How the sharing economy uses data to build trust
Not using your apartment for the weekend? Rent it out on Airbnb. Traveling across country? Offer someone a ride on BlaBlaCar. Got some free time on your hands? Offer your services on TaskRabbit.
The “Airbnb model”, also known as the sharing economy, has fundamentally changed the way we think about ownership. Just as peer-to-peer businesses like eBay allow anyone to become a retailer, sharing sites let individuals act as an ad hoc taxi service, car-hire firm or boutique hotel as and when it suits them.
But, how can you trust your stuff (or your life) with a complete stranger?
How to build trust in the sharing economy
“We are entrusting complete strangers with our most valuable possessions, our personal experiences – and our very lives. In the process, we are entering a new era of Internet-enabled intimacy.”
As well as the required background checks carried out by (most) platform owners, online reviews and ratings are generally posted by both parties to each transaction. That way users can quickly spot lousy drivers or house-trashers.
Reviews are an incredibly important part of building trust in a peer-to-peer marketplace because according to studies 88% of consumers trust online reviews as much as personal recommendations. But, simply having reviews isn’t enough. Honesty is essential. Would you believe it if every Airbnb had all 5 star reviews? Probably not. You’d think they were just flooding their system with fake positivity.
Which is exactly the problem Airbnb had when they first started. The reviews were good – so good they were actually unbelievable. Airbnb knew that most ratings systems are overly positive and suffer from a non-response bias. But, their data was showing an incredibly high percentage of 5 star reviews. When they investigated further, they realised that they had underestimated how people would use their reviews system based on social constructs.
Dave Holtz, a data scientist at Airbnb, explained how they tackled the issue in his keynote at Extract San Francisco (2014).
By simply changing the way they asked for reviews, Airbnb’s data showed a 16% upswing in the number of reviews and a noticeable increase in the candidness of their guests.
A social element
Another common practice to build trust in the sharing economy is by connecting with other social media sites. That way users can check to see if they have any friends (or friends of friends) in common, which can make them feel more comfortable.
“We couldn’t have existed ten years ago, before Facebook, because people weren’t really into sharing”
– Nate Blecharczyk, Co-founder of Airbnb
Thanks to social media sites like Facebook, people are generally more comfortable meeting and transacting with people they meet online.
The importance of face-to-face
One of the differences that separates businesses in the sharing economy from the more traditional eBay marketplace, is that users aren’t anonymous. When you buy something from Etsy all you really know is that someone has a painting to sell. But when we bring these transactions into the real world, the results are striking.
No one knows this better than the popular car-sharing service RelayRides. Initially they adopted a ZipCar model in which borrowers could use a special card to access the cars. The system proved too costly to implement and slowed down the company’s expansion, so they reverted to a more traditional face-to-face handoff. The in-person meeting created another element of trust and RelayRides found it made renters take better care of the cars. Their data showed that owners made far fewer damage claims and both parties reported higher satisfaction ratings.
“They really liked that human connection. People strike up a conversation and realize they have something in common, which boosts trust and makes people feel accountable. They’re going to have to return this car to that person and look them in the eye.”
– Andre Haddad, CEO of RelayRides
Solving the lemon problem
“If buyers are unable to differentiate higher-quality cars (plums) from lower-quality cars (lemons), they are unwilling to pay above the average value. As a result, higher-valued used cars exit the market, the average price declines, and buyers’ willingness to pay decreases as well.”
And then eventually all that’s left are a few lemons. Not good.
But the sharing economy is changing all that. When companies can provide an environment that encourages accurate reviews from both buyers and sellers, consumers are more willing to pay for high-quality products and services.
Relying on data
The importance of cultivating a trustworthy review system is clear. Companies like Airbnb and BlaBlaCar are using their data to measure and assess the effectiveness of their systems and make changes when needed. As Airbnb’s guidelines say…
“Our community is built on trust, and trust comes from honest conversation.”
And if in doubt, you can always refer to this handy Lifehacker guide for spotting fake reviews.