Online Two-Sided Models Disrupting the Business Approach

Introduction

Traditional business models focus on providing good and services, job security, and occupational benefits. Employees and customers in such businesses experience challenges, such as restricted working hours and professional bureaucracies in ordering and delivery, among other aspects. However, “online two-sided models” provide a progressive approach focusing on efficient and timely service delivery to potential customers. For instance, Uber disrupts the operations in the transportation sector by ensuring that the business approach meets the customers’ needs when and how they require them (Teixeira, Brown, & Lopez- Lengowsk, 2018). Accordingly, Airbnb remodeled its approach to real estate and properties by providing an innovative model that enabled customers to access services using unique strategies.

According to Kosintceva (2016), the growth of significant data analytics sector, cloud internet, and the contemporary payment platforms, including mobile money and other online payment platforms, such as PayPal, have revolutionized services sector. Thus, as Uber provides taxi-related services, Airbnb manages property bookings, while other businesses, such as Fiverr and Upwork, offer a unique platform to access services for both buyers and sellers through marketing strategies. Additionally, the platforms spend significantly on research and development to ensure potential customers access envisaged products or services. Although traditional work structures have enhanced job security and access to work-based incentives, such as paid leave, over time, and compassionate allowances, the contemporary business models provide unique approaches for customers to access quality products and services, devoid of  paperwork bureaucracies, intermediaries, and logistical costs.

Background Information

Online commerce has experienced significant growth and has been adopted across the world. On-demand companies continue to improve service delivery through innovative systems that meet customer satisfaction and boost accessibility to services. Donovan, Bradley, and Shimabukuru (2016) explain that on-demand firms provide a platform that is based on innovative apps and technological models to render services to prospect consumers. According to the authors, the platform offers cost reduction systems, such as operating costs, logistics, entry requirements, and allows workers to experience more flexibility in service hours. The gig economy provides an opportunity for innovative product or services marketing and distribution.

The progressive nature of the “online two-sided platforms” has led to difficulties in the regulatory environment and customer services. Donovan et al. (2016) illustrate that the gig economy provides an advantage for underemployed workers to access opportunities. Further, the authors exemplify that the platforms have implications for workers based on employee protection systems and access to a conventional benefit to staff. Despite the occasional operational difficulties that have characterized the industry, customers remain the highest beneficiary of the “online two-sided platforms.” The platforms provide an opportunity for clients to engage with service providers before settling the payment. Notably, one of the advantages of the online two-sided platforms is the flexibility and accessibility of the services from any location (Donovan et al., 2016). Accordingly, the model enhances efficiency and acts as an economic growth stimulant to stakeholders such as customers, gig employees, employers across various sectors, and the company facilitating the interactions in the marketplace or platform.

Issues Faced

The online markets have experienced growth in recent years. The growth of customers in the various online two-sided platforms has redefined the perspectives of customer service and quality. According to Teixeira et al. (2018), Uber, Etsy, and Airbnb attained a million mark in clients’ population due to the efficacy of their business models. Conversely, the growth in the number of customers has also created challenges in marketing and operations, such as meeting customer expectations and dealing with such topics as compensation of different types of damages from insurance companies that occur to customers.

Enhanced internet connectivity across the world has accelerated the business on the virtual platform. Graham et al. (2017) illustrate that developing the global connectivity infrastructure across continents reduces barriers to interactions leading to the growth of electronic commerce. Besides, the authors posit that sub-Saharan Africa is one of the highest beneficiaries of the gig platform due to enhanced connectivity, which reduces the escalating unemployment level (Graham et al., 2017). The platform also provides a variety of integrated job offers. For instance, an ordinary graphic design task on such platforms develops progressively to a level where a client can request tasks and other related assignments based on the quality and agreement between the provider and the professional.

