Jeremy Barton owns a nice Subaru Impreza, but he rarely drives it. As a co-founder of a tech startup in San Francisco, he usually just rides his bike to work. So when Barton heard of a new website called Relay Rides that lets regular people rent out their own cars, it sounded perfect.
“Not only does it help pay my car payment and my insurance, but I also get a really good feeling knowing that someone can use it,” says Barton, who’s 27.
But getting started as a do-it-yourself car rental company proved more difficult than Barton expected. For weeks after he joined Relay Rides, his Subaru continued sitting in its parking spot, unused. With no reviews of Barton or his car on the website, borrowers skipped over him to use cars that already had been well-reviewed.
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And when Barton finally received a text message informing him that the car would be rented, he had some concerns. Who was this mystery borrower? Would they trash his car?
“I was nervous about it, to be honest,” says Barton. “I didn’t panic. But I would’ve liked to know more information about the person. It would’ve given me a bit more ease.”
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So Barton, the very definition of an early adopter, decided to do something about it. His company, Legit.co, uses data culled from social media sites including Twitter and Facebook to help users on websites similar to Relay Rides figure out who’s trustworthy and who’s not. After all, if Barton had a moment of trepidation about lending his car to a stranger, imagine how much work lies ahead for Relay Rides, as it tries to expand its network of car lenders and borrowers across America.
“To create a true collaborative consumption industry, finding a way to establish trust between strangers is an absolute requirement,” says Shelby Clark, co-founder of Relay Rides.com.
And yet, despite the hurdles, it’s happening. Consider the case of Airbnb.com, a website that lets people rent out their apartments directly. According to the company’s website, AirBnB rents out apartments in more than 19,000 cities and 192 countries, and consumers have booked more than 2 million nights through the service. Then there are the peer-to-peer lending websites like Zopa.com, Prosper and Lending Club, which collectively facilitate the lending of billions of dollars a year between peers all over the world. To date, according to stats on its site, Lending Club alone has processed more than $460 billion dollars in loans that have generated nearly $40 million dollars in interest paid to investors.
The activity on all of these sites is a form of “collaborative consumption.” That sounds like a mouthful, but actually it’s very simple. For the last two centuries, capitalism has grown around the idea that if you need something, you buy it. Need to drive to work? Buy a car. Need to mow your grass? Buy a lawnmower. Need any service at all, from babysitting to grocery delivery to a college class on how to use Excel spreadsheets? Buy them.
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All About Community
Collaborative consumption is based on the idea that each of these problems actually could be solved in a variety of different ways, often at greater profit to the seller and lower cost to the person in need. Instead of buying a car, you could use a website to connect with people looking to share their cars, or others hoping to carpool. Rather than buying a garage full of lawn tools that get used once a month, a collaborative consumption service could help you barter tools and lawn care services with your neighbors. To handle those annoying chores of modern life like carting home groceries or building Ikea furniture, maybe you could use an online community to find people who actually like doing those things, and who would trade their services for access to things you already know or own.
“The generation I’m in values experiences and purpose more than material goods,” says Michael Karnjanaprakorn, a cofounder of Skillshare.com, where people offer to teach each other classes on anything from how to make baby food to becoming a pro flea market shopper. “People say, ‘I don’t need to buy this stuff anymore, so why don’t I make my life richer and have better experiences?’”
There’s another realization at work here, too: To sell things, we no longer need so many middlemen. The Internet is a peer-to-peer distribution mechanism that allows individuals to conduct transactions directly with one another.
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Considered individually, a website like Relay Rides seems like exactly that: Just one more website. But taken together, collaborative peer-to-peer sites actually are at the core of a brand-new industry, one that supporters say could alter the fundamental way that commerce works.
“I believe that we’ll look back and see this period as a collaborative revolution,” Rachel Botsman, a writer and entrepreneur who focuses on collaborative companies, told an audience at a recent TED conference, “a turning point where we use technology to reinvent entire sectors, leapfrog over broken consumer models, and find a healthier balance between the needs of individuals, the needs of companies and the greater good of society.”
