Terms can become hard to define when they become too big. By too big, I do not mean in terms of impact or scale. It happens when the connections between a broad church of products, services and ideas becomes so loose and diluted that the umbrella term starts to lose meaning. The more inaccurately the term is applied the more its value is questioned, and eventually the flame of meaning behind an important concept burns out. It becomes a passing buzzword. Is this the current state of the so-called ‘sharing economy’?
These days, it seems that any platform that uses the power of the internet to efficiently match people’s wants with people’s haves is labelled the ‘sharing economy’. No wonder we are in a mess trying to describe how the likes of Airbnb, Uber and Taskrabbit are connected. No wonder we find ourselves in a place where leaders such as Senator Clinton uses multiple terms in one speech. No wonder the media frequently opts for the ‘sharing economy’ but then subsequently attacks the term for not being fit to describe the different economic activities it encompasses. And so we invent more terms such as ‘on-demand economy’ or my least favorite, the ‘gig economy’. Seriously, how many ‘economies’ can we have?
It’s tricky to find the right definitions because people naturally apply different lenses and language when thinking about similar ideas and examples. There are multiple focuses: on the benefit (e.g. access), behavior (e.g. sharing), business model (rental) or even a market structure (e.g. peer-to-peer).
Combing through dozens of articles and research papers revealed a starter list of commonly used terms. It is unlikely that we’ll arrive at precise terms, but this post is an effort to make the distinctions clearer and to shine a light on the mechanisms and principles behind the terms.
UMBRELLA TERMS: Terms used to apply to a group of ideas or companies with commonalities.
Access Economy: Systems that enable people to pay for access to the benefit of goods rather than needing to own them outright.
Note: When using this term, consider whether the example is focused on delivering the benefit of access over ownership. For example, people are able to access media content easily from Netflix or Spotify, or access a car from a carclub like Zipcar.
Circular Economy: Systems that generate the most efficient use of resources by extracting maximum value from products and materials while in use, and extending longevity through reuse at the end of a lifecycle.
Note: When using this term, consider whether the example focuses on the benefit of maximizing the efficiency of use of a product or material. For example, people are able to buy used Patagonia items through Yerdle, or recycle and repurpose their trash with Terracycle and Preserve.
Collaborative Consumption: Systems that reinvent traditional market behaviors — renting, lending, swapping, sharing, bartering, gifting — in ways and on a scale not possible before the internet.
Note: When using this term, consider whether the behavior around exchanging assets changes and becomes more efficient through technology. For example, Airbnb enables people to rent out their homes and unused spare rooms to guests. Zopa allows people to borrow money from not just their family or friends but from beyond their social circle. And eBay elevates the “garage sale” allowing people to sell their unwanted things to people not just in their locality but to people with access to the internet.
Collaborative Economy: Systems that unlock value from underused assets* by matching ‘needs’ and ‘haves’ in ways that bypass traditional intermediaries and distribution channels.
Note: When using this term, consider whether the example focuses on bypassing the traditional intermediaries to change the dynamics of supply and demand. For example, Vandebron enables people to buy their power directly from independent energy producers. Food Assembly allows people to buy their fresh produce from local farmers. Upcounsel allows people to select and hire an attorney directly from a marketplace. Uber enables people to get car rides directly from Uber drivers in the vicinity.
Gift Economy: Systems that enable goods or services to be given without any immediate payment or expectation of future quid pro quo.
Note: When using this term, consider whether the example facilitates true gifting of a product or service. For example, Freecycle enables networks of people who want to give and get stuff for free, Impossible enables people to give away their time, skills and objects within the social network, and Couchsurfing enables people to connect with locals to stay on their couch for free.
Gig Economy: Systems that break up a traditional company ‘job’ into individual ‘gigs’ that independent workers are paid to do for a defined time.
Note: When using this term, consider whether the example changes the nature of work, and the worker relationship between the provider, customer and intermediary platform. For example, TaskRabbit pays task runners for every singular task they fulfil. Uber pays drivers per ride they give passengers. Postmates pays workers per delivery they are able to take.
On-Demand Economy: Systems that instantly match buyers and sellers to deliver goods and services immediately when people need them.
Note: When using this term, consider whether the example is focused on time-based benefits such as immediate convenience or instant gratification. Instacart allows people to get their groceries delivered in an hour. Drizlyallows people to get liquor delivered in under an hour. Amazon Primemembership expedites shipping and enables people to receive their orders within the hour if they are in the metropolitan area.
