Uber and AirBnB: What Could Possibly Go Wrong? – Rob Norman, GroupM

By GroupM Archives
Cover image for  article: Uber and AirBnB: What Could Possibly Go Wrong? – Rob Norman, GroupM

If corporate valuations based on the price of the last round of financing are a reliable measure of a company's worth then Uber and AirBnB are now worth in excess of $50 billion.

They have achieved these valuations by delivering on two of the fundamentals of network businesses. In both cases they have pushed utilization of fixed assets closer to 100% and at the same time reduced the marginal cost of new inventory close to zero. Furthermore, and with the “network trifecta” in mind, they have achieved both through a “capital light” model -- certainly in comparison with the transportation and hospitality industries that they have set out to disrupt.

Investors have declared victory. In both cases they believe in the model and they believe in its durability -- and that both companies have moved fast enough to create significant barriers to entry.

So, what could possibly go wrong? The objections of the licensors and owners of taxi and licensed limo services are well known and widely reported, as are the objections of certain jurisdictions, like New York City, which objects to AirBnB on the grounds of tax avoidance relating to rules surrounding income derived from unoccupied residential real estate.

So these are regulatory headwinds -- but there may be social headwinds mounting also. This weekend the BBC reported an allegation that a female customer of Uber in Delhi was raped. In addition the New York Times reported the growth of “power” AirBnB landlords who were acquiring real estate with the specific goal of monetizing them via the platform with the dual effect of attracting further regulatory scrutiny and squeezing out the sole operator who was the early beneficiary of the service and who helped the company maintain some semblance of the moral high ground.

Increasingly AirBnB customers are also asked by their “hosts” to participate in subterfuge: “If anyone asks who you are, tell them you are a friend of Hugo” is not a request you typically get at Marriott. Uber X passengers increasingly encounter drivers that don't know their way and just possibly may not be appropriately insured for the service they are providing. Yellow Cabs may get lost but the Medallion ensures the assurance of insurance.

These incidents may be few in number but it's well known that bad news travels every bit as fast as good and that businesses which depend on their perception as consumer champions may fall as fast as they rise.

Uber and AirBnB have, without doubt, created efficient marketplaces but they may not be sustainable if those marketplaces are shown to lack integrity.

Rob Norman is Chief Digital Officer Global of GroupM. Rob’s principle tasks are developing theRob Normaninteraction organization within GroupM, developing positioning and thought leadership and leading the interaction contribution to business development. You can reach Rob at @robnorman or rob.norman@groupm.com.

Read all Rob's MediaBizBloggers commentaries at Musings from GroupM.

Check us out on Facebook at MediaBizBloggers.com
Follow our Twitter updates at @MediaBizBlogger

The opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaBizBloggers.com management or associated bloggers. MediaBizBloggers is an open thought leadership platform and readers may share their comments and opinions in response to all commentaries.

Copyright ©2019 MediaVillage, Inc. All rights reserved. By using this site you agree to the Terms of Service and Privacy Policy.