How the world learned to build revenue through idle assets
Most of us likely had a similar reaction the first time someone mentioned Uber to us.
“I don’t want to ride in some random person’s car. Why can’t we just call a taxi like normal people?”
Uber now has a $78 billion market capitalization, because most of us got over our initial reservations and booked an Uber when we needed a ride. Aside from the company’s financial success, there are millions of people around the world who have turned to Uber for a job when they need some extra money or can’t find work.
Do you remember the first time you heard of AirBnB?
“I’m not going to sleep in some random person’s living room. What am I, a college student staying in hostels while I backpack across Europe?”
AirBnB brought in $3.4 billion in revenue last year because it met an unmet demand in the marketplace: those who couldn’t afford it could pay less than it would cost to rent a hotel, and those who could afford it suddenly had the ability to rent an entire house for their vacation.
A newer entrant to the market that combines both business models, Turo, is currently valued at around $1 billion and they haven’t been in the business of renting personal vehicles out to others for nearly as long as the previous two.
What is there to learn from this trip down memory lane to look at disruptive business models that have taken the world by storm?
For one, genius new business ideas are often seen as crazy. Just ask Albert Einstein or Nikola Tesla.
Perhaps more importantly, we can learn – if we choose to – that the new gig economy and technological advances have opened up a lot of new opportunities to realize the stored value in unused assets.
There is money on the table – billions of dollars worth – to people who are willing to embrace these new sharing economies and put their unused assets to work. Follow me on a money-making journey as we go through a few of them.
How to Take Advantage of a Rental Market
The world is full of copycats, that is nothing new. If you listen to interviews or episodes of “How I Built That” featuring the founders of Uber or AirBnB, you hear much of the same story that is quite familiar with authors, inventors, founders and movie makers.
“We took our idea to every Venture Capital (VC) and Angel Investor firm in Silicon Valley, and the only ones who would take our meetings laughed us out of the room. The day we made our first million, we couldn’t answer the phone fast enough to field their calls asking to take us out to lunch.”
It’s a tale as old as time. The movers and shakers of the world capture lightning in a bottle, but the people whose sole job is to fund those new groundbreaking inventions and ideas wanted nothing to do with it. Until they bootstrapped, begged friends & family for cash, and survived on Ramen noodles for a year to make it all happen.
After that, we all know the story: fame, fortune, and off-the-charts stress levels ensue.
And, of course, the copycats.
Rather than building their own new longer-lasting lightbulb, many times those same investors who passed on the brilliant idea when it was first offered to them will fund a startup competitor with the same idea, believing that lightning can strike the same place twice. As we’ve seen with Lyft, there are some that can tread water, at least, but not often will they come anywhere close to the original.
There is a reason it’s called first mover’s advantage in business school.
Once all of the copycats were funded and in the market, people all over the world began to try to figure out what other unused assets we could use technology to find revenue in.
EBTH took estate sales online into a gamified website and app that allows people to browse through collectibles, furniture, artifacts, and other personal belongings that the deceased no longer have a need for and their family doesn’t want.
REI started offering some of their outdoor products to be rented by members of the co-op rather than purchase. Dozens of other copycats sprouted up to chase this model, but none could quite make it stick. It seems the original responses to Uber and AirBnB could never quite be beaten in the outdoor equipment market.
Turo, as mentioned above, allowed any car owner with a smartphone to rent their personal vehicles out to anyone who needed a vehicle, whether it be for one hour or an entire month. As the business took hold, small companies around the country began to buy fleets of vehicles purely to list them on the platform.
COOP has taken Turo to a new level and marketplace, moving the technology from personal vehicles to business vehicles such as trucks, tractors, trailers, and vans. While Turo was a Silicon Valley startup, COOP is backed by Ryder, which means the company already has some serious money and power behind it. This is a company to keep your eye on, as tens of thousands of businesses around the country have vehicles sitting in their parking lot unused while they could be bringing revenue. If Turo is already at $1 billion, imagine where COOP will be in five years.
The point of all of these examples is to show the fire that has taken hold on both the supply and demand side of this new business model that allows owners of assets that are not currently in use to rent them out to make money. Some people do this part-time to make a little extra cash or bring much-needed revenue into their business, while others form completely new businesses providing assets to the platforms.
Every new business and idea has its early adopters who jump on board the moment they hear about it, and laggards who begrudgingly will use the product or service only when it’s been long proven and all of their friends and family have tried it.
If you are in the latter category, still, it may be time to take a look around and realize that this is far from a fad. The asset sharing economy is here to stay, and the only question is whether you will use it to make some money on the supply side or make your life a little easier on the demand side.
Sharing Economy and the Hotel Industry
We already mentioned AirBnB in the introduction above, so now would be a great opportunity to dive in a little closer and look at the competition that now exists in their marketplace with Vrbo.
One of the first decisions that an entrepreneur has to make in business is to determine how they will compete if they are not the first entrants into a marketplace. That decision may seem pretty simple to the layman, but there is a lot that needs to go into it. At a very high level, an entrepreneur or founder has two options to choose from:
- Compete on price (sell my widget or provide my service for cheaper)
- Compete on differentiation (make my widget unique or better)
Vrbo chose the latter, opting to compete with AirBnB for vacation rentals alone, rather than taking on the entire market of away-from-home rentals. This could be a wise move, as many people know about AirBnB to rent rooms from an individual rather than a hotel room, but they have not done the best job at marketing the fact that AirBnB provides the ability to rent entire homes – but that has been the entire branding and marketing focus for Vrbo.
