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«Katie Finley Photo: Welcome: Sholeh Johnston Centre for Cultural Policy Studies Trust in the Sharing Economy: An Exploratory Study MA Global Media ...»

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Centre for

Cultural Policy Studies

Best Student

Katie Finley

Photo: Welcome: Sholeh Johnston

Centre

for Cultural

Policy

Studies

Trust in the Sharing Economy: An Exploratory Study

MA Global Media and Communication

September 2013

Acknowledgements

Special thanks to:

Dr. David Wright, both for supervising this project and for two excellent courses during the

year.

P, for boundless wisdom, and M & D, for everything.

Table of contents

Introduction 1 1 The sharing economy 5

1.1 Societal drivers 5

1.2 Economic drivers 6

1.3 Technological drivers 7

1.4 Introduction to trust in the sharing economy 8 2 Trust: A theoretical framework 10

2.1 Defining trust 10 2.1.1 Expectation 11 2.1.2 Risk 11

2.2 Types of trust 13 2.2.1 Generalized trust 13

2.3 Context: Online trust 15 2.3.1 Reputation systems 18 2.3.2 Social graph integration 19 2.3.3 Trust in the marketplace intermediary 21 3 Introduction to the Airbnb case study 24 4 Research design 27

4.1 Exploratory purpose 27

4.2 Qualitative methodology 27

4.3 Data collection 28 4.3.1 Document review 29 4.3.2 Interviews 30

4.4 Data analysis 31

4.5 Limiting considerations 34 5 Results and discussion 36

5.1 Reasons for using Airbnb 38 5.1.1 Value for money 38 5.1.2 Flexibility 39 5.1.3 Cultural experience 40

5.2 Perceived risks of using Airbnb 41 5.2.1 Lack of site-wide hospitality standards 41 5.2.2 Listing not accurately represented 42 5.2.3 Personal safety 43

5.3 Trust-enabling elements of host

–  –  –

Introduction All over the world, people are renting rooms from strangers through Airbnb, outsourcing grocery trips to TaskRabbits, and getting across town with ride-sharing service BlaBlaCar.

These people are participating in the sharing economy, an estimated $26 billion sector that has rapidly grown from a niche market to a mainstream social movement. In the midst of dwindling global resources, unprecedented technological advances, and 5.5 quadrillion non-biodegradable plastic polymer particles – “nurdles” – floating in the Pacific Ocean, people are adopting new practices and using new services that reduce waste and extract more value from current possessions. In other words, people are beginning to share.

Sharing is intrinsic and intuitive, and is inextricably entwined with the progression of human development. Sharing is one of the oldest human behaviors (Rinne et al. 2013); humans have hunted and gathered in packs, farmed in cooperatives, and bartered through trade networks for thousands of years. The commons – from drinking water to grazing land, and more recently from roads to infrastructure – are intrinsic to our everyday lifestyles, yet have slipped out of the collective lens of awareness as populations are increasingly urbanized, personalized, and privatized (Burnham 2011). The global population has become entrenched in the dominant ownership mindset. People are wading through an asset-heavy lifestyle engineered by the rise of hyper-consumption with a whole lot of stuff, most of which isn’t really wanted, needed, or even used. While established businesses continue to hammer consumers with various iterations of the same proven formula – create product, sell it, collect money, repeat – a new, grassroots model of doing business is emerging, providing consumers with the power to get what they want and need at less personal and environment cost (Gansky 2010). This emerging business model, a broad trend that is impacting every sector of society and business, is called the sharing economy.

