Thursday, May 21, 2015

The Last Word On The Sharing Economy: Actually, The Emperor Has Some Very Nice Clothes, It's The Crowd That Has To Go Naked

Wow, just wow.
I am, he said modestly, reasonably au courant with most of the issues and still am dumbstruck by this mini tour de force.
From FT Alphaville:

The sharing economy will go medieval on you
In Paris this week, at the Ouishare Fest, the great and the good from Europe’s sharing economy have been delving deep into what it means to be running a collaborative business model within a capitalist framework. Are the two even compatible? Or is there a fundamental conflict at the heart of an industry that preaches collaboration but, due to being radically commercialised by venture capital money from Silicon Valley, also needs to profiteer from the goodwill of others if it’s to remain viable?

For the most part it’s a hypocrisy the community is trying to address. The $1bn elephant in the room — the fact some aspects of the sharing economy are becoming the very thing they set out not to be — has basically become too enormous to ignore.

It all comes down to how these web 3.0 businesses are structured. Most models focus either on leveraging networks of existing resources, capital and volunteers then charging rents for platform use or on forging platform monopolies that lock-in users so that their data can then be monetised.

For now, the uncomfortable truth is that the sharing economy is a rent-extraction business of the highest middle-man order.

The other (increasingly less) secret dirty truth, as Jeremiah Owyang, industry analyst at Crowd Companies noted in his speech at the festival on Wednesday, is that for the most part the sharing economy is owned by Silicon Valley’s 1 per cent.

While it’s definitely no secret that venture capital has been flooding into the sector, the numbers as Owyang puts it, already far outweigh the sums that flowed into the web 2.0 social media boom at this stage.
Owyang’s analysis calculates that $12.7bn has now been invested in 232 sharing economy start-ups, over the course of 653 funding events, with an average value of $10m per event. Average funding per start-up is estimated to be $54.75m. He adds that most of the money has been raised in the last year or two meaning we’re only at the beginning of what is usually a five year cycle — at the end of which VCs will want their money back.

The big unicorns in this space, car-riding apps Uber and Lyft, and room-renting site AirBnB, skew the data a lot, but even when these are removed we’re left with an average total funding of $35.9m.

Accordingly, Owyang says, if these companies are to save face, they should follow public listing strategies like those deployed by the online craft platform Etsy, which also happens to be a B corporation. Etsy offered its providers and partners with an early opportunity to buy up to five per cent of discounted stock.
As Owyang has observed in blog posts:
“This was a smart move for the company, as it fosters one of the highest form of loyalty with its community: shared destiny. As Etsy performs well in the market, creators who purchased the shares benefit as well. Those creatives have already seen a 39% increase in the value of those shares since the IPO.”
But Owyang is also optimistic that capitalism will find a solution to much of the dichotomy at the heart of the space. With time, he notes, competition will force companies to improve on worker and user rights. And it’s unclear for how long being an asset-light operation will remain an advantage, especially if and when incumbents step up their game.

The view from Indy Johar, social venture specialist and founder of Project00, however, was more nuanced. Many of these companies, Johar notes, are entirely new species of corporations. If not for their intrinsic monopolistic nature and ability to”lock-in” users, many might have no value at all....MUCH MORE
Old school rent extraction device