The sharing economy is facing the ultimate test in 2019 with a raft of initial public offerings. Even after Uber's recovery, there remain serious doubts not only about the future of those businesses, but also of the entire sector. Should wise investors avoid the soon-to-IPO Airbnb and publicly-traded Expedia Group, which gets about 10% of its revenue from its fast-growing HomeAway-VRBO subsidiary?
Not all segments of the sharing economy are created equal. One benefits from a strong foundation. The other is chugging uphill, hoping not to stall. The contrast is clearest in five major areas.
A car ride is a utility, a barely tolerable way to get from point A to point B. There are no Rolls Royce Ubers or Lamborghini Lyfts, just anonymous sedans and SUV’s that, if you are lucky, are carrying a room-temperature bottle of water just for you.
On the other hand, an Airbnb booking can be a grand experience unto itself: French chateaus, horse farm cottages, sailboats, re-purposed shipping containers, tree houses, trullos -- even a Spice Girls bus! Add in a Viking professional stove in the kitchen and a craft brewery in town, and customers can easily spend weeks anticipating their stay. The combination of a unique property and a responsive host leads to amazing Instagram posts -- the ultimate barometer of the new economy. Uniqueness of goods was what helped eBay in the early days and is currently responsible for Etsy’s resilience in the e-commerce world.
Sharing economy assets degrade over time, but at different rates, depending on the type. A house and an automobile are two of the most expensive purchases for any household. Naturally, everybody wants to make the best use of these purchased assets.
Barring recessions and buying at extreme tops of the market, the value of a house generally goes up over time -- chiefly because they are not making land anymore. Conversely, a car depreciates over time and has an average life expectancy of about eight years, according to Consumer Reports. Just in the first year, a new car loses about a fifth of its value! Airbnb 2, Uber 0.
While tremendous progress has been made on autonomous driving technology, a car still requires an alert and capable human. That takes continuous engagement, often fighting stress and exhaustion. On the other hand, a multi-day Airbnb stay has economies of scale for the home-sharing host -- attention is required when the host checks in, but with lock boxes and digital devices, home-sharing is currently capable of being largely autonomous. Another edge for Airbnb.
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