Heady stuff. But everybody who works in this new collaborative consumption field agrees that none of that transformation can happen until they figure out ways to build real trust online. Which is why the brand-new industry of collaborative consumption has sprouted an even newer industry: Trust verification. In the last few months, a score of small startup companies has spring up, all of them trying to figure out ways to help users of collaborative websites figure out whom to trust, and whom to avoid.
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Image: elycefeliz, via Flickr.com
Christopher Maag Contributing writer for Credit.com, Chris graduated with honors from the Columbia University Graduate School of Journalism, and has reported for a number of publications including The New York Times, TIME magazine and Popular Mechanics. Have a question for our experts? Email them at CreditExperts@Credit.com.
{ 8 comments… add a comment }
The article says “[Barton's] company, Legit.com, uses data culled from social media sites….”
But the domain legit.com is not in use. And Google does not find any company called “Legit.com.”
Is there some other name for this company? And does the article require a correction?
Apologies. It should have been Legit.co. It’s been fixed and link added.
Do you have any substantiation for the claim about the number of rooms rented via AirBnB vs. hotels in Manhattan? AirBnB lists roughly 9000 properties in Manhattan, versus 60000 hotel rooms. Its hard to believe that Manhattan hotels are operating at 15% occupany rate.
Paul, this is a stat directly from Ms. Botsman, which she also referenced at this Wired event http://www.wired.co.uk/news/archive/2011-10/13/rachel-botsman-wired-11 (10:30). But as you suggest, the stat warrants a closer look. She may have meant to say that more rooms are occupied via AirBnb on any given night than in New York’s biggest hotel. That stat has been referenced a number of times (http://techcrunch.com/2011/05/31/airbnbs-soaring-valuation-should-be-a-wake-up-call-to-independent-hotels/), though is a far cry from the stat she offered. We will source this and issue a correction if necessary. Thanks for reading and scrutinizing.
Building trust over the internet is going to be a huge task, there’s simply too many people out there willing to do just about anything to get an extra dollar. It will be interesting the track the growth of these “trust verification” systems, and how they operate.
I think the upside of people owning their own cars, tools, etc. is that they like to take care of them, where people using a car they don’t own rarely handle it with care. This is why I would be extremely hesitant to offer my car in a service like this.
Unfortunately the few criminals that are out there create big trust issues in the Collaborative Consumption model so nice and cool concepts like HiGear hit the wall. I think trust and safely have to really improve so that Collaborative consumption model can flourish even more. I am a huge fan of what’s mine is yours by Botsman and also The Mesh by Lisa Gansky and I think there are always ways to improve trust and safety. We just need to pay more attention to that and implement safety in the bone and the structure of the collaborative consumption businesses. Although I believe that most people out there are nice but we can take huge risks just based on these assumption. Just a handful of criminals can mess up the whole thing!
I am sure we can all work this out and find perfected trust and safety mechanism in place .Looking forward to the improvement if it in 2012
Alina Shahnazari, Cofounder of Clouditems
Trust is a key issue indeed. It can even be a deal breaker and slow down a collaborative consumption business like crazy. For me it’s one of the three pillars of collaborative consumption (http://blog.kodesk.com/2011/11/01/the-three-pillars-of-collaborative-consumption/). And that’s why we are working on a solution, peertru.st that doesn’t use social networks but instead relies on peer-to-peer validation. Feel free to subscribe to peertru.st if you want to be in the loop.
Great article Christopher. We at WhyTrusted.com believe that beyond the social influence, trust is build based on transparency and consistency. That is why that we privilege showing the reputation trail and, ultimately, let the user decide if someone is trustworthy or not.
We provide a TrustScore as our perception of trustworthiness based on the reputation trail, but let the user check each public profile from eBay, LinkedIn, Facebook and Twitter.
Have a look and try it if you wish.
Mauro Nunes, cofounder of WhyTrusted.com