Airbnb’s IPO Could Transform the Sharing Economy–but Not for the Reasons You Think

Years ago, I used Elance (now Upwork) to find freelance writing jobs. Elance functioned like most sharing platforms: Freelancers like me could transact with people who needed various tasks done. Elance facilitated the transaction and took a cut in return. 

Frankly, it was great. While the cut was, as I recall, somewhere around 8 percent, that was a cost of sales I was more than happy to pay.

What Elance didn’t do — or at the very most, paid lip service to — was help freelancers develop their businesses, especially in terms of tangible tools, infrastructure, etc. The format didn’t foster any kind of longer-term relationship. While I completed a number of projects, each was essentially a one-off.

Again, I’m not complaining. It worked for me. But I did know other people who could have benefited from a broader form of partnership.

The same is true for most companies in the sharing economy sector. Take Uber. Uber provides the marketplace. Which is great. But if drivers want to invest in a better vehicle, or other tools to better run their businesses, that’s up to them.

Which, once again, is fair enough. That’s the deal. Both parties go in with their eyes wide open.

But that “relationship” does often limit the providers’ ability to innovate and grow their businesses. Which also limits a company like Uber’s ability to provide better service, and therefore grow its own business. 

Because a marketplace, no matter how awesome its tools, is ultimately only as good as its providers.

That’s a problem Airbnb clearly hopes to tackle through its upcoming IPO. The company is holding back more than nine million shares of stock to fund a host endowment that it hopes will grow to over $1 billion. An advisory board — “a diverse group of hosts on Airbnb who meet regularly with Airbnb executives to represent the host community’s voice and make sure that hosts’ ideas are heard” — will guide and oversee how that money gets spent. 

During a downturn, a portion of those funds could possibly be used to help hosts weather a revenue shortfall. In better times, funds could possibly go to things like grants, investments in new products and services, education, or annual payouts to hosts who “most advance the Airbnb mission.”

Airbnb admittedly hasn’t worked out all the details. They have time, since disbursements won’t occur until the fund is worth $1 billion. Spending will come from growth on principal.

But if the program works, it could be a major step toward solving a fundamental problem in the sharing economy: turning an endless string of one-off transactions between two parties into something more akin to a long-term relationship. 

If it works, host attrition may decrease. If it works, the overall quality of what Airbnb hosts provide may increase — and so should customer activity and revenue for the company and the hosts. 

If it works, the program could serve as a model for other businesses operating — on all sides — in the sharing economy.

Which, if that’s you, means you should definitely pay attention to the outcome.