The Future of the Shared Economy
Airbnb’s Losses and Layoffs
For companies that made their name in the business of sharing rides, homes, and offices, the coronavirus has posed a significant challenge. Travel has largely come to a halt, and most people are wary of sharing space with strangers.
On Tuesday, Airbnb announced it would lay off almost 25% of its workforce. Before the pandemic, Airbnb had 7,500 employees and was working on hotel and transportation projects. Now, the company is cutting 1,900 jobs. Airbnb’s CEO said he expects the company’s revenue to be cut in half compared to last year.
In April, Airbnb took out two $1 billion loans. Those loans came after the company stopped marketing and hiring in order to reduce expenses by $800 million in March. Airbnb also cut its internal valuation by $5 billion.
Roadblocks for Lyft and Uber
In the first weeks of the coronavirus pandemic in the United States, some research showed Lyft (LYFT) and Uber (UBER) rides were down by as much as 94%. These businesses have been hard-hit, as former customers are no longer in need of rides to work, entertainment, or restaurants. “I think it’s going to be a very, very long time before either one of these companies sees any kind of a pickup,” predicted one analyst last week.
Meanwhile, on Tuesday, California and the cities of Los Angeles, San Francisco, and San Diego sued Uber and Lyft. The lawsuit claims the ride-sharing giants have misclassified drivers as contract workers, when they should be listed as full-time employees. If the companies listed their drivers as employees instead of contractors, they would have to pay overtime and sick leave.
Uber responded by saying , “At a time when California’s economy is in crisis with four million people out of work, we need to make it easier, not harder, for people to quickly start earning.”
In an effort to save cash, both Uber and Lyft are cutting their workforces. Last week, Lyft let go of close to 1000 employees, roughly 17% of its workforce. Then, yesterday Uber announced that it will also lay off 3,700 people who work in customer support and recruiting. That’s about 14% of Uber’s workforce.
In terms of earnings, Lyft reported first quarter revenue and rider numbers that beat expectations yesterday. Shares of the company popped more than 15% after hours. Be sure to keep an eye out for Uber, which reports its latest results today. Coronavirus’ impact, UberEats, and profitability will be key areas to watch.
WeWork and What to Watch
Along with the other major “shared economy” companies, WeWork started global layoffs via Zoom (ZM) last Thursday. This comes after the company faced other financial struggles and laid off workers in November.
WeWork’s business model involves filling buildings with employees from many different companies to work alongside each other. Early in March, WeWork had tried to reassure investors that it would be able to get through the crisis with the $4.4 billion it had in liquidity. Now, as WeWork businesses continue to sit empty and layoffs have begun, that seems less certain.
While it’s been a tough stretch for these “shared economy” heavyweights, none of them lack imagination and innovation. These traits helped them get to where they are today and may help them navigate the future moving forward. To that end, WeWork is already making plans to redesign floor layouts. It will also put new sanitation measures in place as well as systems for monitoring traffic flow. For its part, Uber is developing technology to detect if drivers are wearing face masks before they accept trips.
On another more hopeful note, it’s likely that when the virus is defeated, humans will be longing for experiences and connection after months of lockdown. The companies that helped create the shared economy will likely be at the forefront of helping people find new ways to share.
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