Case Analysis

The Airbnb Case

The Airbnb case is an ideal illustration of the modern disruptive business models. According to Teixeira et al. (2018), the enterprise, which started in around 2008, operates in the real-estate sector to match clients, with short-term lodging needs, with investors in the real estate industry. The business model accelerated the growth of the company from 1000 clients in 2009 to a million customers in 2011 (Teixeira et al., 2018). The improvement is attributed to referrals from previous clients who express the satisfaction of service, and hence advertise the company’s services to friends and relatives. Accordingly, the founders of the business Chesky and Gebbia sort to improve the quality of photo images utilized to boost property bookings to enhance traffic on the platform (Teixeira et al., 2018). The step demonstrates that customers in a two-sided marketplace are persuaded to buy products or services from a perceptual conviction of photos or through referrals from either friends or relatives. Furthermore, Airbnb as a typical two-sided marketplace, which applies value addition models to gain trust and loyalty in the sector. For instance, the company disrupted the normal operations of the lodging market by providing homemade breakfast and spacious lodging, which was beyond the regular expectations of clients in various cities. Such steps inspired customer to make listings on the Airbnb platform leading to a million listings.

Although two-sided marketplaces have attained substantial success, the approach also experiences occasional operational issues with customers. Among the challenges involved are customer satisfaction and product or service quality. Liu and Mattila (2017) aver that customer services are a key aspect of managing a business that depend upon referrals, especially on the virtual platform. Accordingly, the authors demonstrate concerns from scholars on the economic impacts, issues of regulation, and other forms of discriminations to customers on the virtual platforms. Although Airbnb model emphasizes on providing a feeling of belonging and a home approach within their hotel leasing, the perception of a customer about the services has been diverse (Liu & Mattila, 2017). From the case of Teixeira et al. (2018), complaints from customers about misplacing personal assets are some of the challenges encountered by organizations in a two-sided marketplace. However, the steps considered include engaging insurance and protecting private properties, which are significant initiatives that improve the stability and growth of the sector. 

Etsy Case Analysis

Etsy Case is an ideal example of a “two-sided e-commerce platform,” given the nature of its business approach. The business exploits innovative technology to develop third-party applications and tools that support sellers on the platform (Teixeira et al., 2018). The over 150 apps developed for the platform support sellers to access services from buyers who market their products (Teixeira et al., 2018). According to Teixeira et al. (2018), the platform offers substitute products to the mainstream market and enhances engagement between buyers and sellers on the networks, leading to improved business. The authors further illustrate that the interactions with Etsy enhanced growth to reach a million clients by 2008. Facts on the Etsy case demonstrate the possibility of talent-tapping from different global destinations to deliver difficult to procure services at lower rates. Muhammed (2018) asserts that companies using the gig model save above 20% in labor costs. Organizations receive the advantage of minimizing payroll needs by exploiting the expertise of freelance workers to match them to the needs of customers. Accordingly, the author also illustrates that 92% of millennial are enthusiastic about working remotely. Such opportunities offered by Etsy could benefit the millennia’s and other young people to provide unique services and exploit their talents to benefit customers. Muhammed (2018) adds that by embracing the gig models, companies appeal to the “generation z,” which leads to competitive advantage in the market. Accordingly, the case exemplifies Etsy as a platform enables to deliver unique goods, such as rare zippers or fabrics made to capture customer interest due to enhanced quality and value. Hence,  Etsy business models allow customers to interact with creators of unique products and develop customized brands that fit the demand of the buyers.

Uber Case Analysis

Uber is a dynamic business model that disrupts the operations in the traditional taxi industry. The San Francisco based company is “an online two-sided transportation platform” operated on a mobile app model that links buyers and sellers of transportation services. The application enables potential customers to make requests for trips on the app, which are then routed to the nearest independent drivers operating on the platform for pick up (Teixeira et al., 2018). According to Teixeira et al. (2018), the company’s customer base improved considerably between 2010 and 2012 and reached to a million clients. Such growth can be attributed to its unique approach facilitated by enhanced efficiency and effectiveness in time management. The authors illustrate the growth strategy of Uber as unique with the “one-size-fit-for-all” approach to identify the specific city-to-city taxi needs and respond to them using a mobile app tailored to the setting.

