How Blockchain-based Startups Could Replace Major Players Part 2

How blockchain-based startups could replace Uber, Airbnb and other major players in the sharing economy market. Part 2. Aggregator platforms and unexpected consequences.

 

Multiple studies have shown that Airbnb presence is a city may lead to increased rents and properties going off rental market because year-round renters are now competing for the same apartments with business-savvy renters that are looking to grab apartments off market with the goal of renting them on Airbnb.

A similar controversial trend has been occurring with Lyft and Uber: the promise of the platforms is to take cars off the road, yet instead, multiple studies have found that Uber and Lyft compete with public transit and worsen congestion in cities.

Services such as Uber Express Pool directly compete with mass transit. Christo Wilson is a professor of computer science at Northeastern University in Boston, Massachusetts. His research found that about 60% of people who use Uber would use public transportation if Uber was not available. Instead of using ride-sharing apps for legs of their trips, many people use the apps as a standalone mode of transit and ignore public transportation altogether (source: http://www.chicagotribune.com/bluesky/technology/ct-uber-lyft-congestion-20180225-story.html ).

According to a study by Schaller Consulting found that in 2017 the number of taxi and ride-hailing trips in New York City has increased by 15% compared to 2013. The number of unoccupied taxi and for-hire vehicles increased by 81% because of the downtrend in utilization. At the same time, the number of taxis and for-hire vehicles increased by 59%. In plain language, this means more taxis and for-hire vehicles on the road, more congestion and more empty driving for taxis and for-hire vehicles.

A study of traffic patterns in San Francisco has shown that on a typical workday drivers on ride-sharing platforms make over 150,000 trips per day and most of the trips occur in the most congested areas of the city.

At the same time, another study of behavior patterns of ride-hailing users in Boston, New York, San Francisco and other major cities across the US has shown that if people did not have access to the ride-sharing apps, they’d walk or use public transit.

Another issue with aggregator businesses is that since they do not own properties the access to which they provide, they do not have to follow the regulations that other players in the marketplace have to abide by. For example, Uber has been claiming for years that it is not a taxi company but a technology company and that the laws that regulate taxi companies do not apply to Uber. Recently, it has lost a major court battle in Europe where a court said that Uber was indeed a taxi company. However, for years the company avoided running background checks on drivers claiming that most of the drivers on the platform do not drive full-time. The company has also not been providing drivers with any work-related benefits and treated them as contractors.

Finally, one of the disadvantages of the aggregators is their business model. They would often start with lower prices to attract new customers and take over the competition. Once the competition goes out of business, many of the platforms start raising their prices for both service providers and users of the platforms. This means that what initially has been advertised as a way for users and providers to connect directly becomes a monopoly that dictates the prices and serves its own interests and not the interest of the members of the platform.

For example, according to an article in Bloomberg, in 2017 Uber switched from charging rides per mile and per minute to charging them what it thinks they will pay. The company started using data and data science to engineer ways to increase the amounts it charges customers and decrease the amounts it pays drivers. The new system is called “route-based” or upfront pricing.