It took Airbnb only five years to reach $10 billion in valuation, half the time as LinkedIn and less a third the time as Chipotle Mexican Grill. Why? That is the question I have been asking myself all summer... Back in early June I published an article titled “Social Capital: The Secret Behind Airbnb and Uber”. As shown below, the higher a company moves up the Social Economy Pyramid, the faster the rate of value acceleration as it is able to access multiple social value drivers. But to be honest, I felt like a bit of a fraud as I didn't actually understand what was driving the $10 billion valuation of Airbnb and the $18 billion valuation of Uber, I just knew somehow they were defying the laws of traditional economics.
The Social Economy Pyramid: Years to Reach $10 Billion Valuation MarkNote: $10B valuation is based on market capitalization for public companies and private valuation for Airbnb and Uber, Starbucks took 16 years to reach $10B valuation from the date Howard Schultz joined the company Source: Brady Capital Research, Bloomberg, Company press releases
Web 2.0 Laid the Foundation for a New Form of CommerceThis compelled me to do a crash refresher course in microeconomics, which I hadn’t looked at since I studied for the CFA (Chartered Financial Analyst) exam back in the mid-1990s. Back then, the world of commerce was very different - the Internet was still new, the start-up Amazon was an online bookstore, and the dotcom wave was just starting to rise. I was oblivious to all this, however, as I was living in the Industrial Age, working as an Associate Analyst looking at forest products, oil and gas, and auto companies. Fast-forward a decade… In early 2010, I embarked on a 2 1/2 month road trip with my fiancé around the United States, attending the SXSW Interactive Conference in Austin and the #140 Conference in New York City. These conferences opened my eyes to how Web 2.0 companies (user-generated content and social networking companies) were going below the depths of corporate ecommerce to create a new undersea social world of transparency, authenticity, and engagement focused on individual empowerment, community, and collaboration. And this summer, as I immersed myself in the new Sharing Economy, I realized how the massive global network of highly connected individuals created by these Web 2.0 companies laid the foundation for the emergence of a diverse and self-sustaining ecosystem that now enables people to transact beyond the depths of the corporate ocean.
Where the Long Tail Meets the Blue OceanTwo of my all-time favorite business strategy books are “Blue Ocean Strategy” and “The Long Tail”. But it wasn’t until I re-read my notes on them this summer, that I realized companies like Airbnb and Uber are accessing not only what W. Chan Kim and Renee Mauborgne refer to as “blue oceans” of market demand, but also discovering what Chris Anderson refers to as new “long tails" of supply, with no capital or time constraints. The result is abundance in both demand and supply, inspiring the title for our new in-depth research report “The Abundance Economy: Where the Long Tail Meets the Blue Ocean”. In simple terms, the Abundance Economy is comprised of companies with two-sided markets that enable people and businesses to monetize under-utilized/latent assets, goods, and services by providing them with structural and customer capital. And while the definition of economics (i.e. the science of choice under scarcity) works for Industrial Era companies, it longer applies in this new world of abundance. So we came up with a new term - introducing "copianomics”: the science of choice under abundance.
A Deep Dive into the Top Fifty Abundance Economy CompaniesIn our in-depth research report, we categorize the top fifty Abundance Economy companies on the basis of the source of their value origination into five classes:
- Assets – Short-term rentals of homes, cars, boats, commercial space
- Goods – Reselling apparel through the new Closet Sharing Economy
- Delivery Services – On-demand goods delivery and personal chauffeuring
- Commodity Services – On-demand home and caregiver services
- Specialized Services – Online marketplaces for specialized skill providers