Collaborative Consumption: The Explosive Rise of the Sharing Economy

Just a decade ago, it was almost inconceivable that you could rent an apartment or car from complete strangers. But in 2016, all of this is possible thanks to collaborative consumption. The raging success of the sharing economy is having a major impact on the way many people work, live and play. It is clear that this growing part of the economy will play a significant role in business for the immediate future.

What Is the Sharing Economy?

The sharing economy allows people to borrow or rent others' assets.

The investment education site Investopedia defines the sharing economy as “an economic model in which individuals are able to borrow or rent assets owned by someone else.” The model is more likely to be utilized when the price of an asset (like a house or car) is high and the asset is not needed all the time.

While people have always shared possessions, the Internet made it far easier for individuals to find the assets they need as well as for owners to find potential sharers. The sharing economy allows owners to make money from their underused assets or services. For example, car owners may rent out their vehicles or condo owners may rent out their homes when they don’t use them.

The History of the Sharing Economy

Changing consumption habits by the public have led to explosive growth for the sharing economy over the last several years.

The first usages of the term “sharing economy” popped up midway through the 2000s after a few businesses used the social networking boom to explore the sharing of resources. In 2004, Harvard law professor Yochai Benkler published a paper suggesting that people share goods as part of the economy.

In 2010, Rachel Botsman co-authored a groundbreaking book, What’s Mine Is Yours, which described the roots and potential future of “collaborative consumption.” The book truly brought the idea of the sharing economy to the public. It’s no coincidence that just a year later, Time magazine named collaborative consumption one of the “10 ideas that will change the world.” Botsman remains one of the preeminent experts on the subject and frequently weighs in on the growth and change of the sharing economy.

Since then, companies like Airbnb, Uber, Lyft and others have become household names. Governments began to explore regulation of these services, and safety issues were raised. In 2014, PricewaterhouseCoopers found that the global sharing economy has produced $15 billion in total revenue, and could produce up to $335 billion by 2025.

Leaders of the Sharing Economy

As with any burgeoning industry, there are leaders at the forefront who are making the largest strides toward success. These companies are the engines behind the success of the sharing economy.


Arguably the catalyst of the sharing economy and collaborative consumption, Uber has spread its reach to 300 cities worldwide and is valued at $40 billion.

Founded in 2009 by Garrett Camp and Travis Kalanick, Uber is a transportation company that allows users to find vehicles in more than 300 cities worldwide. They can also use their own vehicles to drive others and profit from that time as if they were a taxi driver. Uber was expected to bring in $10 billion in revenue in 2015 and has been valued at $40 billion. There is little question that Uber is the biggest player in the sharing economy and among the most powerful startups in the world.


Now with listings in more than 190 countries, AirBnB is among the heavy weights of collaborative consumption and a leading powerhouse in the sharing economy.

Hatched as a solution for young San Franciscans struggling to pay their rent, Airbnb (then called Air Bed & Breakfast) has since become a leader in lodging. The service allows users to rent out their living space, whether it’s a condo, spare room or entire house. After Airbnb’s founding in 2007, it took the company just four years to reach 1 million bookings. Today, Airbnb reports that it offers more than 2 million listings in 34,000 cities and 190 countries.


An up-and-comer to the sharing economy, Fiverr appears poised to become a hub for freelance services.

An online marketplace for creative and professional services starting at a cost of $5, Fiverr has quickly become a leader in freelancing. The company spawned from other gig-based marketplaces like TaskRabbit and SnapGoods. Fiverr allows anyone to host and seek out various services, from graphic design to career advice. As of November 2015, the company had raised $110 million in funding, and it is quickly becoming the biggest marketplace for freelance work.

Effects on Other Sectors of the Economy

The sharing economy is having a massive effect on other portions of the economy. In some ways, the overall economy wasn’t fully prepared for the explosion in collaborative consumption. The positive and negative effects of the sharing economy might be the most important aspect of this paradigm shift.

Increase in Demand

The availability and popularity of the sharing economy have made the total demand for such services much higher. Workers are interested in being for-hire drivers because of Uber. Now there is more desire for short-term rentals because of Airbnb. The sharing economy has created new opportunities for profit — not only for companies, but for workers as well.

However, there have been adverse effects on similar services. Taxi drivers have grown angry at Uber and its competitor Lyft, which potentially undercut their business. This has led to taxi strikes across the globe and demands for regulation.

Importance of Safety

The growth of the sharing economy has democratized access to goods, but it may have major loopholes in public safety. Discussions are happening in countries and cities across the globe about the responsibility of companies like Uber and Airbnb as well as their users when problems arise. If someone is hurt by an Uber driver, is the company liable? If someone dies in an Airbnb rental, is that on the renter? The answer to these questions will have a massive effect on the next stage of sharing economy.

Rating and Reputation

Collaborative consumption platforms typically rely on rating and reputation systems, where users rate each other. Rating systems can be used to decide whether to proceed in taking a ride with or renting from someone. Poor ratings have a negative effect on future interactions but can help encourage users to act a certain way. This practice is common among social networks.

Legal Issues

The sharing economy has its fair share of legal problems, with everything from lawsuits to strikes occurring around the world in opposition to companies like Uber and Airbnb. Legal issues are integral to understanding the growth of collaborative consumption.

In the case of Uber, opposition centers on the fact that the company does not pay taxes or licensing fees. It is also criticized for endangering passengers by allowing them to ride with untrained, unlicensed and uninsured drivers. Uber is involved in 175 lawsuits and has been the subject of several protests in Europe. The company has even been banned in Spain.

Some have questioned Uber’s aggressive tactics. The company was called “a bunch of thugs” by officials in Portland, Oregon, and is under fire in countless areas.

Similarly, Airbnb has faced pressure because most of its users do not have to register their listings as a hotel would. The question of “who to sue” remains with Airbnb rentals. If rental owners have licenses, they are typically asked to shoulder the burden. But for those without licenses, that isn’t possible.

The company also has been criticized for not having to pay hotel taxes. This has resulted in users in places like New York City and San Francisco fining other users. Airbnb has attempted to engage in tax negotiations with many municipalities with little success.

The Future of the Sharing Economy

The sharing economy is a complex and dynamic part of the larger global economy. At Point Park University, our online business programs are designed to educate students about today’s economic trends and tomorrow’s opportunities for growth. Learn more about earning your business degree from Point Park today.