Damiano's picture
How sharing economy platforms could power a new collaborative economy

The Challenge: 

The Question: 

Is it possible to create non-extractive alternative digital platforms that produce positive externalities?

The Problem: 

Bottom-up initiatives struggle to find funding; digital platforms extract value from our online activities

The Solution: 

Building non-extractive platforms that redistribute the wealth to give back, through social projects, the value that we generate online

Channels: 

Almost six years ago I took a gap year and, I decided to spend some time away from Italy, in Australia. Back there I found a guy that told me about this movement: the biohacking. Basically, a bunch of tinkerers started to use their garages as biotechnology laboratories with the aim to make those biological technologies available to everyone.
From that moment I started a path that led me to follow many movements and initiatives that are trying to create alternatives to existing power infrastructures.
My name is Damiano Avellino, I'm 24 years old. I’m one of the founders of Fairbnb and of other non-profit initiatives that seek to create a more inclusive and fair society.


During my years at the University, where I studied biotechnology, my curiosity was fed by great Professors during the day and by biohackers geeks on the internet during the night.
My first attempt to create a biohacker space dates at my freshman year, as you can imagine the excitement of my colleagues vanished due to the pressure of our studies and the difficulty of the journey.
The problem wasn’t related to the goodness of the project, both other colleagues and professors seemed thrilled by the idea of having an open source lab for biotechnology. What stopped the initiative was the lack of support and guidance from existing organizations incapable of grasping and helping to fund new ideas.

In general, there’s a tendency for new initiatives to struggle in the initial fundraising. It’s easier to get funded if you are already big or active enough.
If you have applied for any grant, you know how competitive these things can be, and
probably you understand how the abundances of projects and the lack of funding
tend to lower the diversity of the ecosystems and sometimes discourage innovative ideas - This doesn’t apply to for-profit start-ups that can rely on other types of financial support (VC, Business angels, etc) -.

Anyway, this part of my story is not what I’m here to write about.
I’m here to write about emerging opportunities we have to finance bottom up initiatives, that are not exploiting, related to a viable strategy to transform existing sharing economy platforms in a mechanism to perpetually fund non-profit projects and grassroots initiatives.


This story is about an ongoing project that could pilot a new model of sharing economy that by succeeding could lead to the flourish of a new collaborative economy.
Fairbnb is in an early stage, we didn’t launch the beta yet, but I’m convinced for some reasons that I will briefly explain at the end, that it represents a huge opportunity to change the digital economy.

Why should we attempt to change the digital economy?

Well, during the last ten years our economy has been completely “platformed”: the largest taxi company doesn’t own any cars (Uber), the world’s biggest media owner creates no content (Facebook) and so on. In almost every sectors a single player with a “platform business model” dominates.
There are two main problems with this:

1) Platforms that succeed are the best for investors not for users  (the growth is achieved thanks to massive investments), therefore are extractive, so Amazon takes % on the little bookstore sales, Airbnb takes % on your house, etc.

2) Platforms tend to become a natural monopoly due to the network effect.

(I’m not mentioning how we lost our privacy and the possibility to have control over the data that we generate because it could lead us too far)

My intention to create an alternative to this model grew with time and thanks to some precise experiences.
I firstly became interested in platforms thanks to Eugenio Battaglia (Platform Design Toolkit) with whom I share the passion for biohacking.
He gave me the Pentagrowth report and fulfilled my head with other absorbing materials and thoughtful conversations that shaped my platform thinking.

The second crucial event happened last year when I was selected to participate in the Global Changemakers summit.
The rough idea that was floating in my mind, since probably a couple of years, had the chance to become a real project.


The idea to use part of the money generated by our online activities to redistribute wealth to local projects as an opposite model to the present one, that uses part of the wealth generated by our online activities to enrich billionaires, was simple and not probably not even that original.
But the fact that I had to attend a summit with 60 young activists all very influential in their communities and from all over the world gave me the chance to think concretely about a model for a particular platform that relies on crowdsourcing, and that could work.

