Posted by: Contributing columnist, Clarion-Ledger, Business, June 30, 2016
Last week I introduced the key criteria for peer-to-peer business opportunities and how these types of businesses are triggering an amazing revolution — from Airbnb and Uber to Oxford’s own Curtsey. If you recall, I outlined my belief that there are always two critical criteria needed to make a peer-to-peer business succeed — an asset that isn’t fully utilized and a technology solution that easily makes that asset available to others.
While these are the necessary minimum criteria, for any business opportunity there are usually other significant criteria to consider as well. Any successful business must understand and appreciate the user experience, and peer-to-peer opportunities typically have consumers as both buyer and seller, so the user experience needs to be tailored. Regulatory considerations are also critical in any disruptive technology, and that certainly applies to peer-to-peer businesses, which have been some of the most disruptive business models we’ve seen. And over the next couple of weeks, we’ll continue to explore how these factors have specifically affected the most popular peer-to-peer businesses, including Airbnb and ride-sharing services like Uber and Lyft.
If you are not familiar with Airbnb, the premise is that ordinary people rent their most personal possession — their home — to travelers. This can include renting simply a bedroom, a couch to sleep on or the whole house, and the owners are oftentimes there too.
TONY JEFF: Peer-to-peer business Part 1
In fact, the business began with its three founders using the internet to rent out space in their homes (at the time, their couches) to travelers to make extra money. That idea has since transformed the travel industry and turned Airbnb into the behemoth it is today, with more than 60 million users and rental listings in 34,000 cities in 191 countries. The company is worth around $25 billion, and their only product is a tool to connect people with rental space to those who need it.
Along the way, Airbnb founders recognized that earning users’ trust was their biggest hurdle and critical to their success, so they intently created their technology platform in a way that allowed for both hosts and guests to have access to as much information as possible, including reviews, personal information such as interests and hobbies and even photos. While there have of course been some negative experiences, Airbnb is so successful today because nearly all connections are deemed successful and rated highly by both parties.
Unlike Uber, whose ride-sharing platform has been fought by entrenched taxi companies since day 1, Airbnb has been fairly immune to regulatory hurdles until recently. There were no large, legacy groups to lobby cities and states against Airbnb, and in a free market their customer-centric solution has exploded. Recent issues with cities trying to restrict rentals for various reasons — such as San Francisco attempting to fine Airbnb if property owners don’t register their rentals with the city — could have a devastating impact, but I suspect courts and public calls for what is an innovative service will probably win out in the long run.
TONY JEFF: Keys to success for tech startups
Since homes are typically our largest personal assets and because short- and long-term renters can take advantage of Airbnb, I guess it shouldn’t be surprising that the business has so quickly grown to take advantage of a real estate peer-to-peer opportunity. This peer-to-peer company’s groundbreaking business model with its efforts to engender trust have clearly been the key to their growth and success.
Tony Jeff is the president and CEO of Innovate Mississippi. He can be reached at tjeff@innovate.ms.