Barely a day goes by without a new company launching with claims to be the “Uber of X” or the “Airbnb of Y”. They are generally some kind of on-demand service. Think an app that allows for food delivery, laundry delivery or pretty much any kind of delivery at the press of a button.
To some degree, it makes sense to compare such companies to Airbnb and Uber. They are both on-demand businesses and they have high profiles. To call yourself the Uber of something gives a pretty good idea of what you are trying to do. But it also fundamentally misunderstands what makes Airbnb and Uber so special.
Airbnb has accomplished more than an easy app for booking rooms in stranger’s houses. As Stratechery’s Ben Thompson has pointed out, Airbnb has commoditised trust.
Trust is a very important force in travel. If you went on a holiday before the internet, you booked a room at a chain, such as the Hilton, or took a recommendation from your travel agent. You wouldn’t stay in some random person’s house; they might be a slob or a serial killer. The big brands and your local travel agents owned your trust, and this is what AirBnB’s platform has undone.
It is now safer, and sometimes even preferable, to stay with random strangers. AirBnB and their reviews and photos have unlocked innumerable locations and price points and options by giving random strangers – their hosts – a level of trust. This is the disruption AirBnB has wrought on the tourism industry.
In many countries and cities the taxi industry are monopolies or oligopolies, with artificially restricted supply in order to maintain the values of operating licenses. This is what Uber has undone. By flooding the market, Uber has not only reduced times and prices for consumers, but have destroyed those monopolies and very publicly outed the power of entrenched interests.
Uber has also unlocked a number of other inefficiencies. We don’t all need to own cars, and in some cases it can even be cheaper to rely on ridesharing. Those that do own cars tend to have a bunch of empty seats, so Uber has introduced carpooling as well. And through ideas like surge pricing, Uber has shown what is needed and can be accomplished by marrying demand and supply.
Remember, ridesharing is a crowded marketplace. On top of Uber, there is Lyft, Sidecare, and the Chinese competitor Didi Kuaidi. Uber has been able to take the dominant position by being aggressive, moving first, experimenting and paying a lot of fines.
I’m not saying Airbnb and Uber are fantastic businesses and other on-demand services aren’t. Or that the others aren’t innovative, disruptive and have great business models. Obviously, there wouldn’t be such a proliferation of on-demand if there wasn’t money to be had. Although, on-demand companies that aren’t Uber or Airbnb are losing favour with investors.
In fact, some of the newer on-demand companies are starting to look exciting. I was recently chatting with some representatives of a food delivery on-demand company, who spoke of creating an end-to-end logistics platform. It could predict the amount of drivers needed and orders taken based on weather, time, day, time of year. It could work with restaurants to take their orders and make them more efficient.
Now this sounds like an “Uber of X”. But it doesn’t sound like most on-demand.
Sitting on top of traditional services, such as dry cleaners, and providing simple convenience through an app isn’t world changing. You are mostly profiting through a kind of convenience-arbitrage, you will be ditched by consumers the moment times get tough, and you have no moat against the dry cleaner moving into your business.
You aren’t Airbnb or Uber because you have an app that removes a little bit of friction from someone’s life. You become Airbnb and Uber by fundamentally disrupting the status quo.
You know you’re the “Uber of X” when the people controlling the industry you’re disrupting start to admit how much it hurts.
Like when Mike Barnello, CEO of LaSalle Hotel Proprieties, did last week when he addressed Airbnb’s “big numbers” during a quarterly earnings call.
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