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Uber and Airbnb lose billions due to undervalued urban research

Today, there are tremendous financial implications for tech giants who are not investing in research on the potential impact of disruptive technologies in cities.

As cities continue to grow, they increasingly present themselves as lucrative markets for tech giants like Uber and Airbnb. These companies depend on a concentration of people, looking for quick and convenient ways to improve their everyday lives.

While some of us tend to celebrate the fact that these companies have created a whole new system of convenience, the negative social impacts they have on cities and their economies isn’t something we typically consider until it’s gone too far.

The cycle I’m talking about isn’t anything new. Tech start-ups arrive in cities and quickly disrupt local industry (think hospitality, real estate, and transportation). The result? Negative social impacts to be cleaned up by local governments.

But, did anyone anticipate these issues? Had someone realized before implementation that companies like Uber and Airbnb would end up being detrimental to the well-being of the poor and crippling to local economies?

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If we take a look at these trends and the resulting financial implications these companies have experienced, my guess would be that these tech-giants didn’t see this coming.

To give just a couple examples…

In London, it is estimated that Airbnb lost a total of $400 million in revenue in 2017 alone. It’s revenue streams were also cut back in cities like Paris and Amsterdam, where they incorporated legislation putting a limit on the amount of days property can be rented per year.

If we compare these restrictions to the possibility of renting apartments for a whole year on the site, Amsterdam’s 60-day limit and Paris’ 120-day limit represent per annum revenue losses of about 84% and 67% in those cities alone.

As for Uber, the company lost nearly $4.5 billion in 2017, up 61% from the $2.8 billion in losses it survived in 2016. Although the tech-giant continues to lose most of its revenue to drivers, Uber has expressed plans to expand even further into the European market – despite the fact that European governments intend to legally challenge the company’s practices, which will mean even more charges (and losses) for Uber.

For example, last December the European Union ruled that Uber was, in fact, a transportation company. Since then, Uber has seen a massive loss in drivers (as well as revenue) all over Europe, and around 10,000 drivers in just France alone.

This may not seem like a big deal considering that, thanks to self-driving cars, Uber eventually plans increase their profits by taking people out of the equation, but, with that strategy will come huge social implications. The question is, will Uber be ready for it?

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By now, the media has widely covered the social impact of companies like Uber and Airbnb, as well as their subsequent revenue losses. What they haven’t addressed, however, is the fact that sharing-economy tech giants have rarely anticipated the legal and social backlash they have faced, and therefore have not anticipated the loss in revenue they have experienced over the last few years (which is, let me remind you, several billions of dollars).

And, as Uber invests millions of dollars in tech R&D to develop a taxi service with self-driving cars, I have to wonder if the firm is preparing themselves for, or even anticipating the similar challenges that will follow. Or, better yet, if they have realized that these problems could easily be mitigated with the proper investments in R&D on the urban and social impact of their services.

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Today, there are tremendous financial implications for tech giants who are not investing in research on the potential impact of disruptive technologies in cities.

That is why I suggest thinking about the impact of technology in cities and communities in terms of 3 dimensions:

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Technology vs user behavior

When the tech industry develops a new product or service, they have obviously defined their ideal users/clients in order to target the right market.  They ask themselves questions like: What are their needs? How can I fulfill these needs and therefore “make the world a better place”?

But, in doing this, have they anticipated every scenario? Have they thought about how the same people intend to hijack their product and services, not for the greater good but for their own benefits and interests? The website airbnbhell identifies very well most of the nasty behaviors of “coarse” users, those whose behavior cost the company hundreds of thousands of dollars each year.

To mitigate the negative impacts, it is necessary to achieve strong behavioral, anthropological, social and economic research, so that users get the most of these services and carry on using, and paying for these applications without reaping the negative benefits that follow as a result.

Technology vs collateral damage

Here we consider those who do not use the technology, but who are are impacted by it anyways. By disrupting a specific market (such as transportation, for example) tech firms that intend to “make the world a better place” are also responsible for the greater, sometimes unintended impact they have on society. But, do they take responsibility?

Thinking back to the Uber case, what collateral damage has their service had on cities and their urban dwellers? Whether it’s the traditional taxi drivers, or the former (Parisian) Uber drivers from poorer districts who had to stop using the app, both have suffered financially and socially from Uber’s business practices. To look at it this way, you can’t make an omelet without breaking some eggs, but my question is then: how many eggs are you ready to break to make a good omelet? And at what point are you ready to go to court over too many broken eggs? In other words, disruptive technologies are not perfect. And so tech firms must realize their services will always cause some degree of collateral damage.  But, to what extent are tech firms ready to assume financial (and social) responsibility for collateral damage?

Today, the discussion surrounding the sharing economy boom have led to much debate. That is why legal, financial, and social research is indispensable for those firms as they continue forward. First, in order to sustain their positive image and branding, and second, to avoid painful and costly law suits.

I would also argue that tech giants strongly need to think about ethics and their social responsibility, especially when they aim to change the world “for the better”.

Technology vs existing conditions

My third comment might be more controversial. Sometimes we must wonder if we need technology at all, and if the world would be a better place without it. For starters, I will give you this simple example from our daily lives: is it more energy efficient to use motion sensors that turn off the light when somebody leaves a room? Or is it better for the same person to switch off the light when they leave the room?

Thinking about the governance of housing and mobility in cities, several trends appear around the world: governments strive to provide affordable housing and inclusive neighborhoods, as well as public transportation services. What for? Well, the reasons are obvious: every urban community should be able to afford a home and live decently, and to commute quickly and cheaply to/ from work every day while limiting energy consumption and air pollution from personal cars. But how can a city easily provide affordable housing when Airbnb drives up the price of real estate? And how can we influence a city’s population to take public transportation when self-driving cars will be available on the market in the future?

Effective city planning and design takes a lot more time, energy and money than developing a disrupting technology or service. I would therefore argue that it is indispensable for tech industries to understand:

–  how their technology actually benefits urban societies on the long term and

–  how it helps, or counters, the actions of public institutions.

Which are things that, again, require specific research on the future of urban, environmental and social planning.

Thinking about time is also critical. Today, while tech industries and startups try to grow, they disrupt their environments at an incredible rate as a result. It is therefore crucial that we sit back and think about time, as well as the long-term impacts of technology on slower urban processes.

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Cities, communities, time and ethics. These are concepts tech companies need to take into consideration more if they actually intend to “make the world a better place”, whatever that means.

Making the world, and cities, better places, well yes, but with that goal we also need to think about:

  • For whom? As it is literally impossible to satisfy everybody.
  • When? If urban development and social processes both require time and careful reflection, “as fast as possible” isn’t as simple as that.
  • For which values? Firms’ ethics must be questioned and constantly thought through, in order to justify their actions and impact on our world.

Thinking about the right questions before providing simple answers. This is what prospective, urban research is about, and this is why tech companies need to value it more for their own good, as well as the good of everyone else.

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Claire Doussard is a landscape engineer, urban planner and a Doctor in geography and planning graduated from Paris 1 Panthéon Sorbonne and Harvard University. Her scientific interests lie in sustainable urban planning, territorial integration of urban projects and the impact of disruptive technologies in cities. 

 

3 comments on “Uber and Airbnb lose billions due to undervalued urban research

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