How the On-Demand Economy is growing up

When Apple released its iconic “There’s an App for that” Iphone 3G commercial in 2009, it seemed a bit hyperbolic. Eight years later, in the age of Uber, Seamless, and countless others, it seems that Apple’s big ideas have proved to be prescient. Though it took a while for the then-outlandish ideas to truly catch on, it’s apparent that we now live in an on-demand world; with food, entertainment, transportation, accomodation, tech support, and more just a click of a (touchscreen) button away.

And it’s not just the possibility. People are really using these apps. Though one only needs to look at the near ubiquity of Uber to guess that this is the case, the numbers tell their own story: spending, and investment, is rising. In 2015, US consumers spent almost $60 billion on the on-demand economy. The same year, investments in the sector topped $4.1 billion, a rise of more than 500 percent. The hype has born out. The on-demand economy is growing up.

As the on-demand economy matures, consumers and industry players alike are left wondering what to expect. Wonder no more—here are our predictions about how it will all play out.

Mobile Commerce Will Continue To Expand

The advancement of cell phones continues apace, it only follows that consumers will use their phones for more and more of their daily tasks. Mobile commerce has grown every year since the inception of smart phones kickstarted the industry, and now mobile is central to any retailer or brand’s sales strategy. This will continue to be the case.

Big Brands And Retailers Will Continue To Join

With on-demand the hot topic that it is, it makes sense that big brands and retailers are piling on. In the past years, brands ranging from fast food giants to nationwide clothing retailers have rolled out one type of on demand app or another. Even the industry figures most threatened by on-demand services—to use a famous and notorious example, the traditional taxi and hotel services most threatened by Uber and Airbnb—have given in and started to offer their services in various apps.

Open APIs

The proliferation of Open APIs for on-demand services is a miniature revolution inside the larger on-demand sea change. With API integration, users can book an Uber from inside Google Maps, order food on Seamless from within Yelp, or book an Airbnb for inside your ticket booking app. If it sounds self explanatory, that’s because it is: the principal benefit of an on-demand service is that is is available on-demand. That means getting what you need, when you need it, without going through unnecessary hassle.

Emphasis On User Growth

As with many growing startup industries, demonstration of concrete revenue has often fallen by the wayside as a metric for success. In its place, for many investors, user growth has often come to substitute for actual revenues. This has had an unusual, though predictable side effect: an acquisition spree. On-demand companies are consuming each other in a feeding frenzy of acqui-hires.

The Threat of Regulation

One of the biggest dilemmas facing on-demand companies is the questionable status of their employees—or are they contractors? Sometimes referred to as the decision between W2 and 1099 tax forms, this dilemma continues to frustrate such industry monoliths as Uber (as a side note, Airbnb’s continued problems vis-a-vis hotel taxes—and the question of whether or not they should pay these taxes—is an approximate analogue for this issue). The issue is a huge one, and it continues to frustrate c-levels and investors alike: how or whether to pay taxes these employees/contractors, how to conform to labor regulations, what to do about the looming spectre of unionization, the list goes on. Everything is on the table. These issues play heavily into politics, and new administrations and governments will surely seek to add their two cents to the discussion. Though we don’t expect any sweeping regulation to emerge from the current administration, keep your eye on this one.

Still a growth industry

Between the continued growth of mobile commerce, the big brand pileup, deeper API integration, widespread user growth, and the question of top-down regulation, it’s clear that the growth industry of on-demand has come into its own. The coming years will be key to seeing how the young industry finds its place in the broader economy.

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