Peer Economy: Systems that connect buyers and sellers facilitating the exchange of assets directly between individuals.
Note: When using this term, consider whether the example uses a genuine peer-to-peer mechanism. For example, Transferwise matches people based on the currency they have and require in order to make a currency swap.Etsy connects makers of crafts with buyers looking for unique or handmade products. Lyft connects people looking for a car ride with everyday drivers offering services.
Rental Economy: Systems that enable people to rent assets for a fee rather than needing to own them outright.
Note: When using this term, consider whether the example asks for a fee in exchange for rental of a good. For example, Rent The Runway allows people to rent designer clothes, Chegg allows people to rent textbooks, and Getableallows companies to rent construction equipment.
Sharing Economy: Systems that facilitate the sharing of underused assets* or services, for free or for a fee, directly between individuals or organizations.
Note: When using this term, consider whether the example unlocks the value of an *underused asset be it space, skills or stuff, and whether the user behavior involves sharing. For example, Cohealo allows hospitals to share equipment when it’s not in use. BlaBlacar enables people going on long-distance trips to share their empty seats. Peerby enables neighborhoods to share goods.
*‘Idling Capacity’ is the term used to describe the untapped social, economic and environmental value of underused assets.
In addition to the above, there are terms we commonly use to describe the models and market mechanics behind these terms.
Platforms: The network, marketplace or other digitally-enabled mechanism used to facilitate an exchange.
Providers: People on the supply side of marketplaces providing goods and services.
Customers: People on the demand side of a marketplace wanting goods and services.
Providers are also commonly referred to as:
Sellers: People who make the final sale of goods and services. They do not necessarily need to be the producers or makers of the goods and services. For example, eBay sellers.
Micro-earners: People who take on a range of tasks or ‘gigs’ in order to make a supplementary income. For example, Taskrabbit runners who also may deliver groceries on Instacart or goods on PostMates.
Market Mechanisms: These are ways in which the market contributes to the creation, production or distribution of a service or product.
Co-Creation (or Co-Design): Companies ask outside experts or customers to participate in the design or production of goods or services. For example, the T-shirt company Threadless
Co-Housing: Private households who choose to form a community that shares a home with common facilities to facilitate social interaction and share household responsibilities. For example, Bowden House Communityand LILAC in the UK.
Co-operatives: Business or organizations that are jointly owned by its members, with profits and benefits shared among them. For example, local community co-ops such as Park Slope Food Coop in Brooklyn, New York.
Co-Working: Groups of independent workers who choose to share office spaces and resources, to cut down on costs and to facilitate social interaction. For example, the workspaces of WeWork and the Hub.
Commons-based peer production: People band together, free of any hierarchy or organizational structure, to collaborate on projects in order to achieve a common outcome. For example, Wikipedia and local community gardens.
MOOCs (Massive Open Online Courses): Learning programs delivered through online platforms that enable a large number of geographically dispersed and diverse range of students to enroll in courses. For example, Coursera and Udemy
Open Innovation: The use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively (Chesbrough,2011). For example, P&G Connect + Develop
Social Lending (Also referred to as ‘Peer Lending’): The lending and borrowing of money between individuals, without going through a traditional financial institution. For example, Zopa and Lending Club
Transaction Models: The model that describes the ownership of an asset and how it is distributed from provider to customer.
Peer-to-business-to-peer: Models where assets owned by individuals are provided to existing business providers who offer directly to individuals as part of a broader offering. For example, BeMate and EasyCarclub
Revenue Models: The following are the common models used to generate revenue in collaborative-based networks and marketplaces.
Service fees: A company takes a percentage of the total transaction for successfully matching two sides of marketplace (e.g. hosts and guests, buyers and sellers, drivers and passengers).
Flat membership/subscription: A company charges a flat monthly or annual membership fee regardless of usage.
Tiered subscription: A company offers a range of subscription plans at different price points based on frequency of use or number of goods desired.
Membership plus usage: A company charges a one-off or annual membership fee (sometimes with different plans offered based on frequency of use). Additional fees are charged based on usage.
White label: A company creates a back-end platform that can be licensed and branded by other companies.
Freemium: A company offers basic services or use of the platform/app for free. Users then ‘trade up’ for additional benefits and exclusive features.
For more detail, please view the revenue deck on Slideshare.
If you have ideas to improve definitions or think other terms should be added, please let us know. Email: Rachel@rachelbotsman.com.