Disruptive internet-based business models have upended traditional industries like recorded music, newspapers and retailing. The latest flurry of innovation involves start-ups that take a service traditionally provided by a regulated firm – such as a hotel or taxi company – transforming it into commission-paying transactions between buyers and sellers. Accessed via smartphone apps and ‘regulated’ by user reviews, these new services are compelling at first sight.
AirBnB is an example that is already alarming the hotel industry and local governments. Another is Uber, the online ride sharing firm that was recently valued at $4 billion. Uber has gained notoriety because its pricing of taxi rides skyrockets on high-demand days such as New Year’s Eve, but the company insists its market-clearing role absolves it of any opprobrium. Indeed, you might say that Uber’s growth and popularity speaks for itself.