For a little fun math, in 2019 Vrbo’s revenue was 27% of AirBnB’s. Barron’s valued Vrbo in 2021 at around $14 billion. Vrbo was purchased by HomeAway in 2006, and HomeAway was purchased by Expedia in 2015 (the travel industry is often fueled through growth by acquisition). Expedia’s entire market capitalization in 2019 was $19.3 billion, with their newly purchased company (Vrbo) making up the majority of that.
Suffice to say, there is a lot of money to be made by those willing to put their unused assets, whether it be vacation homes or vehicles, in the market to take advantage of the sharing economy.
Sharing Economy and Recreational Vehicles (RVs)
As we saw AirBnB lose a portion of their market share to specialized competitors (Vrbo for vacation rentals), we are even seeing other specialty companies find great success in the vacation vehicle sharing economy.
If you aren’t an RV enthusiast, perhaps you didn’t know that the companies Outdoorsy and the new entrant Camplify are both taking the RV world by storm.
Outdoorsy, located in the United States, booked 840,000 travel days with 620,000 users in 2019, generating $325 million for the platform.
Champlify, started in Australia and now present in the UK as well, started in 2019 with a GTV of $8 million which increased substantially to $33 million in 2021.
Both of these companies are niche markets in niche markets, but every example listed so far shares a similar core to their business models: they are all making money by disrupting traditional industries (hotels, rental car companies) and allowing people to bring in revenue using assets they already own.
COOP: Moving the Sharing Economy from P2P to B2B
One of the key similarities between each of the successful sharing economy platforms that we’ve seen so far is the Peer-to-Peer aspect (P2P). They all gained success by connecting people who wanted something (a ride, a vehicle, a room, an RV) with someone who had one that either wasn’t being used or they were willing to provide temporarily.
We can debate LLCs and sole proprietorships, but corporate structure aside, the people providing their assets to realize stored value were either individuals or very small companies. The next permutation in an ever-evolving industry is COOP, which took that model to the B2B market, now allowing companies, large and small alike, to realize the stored value in their fleet vehicles that are not being used.
The lockdowns have wreaked substantial havoc on small businesses around the world, as many have had to struggle to make ends meet when they were ordered to close their doors. Some were able to stay ahead of the curve by transitioning to an online-only model, others found unique solutions to stay in business but others, unfortunately, had to close their doors forever.
Probably one of the best uses of technology and the sharing economy network today is this new ability for businesses to use their vehicles that are sitting idle due to decreased business, worker shortages, or other restrictions and find a way for the companies to bring in revenue through these assets they already own by renting them to other companies who may have a need for them.
This is one of those precious few situations where everybody wins: the company that needs a vehicle can save money, hassle, and headache by using a simple app and platform to rent a vehicle from another small business that is not using it that day. A small business that has vehicles sitting idle can bring in much-needed revenue by simply listing them on the COOP platform and renting them when the demand is needed.
And as an added bonus, small businesses get the satisfaction of knowing that they are doing business with another small business, helping them increase the utilization of their assets at a time when everything seems to be out of whack.
Furthermore, COOP is supported by Ryder, meaning that while the technology is new and the idea of a B2B sharing economy is still in its infancy, there are many decades worth of experience and know-how behind the platform to keep it running, even in hard and difficult times.
You don’t often get the chance these days to feel good and hopeful about new emerging technology, as most of the things that we typically see are either only providing entertainment value or marginal benefits to the end-user. But if COOP can help keep small businesses afloat by realizing stored value in their owned assets through the sharing economy…that is a technology that any entrepreneur, businessperson or supporter of small businesses can feel good about.
The Sharing Economy: Get on the Train or Get Left Behind
This article opened with many of the initial reservations that some of we old-timers had when we first heard mention of Uber, AirBnB, and this newfangled technology that was allowing people to share their cars and homes with total strangers for money.
But at this point, it’s no longer newfangled and the industry has taken on a life of its own. Not only that but as we’ve seen in crazy times, this ability to realize the stored value in owned assets has shown the ability to help people when they need it.
When the economy was in the tank, it used to be a known symptom that we would see unemployment increase and a large number of people finding themselves in dire straits because of it. Assets would be bought at fire-sale prices by people who had either overextended during good times or found themselves unable to replace their streams of income.
With the sharing economy, the disruption has not only happened to traditional industries, but also to this cause-and-effect that we had become so used to. People who own assets no longer have to let them go at a major loss to make ends meet, but can rather use them to replace that income when the cards are down or business has slowed.
At a time when some small companies are on the brink of bankruptcy due to decreased demand or regulations preventing them from going about their normal business, COOP provides a way for any who have vehicles that are sitting idle to instead bring in a steady stream of revenue.
Technology can be a real headache sometimes for those of us who are too old to have been born into the “digital native” culture that Generation Y and Z were. But in this case, at this time, it very well may be some of our saving Grace.
Fact Roundup for the Sharing Economy
- According to Sam Bowles, professor of Economics at the University of Massachusetts, the “sharing economy” concept is much older than we think. Hunter-gatherers (our ancestors) had no concept of private property, as their tribes shared everything to survive. He and other academics believe that private property only evolved when farming began.
- Uber, probably the most well-known sharing economy on the planet, started off only connecting riders to “black cars,” luxury SUVs for special events.
- The sharing economy is now forecasted to reach $335 billion by 2025
- Companies working in the sharing economy are expected to grow by 2,133% in the next 12 years
- Over 86 million Americans took part in the sharing economy in 2021
- Having grown from renting rooms and rides, the sharing economy now encompasses finance, personal and commercial vehicles, parking spots, bicycles, grocery shoppers, storage spaces, office spaces, freelancers, seats on private airplanes, first-class bus seats in the UK, couches, carpools and many other staples of daily life