The event took place in June 2016; there I brought the rough idea of a project called Solbnb (Solidaritybnb).
Since then the project merged with two other initiatives, which were also trying to create an alternative to Airbnb in Amsterdam and Barcelona, under the name of Fairbnb. Nine co-founders from five different countries and with an age range that goes from 24 to 50 are working together to build the platform along with a growing community.
The platform with shared ownership and control will be non-extractive, inclusive and cooperative.

The peer2peer accommodation market produces every year more than 1.5 billion dollars of revenues (the extracted part).
If Fairbnb will be able to take even a little share of the market, an incredible number of non-profit initiatives could be funded.
We want to use as little as possible of the revenues to keep up the platform and give back the majority of this money to communities through local projects thanks to a crowdfunding-like mechanism.
If we succeed thousands biohackers spaces, social streets, art exhibitions, solidarity initiatives, refugees projects, etc. could be funded.

As Janella Orsi highlight in this article https://goo.gl/0XK6Nu  “That rumored $20 billion company valuation relies largely on the loyalty of users. Like I said, thin air.”

Yes.. a non-extractive P2P accommodation platform most likely is the best opportunity that we have to pilot a new model of sharing economy that could produce positive externalities at an unprecedented scale.

Comments

How do you deal with market failures?

Noemi's picture

Fun thing: only at the end of the article did I understand that FairBnb is about accommodation! :-)

Nice to meet you @Damiano , thanks for contributing on what is definitely a hot topic. Can't believe years passed and more open and fair solutions are coming forward so hard. In the meantime, we use what we have.. (I have to say even if I'm not an uber fan it did its part when I needed it most - aka getting stranded at night in a foreign city, having not many options/money to connect to a cab service).

In 2014 edgeryders fellow member @jimmytidey wrote a post about market failures in dealing with value exchanges (very fragile) and excess capacity being the key reasons why AirBnb and the likes have fertile land to grow.  I liked it because it was critical, yet realistic. Curious if you have identified risks which you are facing in attempting to redistribute wealth in a fairer way..?

Where are you based by the way?

 

Damiano's picture

 

Nice to e-meet you too! At the moment I'm living in Milan, but every week I spend some time in Rome and in Bologna.

Really interesting post, thanks! Full of insights, I jumped several times through a stream of articles during the reading :) .

I do agree that until we figure out how to create valid alternatives, current platforms are indispensable.. there's no wayback... That's why we need to act to create a fairer digital economy where interests of people are central instead of profit, some of this platforms are almost impossible to create an alternative to, others I believe not.

Competition between a non-extractive and an extractive platform is somehow like David against Golia.
I think the key is to pick the right platform and to craft the perfect strategy that enhances intrinsic and extrinsic motivation for the users.
For some reason (community-driven, aggregation platform, P2P are ordinary people, it produce lots of wealth by unlocking unused resources) I see Airbnb as the most suitable.

For the strategy, the only real competitive advantage is, in the end, that % that get subtracted to every transaction.
The % needed to merely run a platform is always much lower than the one taken, lots of this money are used for advertising, paying managers, and the majority of it become profit (this is true for platforms that have a solid business model ).
It's how this subtle but substantial amount of money is used in an alternative way that could make the difference.
Basically the money that is redistribute helps the platform to grow and it lower the Custumer Acquisition Cost in a platform that don't require a huge amount of users to reach the critical mass. 

 

 

Reflecting on Stakeholders

Shajara's picture

@Damiano, thank you for sharing your ongoing work and thoughts here! It reflects something I've been considering a lot lately, which is how individual spending choices can be used to reflect and support our values.

I think a platform like fairbnb will be a great alternative to those who don't agree with some of Airbnb's practices but still need an affordable place to stay. Like you said, currently, these platforms are indispensable. The one thing I was wondering about though, is how you plan on recruiting the people who actually provide the service over to these new platforms?

