Steven Hill in Salon:
The New York Times’ Farhad Manjoo recently wrote an oddly lamenting piece about how “the Uber model, it turns out, doesn’t translate.” Manjoo describes how so many of the “Uber-of-X” companies that have sprung up as part of the so-called sharing economy have become just another way to deliver more expensively priced conveniences to those with enough money to pay. Ironically many of these Ayn Rand-inspired startups have been kept alive by subsidies of the venture capital kind which, for various reasons, are starting to dry up. Without that kind of “VC welfare,” these companies are having to raise their prices, and are finding it increasingly difficult to retain enough customers at the higher price point. Consequently, some of these startups are faltering; others are outright failing.
Witness the recent collapse of SpoonRocket, an on-demand pre-made meal delivery service. Like Uber wanting to replace your car, SpoonRocket wanted to get you out of your kitchen by trying to be cheaper and faster than cooking. Its chefs mass-produced its limited menu of meals, and cars equipped with warming cases delivered the goods, aiming for “sub-10 minute delivery of sub-$10 meals.”
But it didn’t work out as planned. And once the VC welfare started backing away, SpoonRocket could not maintain its low price point. The same has been happening with other on-demand services such as the valet-parking app Luxe, which has degraded to the point where Manjoo notes that “prices are rising, service is declining, business models are shifting, and in some cases, companies are closing down.”
Yet the telltale signs of the many problems with this heavily subsidized startup business model have been prevalent for quite some time, for those who wanted to see. In July 2014, media darling TaskRabbit, which had been hailed as a revolutionary for the way it allowed vulnerable workers to auction themselves to the lowest bidders for short-term gigs, underwent a major “pivot.” That’s Silicon Valley-speak for acknowledging that its business model wasn’t working. It was losing too much money, and so it had to shake things up.
TaskRabbit revamped how its platform worked, particularly how jobs are priced. CEO Leah Busque defended the changes as necessary to help TaskRabbit keep up with “explosive demand growth,” but published reports said the company was responding to a decline in the number of completed tasks. Too many of the Rabbits, it turns out, were not happy bunnies – they were underpaid and did a poor job, despite company rhetoric to the contrary. An increasing number of them simply failed to show up for their tasks. As a results, customers also failed to return.