The sharing economy can be conceptualized as a large-scale social shift with firm roots in the invention of the Internet. Just over fifteen years back, sharing economy forerunners eBay and Craigslist launched, empowering people to become both buyers and sellers through the widespread adoption of peer-to-peer (P2P) commerce. This P2P transaction model enabled people to effectively unlock and redistribute the untapped value of underutilized assets, “capitalizing on our newly found ability to use the Internet to match millions of haves with millions of wants, instantly and efficiently” (Rinne et al. 2013: 3). In the sharing economy – also referred to as “collaborative consumption” – consumers are empowered to transact directly with one another, a disruptive collective behavior that is redefining traditional market relationships and impacting previously ubiquitous business models of production, distribution, and consumption. Rachel Botsman, pioneering author and advocate at the helm of the movement, argues that the sharing economy isn’t a transitory trend, but rather “a powerful cultural and economic force reinventing not just what we consume, but how we consume,” an effective transition from a culture of “me” to a culture of “we” (Botsman 2010). Enabled by sharingsector businesses that have garnered robust financial backing – Owyang (2013) finds that a sample of just 200 sharing startups have raised $2 billion in venture capital – growing numbers of consumers are sharing homes, clothes, rides, cars, power tools, office space, bikes, skills, meals, parking spots, gardens, and much more.

The continued growth of the sharing economy is contingent upon one crucial factor: trust.





Trust is the enabling factor inherent within all sharing-sector activities. Because of its centrality to the success of the sharing economy, various thought leaders – entrepreneurs, social advocates, academics, investors, journalists – have opined as to how trust is established and maintained among strangers engaging in P2P transactions. Despite the prevalence of these expert analyses in the sharing economy media discourse, the voice of those who are regularly engaging in sharing behaviors, the users, remains under-represented. This thesis accordingly approaches the question as to how trust is established and maintained in the sharing economy from the perspective of the user.

An interpretive case study is utilized to most effectively explore the robust set of emergent themes surrounding this complex trust. The selection of a specific platform, Airbnb, a global P2P accommodation-sharing website, was fairly straightforward. Airbnb is one of the most dominant extant P2P services, illustrated by a hockey-stick growth curve (the company had booked 5 million nights by February 2012, and 10 million nights by June of the same year), and an estimated $2.5 billion valuation (Thomas 2013, Sacks 2013). Over 300,000 Airbnb listings (including 500 castles and 200 tree-houses) are active in over 19,000 cities and 192 countries (Fiegerman 2013). But most importantly, Airbnb users are arguably engaging in the type of P2P transaction most reliant on trust to be successful: sharing a home with a stranger. Furthermore, in the wake of a high-profile 2011 incident involving burglary, vandalism, and identity theft in San Francisco, Airbnb has added a $1 million host property guarantee and a veritable army of customer service representatives available 24/7 anywhere in the world. To access the most salient and credible information regarding perceptions and experiences with the service, the research surveyed a sample of well-traveled, highly active Internet users by means of qualitative interviews. The information derived from these interviews was then iteratively coded and analyzed with respect to four research sub-questions (specific to Airbnb) developed over the course of the research, as well as in the context of an analysis of relevant sectoral content. To conclude, emergent themes are discussed with regard to the potential for a portable reputation system that could provide a scaffolding of trust for the growing sharing economy in coming years.

In order to contextualize the investigation, the first two chapters will consist of a literature review. The first chapter will discuss the societal, economic, and technological drivers of the growing sharing economy, and the critical role of trust in maintaining this growth. The second chapter will then review and distill the diverse body of academic literature regarding trust theory; this theory will be further examined specifically within the online setting, and critically applied to a discussion of reputation systems, social graph integration, and trust in the marketplace intermediary to further tease out the theoretical nature of online trust in P2P environments. This literature review will provide the theoretical foundation for the subsequent empirical section of the research.

1 The sharing economy The rising sharing economy is driven by three separate market forces: societal drivers, economic drivers, and technological drivers (Owyang 2013). These forces will be presented in the next sections and followed by a discussion regarding the critical role of trust in the sharing economy.

1.1 Societal drivers More than seven billion people live on the planet, and natural resources – including land, potable water, and oil – are being consumed at an unprecedented rate across the globe.