The reason being is that the people who choose to share their homes or cars with others are often already on these other platforms and until they start to move over to new platforms there is no way for I the user to actually access the platform. I.e. I can't order a ride when there is no driver available. 

I was wondering if some of the money that doesn't go to overhead would result in slightly larger pay for the service providers? Of course, this then cuts into the amount of funding that could go towards new initiatives. I think this reflects some of the thoughts from this talk by Dan Pallotta, namely that we are hesitant to use money as an incentive to create more business in the non-profit sector. 

Overall, I think this type of platform is a timely and needed development. I'm curious your thoughts on how to address the needs of these key stakeholders? 
 

 

Is it the same users switching or new "market" ?

Noemi's picture

I think @Damiano & co. are not planning on charging more, but less.. maybe only to cover overhead in the beginning and then socialising the community into paying gradually more to support initiatives being funded? 
It's basically breaking down the offer into pieces - some could be attractive to some people (those needed to change service), some to others (who are the real supporters for the service).

What does one need to tap into in the incentive system, well that looks very ambitious. I'm not sure what is a good incentive - I agree that a lower commission compared to other service providers does not cut it - especially since you are not so competitive in the market that the same user can get as much occupancy as with airbnb (following the logic of @Shajara 's driving example).

@rmchase should know better or maybe has advice? :-)

Hello @Shajara, thanks for

Damiano's picture

Hello @Shajara, thanks for the comment.
I will speak just as Damiano because we still need to vote things on loomio.
 
The growth strategy that I propose is bonded to projects. 
I will underline here the basic principles.

So Airbnb as just two main actors:

Host and travelers

Fairbnb should have three:

Hosts, travelers, and projects.

Basically, I see the MVP as an Airbnb with an additional feature, an easy system to crowdfund projects on the platform (60% local 40% from wherever you want).
The fees will be more or less the same as Airbnb, 15%: 5% will be used to cover costs for the service, 10% will be allocated to projects directly by the travelers.

The trick is that the 10% that goes to projects will bring users. 

The idea is to maximize the intrinsic and extrinsic motivation for users and let everybody be connected with the goal of the platform, in particular, projects will allow the organization to grow, scale and create a widespread mass of users.
Bonding our initiative to hundreds of others will create that crowd-powered process that is needed to achieve the critical mass without relying on VC money.

To offer a decent service and try to trigger the network effect at the beginning around 5000 accommodations are needed, distributed in all the major cities.

The process I see is this:

1) Looking for 1000 projects (independent, possibly new, diverse to give everyone the chance to support the cause they care most).  
This will be hosted on the platform for a certain amount of time and with a minimum and maximum goal (e.g. 5k-20k euros) when the platform will open.
(I see the selection done thorugh an open call in different countries to have a worldwide coverage)

2) During the call and for two months after the selection the platform will be open just for hosts to register.

3) Projects will help to find at least five accommodations in their city.

4) The platform will open to everyone.

5) Boicott Airbnb campaign, start a serious public debate with action (put the initiative as an anti-capitalistic model that could compete with the existing one)

Basically 5000 accomodations will solve the chicken and egg problem.

With an average per night of 28 euros 
5000 * 28 * 31 * 10/ 100000
It's an average of 434 euros a month for each project.

This growth strategy is like the basic to avoid failure at the beginning, because I think it's possible like for everyone to find five people that will put their accommodation on the platform. 
This strategy should be integrated with all the "traditional" strategies.

The community that will form will be capable of doing much more. 
The value proposition is easy to understand, if you travel with Fairbnb you do good by traveling (in a quantifiable way) instead of giving money to some billionaire.

I think is really important to involve networks like Edgeryders, Ouishare, Global Changemakers, etc
Hosting 5 projects for every organization will help to crowd-power the activation of the platform and engage existing networks that have been thinking about world's challenges a lot.