According to the founder, Travis Kalanick, the Uber model provides an alternative to city transport services through innovative approaches (Teixeira et al., 2018). For instance, engaging individuals who operate a taxi business using their cars enhances quality in service delivery. The founder also demonstrates the uniqueness of the model through products acting as accelerants in four categories of weather, sports, holiday or events, and restaurant or nightlife (Teixeira et al., 2018). The Uber model experienced successful application when it was tested in San Francisco city known for limited taxi services, especially during crucial nights such as New Year. The potential of Uber to disrupt activities in the transportation sector are incumbent on the model it employs to manage the ownership of cars through a new transformative capability. Teixeira et al. (2018) explain Uber’s model from the various perspectives, such as a group of self-drives that deliver people and packages to desired destinations and a personal logistical company that achieves the desires of the clients. Therefore, Uber is a disruptive technology reliant firm that delivers services that clients require, ranging from taxi to products distribution services.

Diversification is a business strategy that offers growth to a company. Businesses exploit the possibility of product or service diversification to improve service delivery and manage costs related to marketing. The diversification of Uber transport services to Uber ice cream by utilizing the same model for bookings and delivering has enhanced new perspectives in the marketing sector (Teixeira et al., 2018). As the founder explains, it is simpler for individual drivers to receive pop-ups on their app and drive to deliver ice cream to customers. As such, it disrupts the delivery industry through efficient management of clients request since the app identifies the nearest Uber to the client for the particular products or service requested. 

Competitor Analysis

Competition in business influence innovation, quality, and value, which sets the customers’ expectations. The gig economy has gained significant opportunities in the mainstream market due to enhanced customer service. The freelance market infiltrates the operations of large corporations with a technological approach and connections to potential customers (Green, 2018). Muhammed (2018) posits that firms employ the gig strategies to save on employee recruitment costs. Additionally, the model appeals to a higher proportion of dynamic workforce delivering comparative advantage to adopting companies. As Liu and Mattila (2017) describe, the Airbnb models beat the competition by packaging its marketing communications through illustrations of idyllic locations. For example, by utilizing different theme, such as “the artist mirrored house, charming castles, and the seashell house on a Mexican island” (Liu and  Mattila, 2017), the business gains a competitive advantage over the conventional lodging approach. Corrado and Hulten (2010) aver that technological innovation shaped the current economic development from the perspectives of ICT investments and research and development (RD). Accordingly, the authors demonstrate that innovations in product quality are important attributes that deliver technological changes witnessed to provide better consumer goods in the market.

Employee job satisfaction is an essential aspect of product quality that enhances competitive advantage. A study by the McKinsey global Institute elucidate that independent jobs have improved levels of autonomy, hence advantaged task-based payment platforms and short term relations between the task operator and the buyers of services (Holden, 2017). According to Holden (2017), individuals who work as agents or casual earners report enhanced satisfaction levels compared to those who undertake assignments based on necessity. Based on the author’s arguments, it is evident that online two-sided platforms have improved quality since providers of service do not engage the tasks as a necessity. Therefore, the level of competition and competitive advantage is enhanced compared to companies operating traditional employment systems where tasks rendered are mandatory for the employees, affecting their motivation.

Critical Competitor Analysis of Airbnb, Etsy, and Uber Platforms

What Options They Have/Had

Players in the freelance business should think strategically and adopt technology to manage the dynamic and growth experienced in the sector. According to Green (2018), the global adoption of the internet connects millions of users who require various services or products from professional freelancers. Hence, utilizing the advantage of global connectivity, the two-sided marketplace can influence interactions on their platform to tap the unlinked population for their products and services. According to the author, the two-sided marketplace should develop the capacity to analyze customers’ future expectations and deliver a comparative advantage for their operations (Green, 2018). Additionally, given that the majority of two-sided platforms have labor challenges between their employees and freelancers working on their platforms, it is significant that the aspect that poses such challenges to customers satisfaction are managed timely. De Stefano (2015) explains that various risks, such as casualization of the workforce by companies that take all engagements informally,, affect online models. The non-standardized forms of job commitment are against international labor expectations (De Stefano, 2015). Hence,  players in the freelance sector should mainstream labor and occupational expectations to professionalize the sector. Enterprises such as Airbnb, Etsy, and Uber, among others that operate online platforms for bookings and freelance services have the opportunity to enhance the value positioning of their products and services. Furthermore, “two-sided e-commerce platform” is based on the competencies of trust, care, and responsibility, which improves customer service and satisfaction. The implementation of such perspectives augments revenue streams leading to growth.