Simultaneously, population and urbanization continue to rise, as younger cohorts are booming and older people are living longer (Rinne et al. 2013). By mid-century, the global population is expected to exceed nine billion. These complementary population and resource pressures are driving the adoption of alternative consumer behaviors; the motivation to increase efficiency and reduce waste has never been higher. Gansky (2010: 28) summarizes the situation in proclaiming “Simple math suggests that in order to have a peaceful, prosperous, and sustainable world, we are going to have to do a more efficient job of sharing the resources we have.” Yet population density and increasing urbanization also drive the sharing economy in another way: the decrease in friction of sharing behaviors. Urban populations are poised to reap the largest benefits of sharing, as the ability to deliver what a consumer wants when it is wanted depends on how many neighboring consumers have it. It is projected that 75 percent of the population will live in the world’s cities by 2050 (Hejne 2011); such population density will drive the critical mass – and consequent convenience and choice – required for successful marketplace creation.

Another societal driver is manifested by a widespread desire for community. Gansky (2010: 50) notes the within the sharing economy, parties not only transact but engage in “rich social experiences.” The adoption of the sharing economy fosters “small world”-type environments across the globe as people reconnect with neighbors and local communities.

Owyang (2013: 5) finds this latent desire to connect evident in many different sectors of the sharing economy, stating “Airbnb guests prefer the experience of staying in a home or neighborhood. Kickstarter funders get to know the makers, inventors, and entrepreneurs behind projects.” Individuals within the sharing economy are increasingly bypassing faceless brands in favor of transacting with and getting to know one another.

1.2 Economic drivers The 2008 financial crisis prompted a widespread distrust of traditional brands and models, fundamentally shocking consumer behaviors and stimulating a value shift in which people began to critically assess what makes them happy (a notion previously bound up with hyper-consumption), and how to best access what they want and need (Botsman 2011). P2P firms emerged in the recession’s aftermath as the pragmatic solution to both an economic crisis and a larger psychological value shift; many perceived sharing as a “post-crisis antidote to materialism and overconsumption” (The Economist 2013). Within the larger context of consumer distrust and financial strain, two economic themes have surfaced: the power of idling capacity and the related ideological orientation toward access over ownership.

Botsman illustrates what she defines as “the power of idling capacity” with a power drill.

According to Botsman and Rogers (2010), half of all U.S. households have purchased their own power drill. Yet the average person uses a power drill somewhere between just six and thirteen minutes over the course of its entire lifetime; this rampant power drill-purchasing phenomenon results in 50 million unused power drills gathering dust in American garages. Botsman labels the unused potential of those 50 million drills as idling capacity. She further finds that a full 80 percent of the items people own are used less than once a month, concluding that the heart of the sharing economy movement lies within capturing this idling capacity and redistributing it elsewhere. Consumers are increasingly recognizing that they are surrounded by idle value – stuff, spaces, skills, time, land – all which can be shared and monetized. In other words, sharing economy users can maximize yield management of what they already have (Gansky 2010).

Capitalizing on idling capacity alludes to the central conceit of the sharing economy: the prioritization of access over ownership. The incentives are largely economic – cars, for instance, are ubiquitous, expensive and underutilized assets. The Economist (2010b) finds that on average, a British car is driven for less than an hour a day, but costs about £5,500 per year to own. Car owners greatly benefit from sharing their cars or not owning a car at all, saving an average of £250-400 per month on insurance, maintenance, and other costs (Gansky 2010). Convenient access to goods – to idling capacity – benefits both parties in the transaction, effectively incentivizing access over ownership for a number of high-value, low-use items.

1.3 Technological drivers Every aspect of the growing sharing economy has been accelerated and facilitated by technology. With 33 percent of the world’s population connected to the Internet and a projected 70 percent of the world’s literate population owning a smartphone within four years, society is connected at an extraordinary magnitude and depth (Suster 2013). The most impactful Internet feature driving the sharing economy is the increasingly ubiquity of social networking and realtime technologies (Botsman 2010). Social networking aggregates supply and demand at an unprecedented speed and scale. The availability of data renders transactions cheap and easy;



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