--
This is basically how I see the activation process.

Lots of people that use Airbnb use also other platforms (they are multi-homers) so probably both @Noemi

Putting the projects at work

Noemi's picture

I like this, basically ensuring that those primarily benefitting from your model become early movers, champions, promoters. Your success is their success.

Interfacing for projects

WinniePoncelet's picture

Cool, this latest post of yours is basically what I was thinking reading the posts so far @Damiano . To leverage the fact that projects stand to win from it. I would focus on existing projects as first target group, as they have a good network usually, probably need money and will also put it to best use. In my opinion efforts are sometimes too much focussed on launching new things, instead of helping existing ones sustain themselves.

What you are then doing is interfacing for projects to monetize excess capacity in their network. Instead of having to invest heavily into logistics, marketing, sales, everything that comes with selling something, you can rely on a 'service' like yours. I think this ties in nicely with the discussion here on business models for The Reef. Diversity is hard to do early on, but interfaces make it a little easier.

Offering this service to a social project rather than a person (what Airbnb does) offers some more interesting possibilities, especially in the way you set this up. What if people can choose to 'bind' their room to a specific cause, donating most of the returns to that project? You could have, eg. for ReaGent where I am involved, a ReaGent branded accomodation service, hosted inside Fairbnb? Will projects then shift more and more towards mobilizing their community to help in non-material ways with excess capacity? Does this allow/force/nudge projects and their stakeholders to be stripped down to the very essence: a community with a certain mission, with a lesser focus on the means to an end?

Just some quick thoughts and a lot of questions, it's a super interesting topic. Would love to hear more, but mainly see things prototyped.

Projects and hosts

Damiano's picture

Hello @WinniePoncelet : for projects, I think that having initiatives with a definite amount of money, spent in a certain way to achieve something defined, is more catchy than sustain the normal activities of an organization and is also easier to avoid that money are not spent in the right way. 
So with ReGent you could apply for example to buy a camper and instruments to go around the city to do biohacking in schools. It should be for activity that is not normally done by the association (this may be different in places like Syria, etc.).  

One of my goals is to allow plurality, especially for new initiative is always hard to find funding. 
Anyway, this is something that needs to be discussed in depth, the nice thing about this is that it will create a perpetual passive funding that could literally enable thousands of valuable projects to reach their goals.

So about the host you pointed out an interesting thing, the model that I described is focussed more on projects and travelers than on hosts. 
I was thinking about something like having the host deciding a single project to "pledge", and it will gain 1 extra day on the crowdfunding platform.
This will create an incentive to find more accommodations and will engage more hosts. 
Making host deciding in large part where the money generated through their apartment goes risk to create a system where people support the project of their friend or something that they have an interest in.. But of course, it's possible to imagine also another way to let hosts support more a certain cause.

Also, I proposed a model for the organization that is based on three levels:
Foundation (Take care of the platform in general and connect the global community)
National Associations (Help to select projects and to develop the organization in each state)
Local Cooperatives (A group of citizens can apply to become a cooperative, it will have dedicated projects on the platform for that particular city, the aim is to do project together maybe about certain topics).

I would like to share more on this, in my opinion a worldwide mobilization on those themes is very needed. Platforms have become the main infrastracture for the economy, we should act now where's still possible to make a change or we will be trapped: it will be harder and harder to compete with existing one (due to their network effects, data collected, availability of money, etc)

@Noemi yes, but project will stay on the crowdfunding part of the platform for a limited time, so that new projects can join.

Sustained effort

WinniePoncelet's picture

Though I value the merit of doing stuff on a project basis as you describe, I also think for the complex issues like education, housing, medicine, sustained effort is needed. An overly large focus on well-defined projects limited in time risks perpetuating a 'quick fix' narrative and devaluating sustained effort that is not as 'sellable', in my opinion. I believe in a healthy mixture and I see most funding initiatives now focus on the project model, so I advocate for more of the long-term view.

