientific papers on the environmental implications of e-commerce published from 200 to 2014 in 38 peer-reviewed international journals.
  24. 24. 25
  25. 25. BlaBlaCar
  26. 26. 27 “We are learning to use our resources in a smarter way thanks to new technologies. Driving alone in your car for 300 miles has always been a nonsense, it is an economical and an ecological non- sense and it is boring” (Frédéric Mazzella, founder of BlaBlaCar). Overview Leading European carpooling startup, which enables passengers and drivers heading in the same direction to share the journey and associated costs through an integrated software platform, BlaBlacar charges a commission for every ride shared (in some countries), and the company is now worth over a billion dollars. Location Active in 22 countries worldwide: Belgium, Netherlands, Luxembourg, Croatia, Czech Republic, France, Germany, Hungary, India, Italy, Poland, Portugal, Romania, Russia, Serbia, Spain, Slovakia, Turkey, Ukraine, the United Kingdom, Mexico and Brazil. Founded 2006, France. Users 25 million people registered. Social impact 10 million rides shared a quarter, 1 Megatonne of CO2 saved over the last 12 months. Economic sustainability Not publicly disclosed. Estimated turnover of $96 million annually. Market value: $1.6 billion. 15 offices. 410 employees. Innovation type A combination of well-designed safety and online reputation mechanisms with an effective global communications strategy. Cross-sector collaboration Several partnerships with traditional companies and governments to integrate carpooling across sectors and amplify positive impacts. Replicability and scalability Model successfully replicated in some countries, and has expanded through a targeted global “acqui-hire” strategy. Plans for further international expansion in Asia and Latin America. Launched in France in 2006, BlaBlaCar connects drivers who have empty seats with paying passengers who are heading in the same direction, generally for trips over 250 km. Since 2014 there have been 47 million human interactions across Europe through the BlaBlaCar platform. From the outset, BlaBlaCar has aimed to become the world’s leading long-distance carpooling platform. In early 2015, it acquired German competitor Carpooling.com, the biggest and oldest player in Europe with 6 million members, and in December 2015 the company launched in Brazil, its first venture into South America. It doubled its membership from 10 million to 20 million in 2014, making it the fastest growing col- laborative consumption company in Europe, and it now operates in 22 countries. It has entered the group of “Unicorn startups” with a market value of $1.6 billion and plans to expand further in Latin America and Asia. BlaBlaCar’s business model relies on a commission charged to the passenger (10%-15%) taken through their online booking system which is being introduced gradually in all countries once a critical mass of users has been reached in the respective country. The platform is based on a trusted community where both drivers and passengers share information about themselves, their car and their travel preferences, while be- ing encouraged to rate each other after sharing a ride. BlaBlaCar provides extra insurance; secure online payments and moderation to create a safe and fair environment. Additionally, BlaBlaCar’s impact on the environment is significant, with 90.000 tonnes of CO2 saved in Spain alone in the past 5 years. From traditional carpooling to BlaBlaCar Carpooling is not a new phenomenon and has adopted many names and variations around the world throughout the years. The first documented example of carpooling began shortly after the introduction of Ford’s Model T, America’s first affordable au- tomobile. In 1914 the recession hit the US prompted many car owners to offer seats in their cars to share costs. Just like today, carpooling’s popularity gave rise to opposition by public transport companies who lobbied the US government to control the com- petition. New liability regulations were introduced by 1918 which reduced ridesharing by 90%. By World War II, the US government partnered with the oil industry to launch an ad campaign to raise awareness on the need to save resources (Cozza 2012). Another example of public support for ridesharing was prompted by the 1973 oil crisis and the subsequent oil embargo imposed by oil-producing countries. A steep hike in the price of the oil barrel ensued, leading President Nixon to design new policies to promote and provide funding for ridesharing initiatives. However, carpooling’s popularity declined again as the oil price fell and disposable incomes rose.
  27. 27. We share. Who wins? Unravelling the controversies of the collaborative economy In Europe, carpooling has also flourished for decades in some countries. For instance, in Germany the concept has been popular for nearly 50 years. Interestingly, at present carpooling has largely replaced the longstanding European InterRailing and hitchhiking tradition. In countries such as Germany and France, where state- run railway monopolies have prevented the emergence of intercity bus networks, carpooling platforms have thrived. The Internet, and social networking in particular, combined with the focus on saving money brought about by the economic downturn, has helped fa- cilitate and promote carpooling among a wider spectrum of users beyond the earlier young, bohemian carpool users (see Table 1). All these elements have paved the way for the phenomenal rise of BlaBlaCar in Europe and elsewhere. Table 1. Definitions of car-sharing and associated concepts B2C Car-sharing: Service whereby a number of people use a company-owned fleet of cars that are parked in dedicated car bays around the city. Members can book (and extend) by the hour via web or phone and access the car via a smart card.28 Many traditional car manufacturers now offer this service as well as new startups. Carpooling: Shared use of privately owned cars by the driver and one or more passengers.29 For the purpose of this study, we will refer to carpooling when it involves long-distance rides where costs are shared. BlaBlaCar is a carpooling platform. The terms carpooling and ridesharing are often used interchangeably. Ridesharing: Inner-city taxi-like service where private ve- hicles operated by independent contractors are booked over the Internet at short notice using geolocation tech- nologies. Uber is a ridesharing platform. P2P Car Rental: Platforms enabling car owners to rent out their cars to other individuals in exchange for a fee, and usually a commission from the platform. Figure 1. Evolution of the car-sharing sector Car Ownership Car-sharing Carpooling Mercedes Seat GM Bluemove Respiro Clickcar BlaBlaCar Amovens Ridesharing P2P Car Rental Uber Lyft SocialCar Drivy OuiCar 28 Car-Sharing. Available from: < http://p2pfoundation.net/Car_Sharing>. [15 December 2015]. 29 Carpooling. Available from: <http://p2pfoundation.net/Carpooling>. [15 December 2015].
