An on-demand company that is truly making things better for everyone involved? Seems too good to be true.
The headquarters of Uber is in a concrete, bunker-like former bank building on Market Street, downtown San Francisco’s unwelcoming main drag.
To get in you have to pass through a security gauntlet on the ground floor. Once you get off the elevator in the company’s offices there are some electronic documents to sign. After that things start looking more like your basic Internet company, with people sitting on sofas working on their laptops, and lots of free snacks. But the place still feels like it’s on a war footing. Which it should be: it’s a controversial company, doing battle with entrenched interests and government regulators.
On Wednesday I visited the California headquarters of a much smaller and much, much less controversial outpost of the “sharing economy,” “on-demand economy,” “gig economy,” “1099 economy” or whatever you prefer to call it. It was on a quiet corner in Santa Monica, about 15 very short blocks from the beach. I walked right in from the street, and one of the first things to catch my eye was a tan poodle (named Jasper, I found out later) who looked straight at me and started running in my direction. Dogs were all over the place as I wandered around. Sweet, sleepy-eyed creatures that emerged from under desks for a quick head-pat or ear-rub.
So, yeah, the dog-sitting marketplace DogVacay has some built-in public relations advantages. I mean, OMG, look at the doggie!
That’s Jasper, bidding farewell about an hour after we first met. Also, just before my visit, my wife picked up our dog (a Labradoodle named Nora) from a DogVacay host in Manhattan after a successful 13-day stay. I am not a dispassionate observer here.
But, dog-slobber aside, DogVacay seems to offer a useful example of just what the potential and limits of the on-demand economy (I’m currently leaning toward that as the best term) are. Like Uber, Airbnb and TaskRabbit, DogVacay is a two-sided market that brings together providers (dog-sitters) and consumers (dog owners) of a service. It is not, however:
- Battling a hostile, powerful, entrenched incumbent. “There is no kennel lobby,” said DogVacay founder and Chief Executive Officer Aaron Hirschhorn right after I met him Wednesday. “At least, not one that’s found me yet.”
- Seemingly taking advantage of regulatory loopholes. There is a far from complete patchwork of local zoning laws and safety regulations governing dog care in the U.S. DogVacay hosts have to comply with them just like anyone else.
- At much risk of seeing its dog-sitters classified as employees. DogVacay hosts work from home and set their own hours, pay rates and job descriptions. On the continuum from employee to independent contractor, they’re clearly much closer to the latter.
- Threatening to replace lots of high-status full-time, full-benefit dog-care jobs with contingent work. Yes, there are full-time workers at kennels and doggie daycare facilities. But their numbers aren’t huge, their jobs aren’t exactly cushy and, given the overall growth of the pet-care market, their jobs probably aren’t in all that much danger either.
So when you contemplate DogVacay’s business, you can dispense with most of the issues that get people all bent out of shape about many of its on-demand peers. What is left over is something that makes the economy a little bit more efficient and more productive and gives people new ways to make money, but doesn’t exactly shake the foundations of modern commerce or employment.
In short, DogVacay is taking what is a fragmented, profoundly inefficient market and making it more transparent and liquid. Pre-DogVacay there were two choices for what to do with the dog when you were away — leave it in a kennel, doggie hotel or other boarding facility, or rely on informal networks to find a friend or neighbor (or maybe a friend of your dog trainer’s brother-in-law’s neighbor) to take care of your pet in exchange for cash, goodwill or a nice bottle of wine.
For a lot of dog owners, the institutional option isn’t really an option. Hirschhorn and his wife started the dog-sitting business that grew into DogVacay in 2011 after their dog, traumatized by a stay in a Los Angeles-area kennel, hid under a desk for 10 days. So DogVacay, while it is surely siphoning some customers away from institutional dog-care facilities, seems mainly to be making the informal dog-care sector less informal.
There are all sorts of potential positive effects from this. Dog-sitters get a flexible source of extra income (Hirschhorn said 80 percent of DogVacay hosts weren’t making money caring for dogs before they signed up) that comes with training, customer support and insurance. Dog owners get a much easier way to find competent, trustworthy people to care for their pets, thus making it easier for them to go on vacations, go to work and engage in other economy-stimulating activities. Also, transactions that were previously usually done in cash — and thus often escaped taxation — go on the books. DogVacay hosts’ income is reported to the Internal Revenue Service once it passes certain threshholds.
I feel a little like I’m reciting here from the McKinsey Global Institute’s report last month on “Connecting talent with opportunity in the digital age.” McKinsey estimated that “online talent platforms” (which include the likes of Monster.com and LinkedIn as well as markets such as DogVacay) could boost global economic activity by $2.7 trillion in 10 years. It’s hard to know what to make of such a number, and improved matching of dogs with dog-sitters is just the teensiest part of it. But McKinsey’s prediction does seem at least directionally correct. Successful online two-sided markets make the world work a little bit better.
They don’t, however, suddenly turn low-status work into a lucrative profession. Hirschhorn says some DogVacay hosts now make a full-time job of it. They’re not making a lot of money, though. DogVacay generally limits hosts to three doggie guests at a time, although a few exceptions are made for especially reliable hosts with more spacious dwellings. Multiply $40 a day (a common price point on the DogVacay listings I looked at) times three dogs a day for 365 days a year, then subtract DogVacay’s 15 percent commission, and you get…$37,250.
To be sure, DogVacay’s promotional material makes no promises of riches. “Earn up to $1,000/month watching puppies” is the headline on the company’s “why host?” page. It’s mainly a way for dog-lovers with time on their hands (our dog’s host was a college student on summer break) to make some extra money.
DogVacay has raised $47 million from venture capitalists and angel investors. Its first major investor was the big-name Silicon Valley firm Benchmark, also a backer of Uber, and Benchmark partner Bill Gurley serves on the boards of both companies. The goal is eventually to become an independent, publicly traded corporation. That entails certain growth expectations, and Hirschhorn voices grand hopes of “building a network of trusted care providers” that could be used to sell or promote things beyond just dog-sitting.
I have no idea whether that’s really such a valuable thing, or whether the demands of DogVacay’s investors will eventually mess with its puppy-loving vibe. But for the moment the company is a (modest) force for economic good — and once you get past the controversy that’s probably true for all those higher-profile on-demand companies as well.
That’s one of the terms that academics use to describe these businesses. Another is multisided platform. If DocVacay pays the host directly via check, it reports that income to the IRS if it exceeds $500 for the year. If DocVacay pays the host via PayPal, the threshold is $20,000 — a leftover from PayPal’s days as a service mainly for eBay sellers (who have their cost of goods to subtract from it) that I would guess the IRS will crack down on one of these days.
This article was written by Justin Fox from Bloomberg and was legally licensed through the NewsCred publisher network.
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