That being said: it's a big idea, but worth pursuing @Damiano . Say that you needed to choose one aspect (eg. connecting projects to hosts) and test it by the end of next week, what would you do?

Long term support for projects

Damiano's picture

I don't have a fully formed idea, but I thought that projects that did well after the first crowdfunding could get back on the platform after 1 or 2 years.
Also, the projects after funded should remain in a dedicated part of the platform to keep updated the community, and there anyone is free to donate more whenever they want.

We need a little money to finalize the platform. Anyway, the activation process has said have many steps. The choice on how to redistribute part of the value generated by the users is made by them deciding to which project pledge their money. This could be also done by Hosts but not in the same % because will have too much "power" and the risk is that they will favorite projects that they know personally.

Really interested in

Alex Levene's picture

Really interested in following this project.

It seems that you've really put some thought into how this could work.

I see a couple of parallels between the service platform and a couple of initiative that run in the UK. I wonder if there's some extrapolation that can be taken from them.

Firstly, many supermarkets in the Uk have charity partners in the local community. They hold them for 3-4 months each. Every shopper who spends over a set amount (i think it is £20) is given a small plastic token. They are then encouraged to drop these tokens into a box by the main doors, selecting one of the 3 charities to recieve their donation.

At the end of the period the tokens are collected and counted and all the charities recieve the amount of money that has been donated to each box from the supermarket company. Its a basic mechanism and it only raises small amounts of cash, but the charities are often very small. Also, (and i think this ties in with your idea in a comment above) the money raise goes towards the delivery of a specific project or purchase.

It is often the case in the UK that fundraising from grant making charities is tied directly to projects. It is very hard to get funding to cover ongoing overheads, and business expenses.

I think that this model would work best with the Fairbnb platform. People chosing to use the platform as hosts and 'customers' would be able to see the successes that funded projects provide,. I assume that a large section of the platform would be dedicated to sharing the success stories with the service users?

I know i would look to use a service like this instead of an airbnb service if it were available.

I guess my question would be what plans do you have for encouraging participation in the platform outside of major cities? I can foresee that these are the areas where uptake of new platforms are often slowest, but that they are often areas with high levels of charity support and high levels of poverty. I'm thinking for example of an area like Cornwall in England (high use of holiday lettings and airbnb style accommodation, but also high levels of regional un/under-employment and low levels of Government engagement in service delivery)

Projects, countryside and suburbs

Damiano's picture

I agree with you about the projects. Studying crowdfunding and charity there are some rules that help: people like "successful" initiative (the achievement of a specific goal that adress a specific need), to produce a somehow quantifiable contribution (for this reason the pledge should be done directly by the users) and to have some choices (this reinforce engagement part).
I think also this model would help us to involve smaller organizations that could be more willing to support the promotion activity for fairbnb.

For the support of Fairbnb outside big cities, I think two are the consideration needed:

The first is that Fairbnb should help valorize places that are underrated.
For example, I'm from Italy (from Rome) and in my opinion, there are so many little places that are worth visiting, is really upsetting knowing that just a few cities here have the attention of international travelers. 
For example, I rarely suggest to go in Rome (especially if you are young), go to Sicily if you can :)!!

More in general the money generated through the Fairbnb system are split 60% goes around the area where you traveled (it can be the entire region) and the other 40% can be given to any project inside the platform. I think the problem could be addressed with specific calls for this projects in those places.


I recently randomly read this book http://www.goodreads.com/book/show/13086.Suburban_Nation that I suggest often and that gave me a much deeper knowledge of suburbs.
For the countryside, I think that the tendency of the people from this places to go in the major cities could be reversed (especially in Italy) since cities don't represent any more a place of opportunity.
This is a much broader argument, but I hope that the platform that we are building could help to experiment new models to solve problems related to this places.

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