Solutions and Suggestions

“Two-sided e-commerce platform” control the contemporary models of doing business. Organizations are fast adopting changes within their operational models to manage the innovative ways of business. However, professionals and academicians in the labor market have raised concerns over the security of jobs, levels of commitments, and standards of products and service transacted in the platforms. Therefore, such platforms should mainstream labor commitments to deliver satisfaction and enhance products and service quality. Although the platforms rely upon agreement between potential customer and service provider, a balance of quality and value should be attained. For instance, Uber could enhance professionalism by applying similar standards, class of vehicle and train all its drivers on the platform. Additionally, other platforms, such as Etsy, can pre-qualify all the professionals into categories based on proficiency.

Conclusion

As it is palpable from the analysis, conventional work structures have job security and incentive programs that keep employees committed to the companies’ goals. However, the contemporary business models, such as Uber, Airbnb, and Etsy, offer unique approaches to customers without the traditional paperwork and contractual agreements. Companies also benefit from the models through reduced operational expenditures and logistical costs. The gig approach manages the escalating global rate of unemployment by providing opportunities to gainful casual employment while exposing various talents. Furthermore, the platforms are a source of income for operators, service providers, and freelance workers. The platforms help people to access services promptly and conveniently. Overall, those platforms provide an opportunity to review the product before purchase, negotiate, and pay competitive rates based on the quality of the product or reviews provided.  

References

Corrado, C. A., & Hulten, C. R. (2010). How do you measure a technological revolution?. American Economic Review, 100(2), 99-104. Retrieved from https://conference-board.org/pdf_free/AEA2010.pdf

De Stefano, V. (2015). The rise of the just-in-time workforce: On-demand work, crowdwork, and labor protection in the gig-economy. Comp. Lab. L. & Pol’y J., 37, 471. Retrieved from https://lirias.kuleuven.be/retrieve/527987

Donovan, S. A., Bradley, D. H., & Shimabukuru, J. O. (2016). What does the gig economy mean for workers? Retrieved from http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=2512&context=key_workplace

Frieden, R. (2017). The internet of platforms and two-sided markets: Legal and regulatory implications for competition and consumers. Available at SSRN 3051766.

Graham, M., Lehdonvirta, V., Wood, A., Barnard, H., Hjorth, I., & D Simon, P. (2017). The risks and rewards of online gig work at the global margins. Retrieved from https://ora.ox.ac.uk/objects/uuid:8c791d5a-e3a5-4a59-9b93-fbabea881554/download_file?file_format=pdf&safe_filename=Risk%2Band%2BRewards%2Bof%2BOnline%2BGig%2BWork.pdf&type_of_work=Report

Green, D. D. (2018). Fueling the gig economy: A case study evaluation of Upwork.com. Management and Economics Research Journal, 4(2018), 104- 112

Holden, R. (2017). Gig. Retrieved from http://www.apg.pt/downloads/file1088_pt.pdf

Kosintceva, A. (2016). Business models of sharing economy companies: exploring features responsible for sharing economy companies’ internationalization. Norwegian School of Economics.

Liu, S. Q., & Mattila, A. S. (2017). Airbnb: Online targeted advertising, sense of power, and consumer decisions. International Journal of Hospitality Management, 60, 33-41. doi:10.1016/j.ijhm.2016.09.012

Muhammed, A. (2018). Four statistics showing how business can benefit from the gig economy. Forbes. Retrieved from https://www.forbes.com/sites/abdullahimuhammed/2018/07/31/four-statistics-showing-how-business-can-benefit-from-the-gig-economy/#35901e46752f

Teixeira, T. S., Brown, M., & Lopez- Lengowsk, D., (2018). Airbnb, Etsy, Uber: Growing from one thousand to one million customers. Harvard Business School. 516(108). 1-14

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