  28. 28. 29 The rise of BlaBlaCar BlaBlaCar was founded with a vision of transforming the world of mobility to make it more efficient, accessible and affordable. As Vincent Rosso, co-founder of BlaBlaCar Spain, puts it: “The initial vision was to ‘Digitalise the motorways’ bridging the gap between the carpool lanes and the internet injecting thus efficien- cy and accessibility into road transport”. BlaBlaCar’s concept has been described as “the hitchhiking of the 21st century” or the “Ryanair for the road” (Nusca 2015). Through its software platform, it connects drivers who have empty seats with paying passengers headed in the same direction. BlaBlaCar is often compared to Uber, however its business model is fundamen- tally different. It connects people who are travelling between cities (the average trip is 320 km long), not within a city, and, critically, BlaBlaCar drivers don’t make a profit. BlaBlaCar puts drivers and passengers in touch with each other and everyone shares the cost of the trip—which would happen anyway, as it is not an on-demand service. This strategy also protects the company from having to deal with taxi regulations that have plagued Uber. In a context of rising fuel costs, expensive public transport and traffic congestion on European roads, BlaBlaCar is a win-win proposition: the driver offers empty seats to cover petrol and road tolls and the passenger gets a cheap trip and convenience. In addition, cost sharing has two implications: drivers are insured since they are only splitting costs and they are not making any revenue that needs to be declared. The idea for the company came to Frédéric Mazzella, founder of BlaBlaCar, during the Christmas holiday. It was the 24th of December 2003 and he was trying to get from Paris to his family home 500 km away for Christmas. The trains were full and his sister had to to make a detour to come to pick him up. On the way back, he hatched a business idea. “The highway goes the same way as the trains and I could see the trains were full with no seats left and the cars were empty.” This was a vast inefficiency in his eyes. “The idea was to organise all the available seats in cars just like we organise all the available seats in planes and trains, with a real search engine, and this did not exist. There was only demand and no offer and organised in a very weird way in that you would have neighbours who would share a ride but you did not know where they were going and when” (Hick- ey 2014). In 2006 Mazzella launched the V1 of the website www.Covoiturage.fr which he coded himself with a few friends, changing the name to BlaBlaCar in 2013. The platform is based on a trusted community where both drivers and passengers share information about themselves, their car and their travel preferences and are encouraged to rate each other. BlaBlaCar provides extra insurance free of charge, secure online payments and moderation to create a safe and fair environment. Monopolies and legal disputes “From the beginning, I realised that what we are disrupting is not hitch-hiking, it’s the transport industry,” (Nicolas Brusson, BlaBlaCar co-founder and COO). The collaborative economy has revolutionized the way we think about car ownership. While ownership of a personal vehicle still looms large, the existence of an increasingly diverse array of mobility modes has prompted many individuals to rethink their own approach to getting around. Collaborative platforms like BlaBlaCar, Uber and Lyft are disrupting the transport sector and are prompting defensive reactions from coach companies and taxi drivers. Over the past year or so, incumbents have filed a number of lawsuits against these startups worldwide. Many of these new software platforms have different business models; BlaBlaCar dubs itself a social network, Cabify is a travel agent and Uber connects paying passengers with drivers who are not licensed for commercial driving, which is illegal in many countries. Given its cost-sharing model, BlaBlaCar has by and large avoided Uber-style conflicts with regulators and incumbents. However, carpooling is undercutting trains and coaches and has attracted an increasing number of users who are keen to save costs and make last-minute travel decisions. BlaBlaCar is currently involved in a lawsuit in Spain for unfair competition with the coach company trade association. This is the first lawsuit it has had to fight in all 22 countries where it operates in. In Spain, transport companies apply to the Transport Ministry for a transport public service authorisation to operate routes that they exploit on a monopolistic basis. In exchange, they are obliged to cover a number of daily services and unprofitable routes in order to provide a public transport service. Against this backdrop, the Confebús trade group claims that BlaBlaCar is operating a for-profit public transport company without complying with the necessary licenses and regulations. The trade group claims that it has lost 20% of the market share as a result. Confebús asked the judge to issue a restraining order to shut the service down, which the judge turned down at the end of November 2015 (Martínez 2015).

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