golden gate bridge

Gig Economy Companies Costs Rise Amid Labor Shortages

Airbnb, DoorDash, and Uber See Costs Rise

From Airbnb (ABNB) to DoorDash (DASH), some of the nation’s largest gig-economy companies are seeing costs rise. But it is not from spending to lure new customers. They are pouring money into recruiting efforts to hire more drivers and find hosts.

Gig-economy companies are figuring out ways to enhance the supply side of their operations to meet pent-demand, which has not been slowing down. As a result, costs are rising at Airbnb, DoorDash, and Uber, among others.

Airbnb Needs More Hosts

Airbnb was hit hard during the pandemic with travel coming to a halt. But as vaccinations rolled out and shutdown restrictions eased, business has recovered. While Airbnb did not have to spend a lot of money to find new customers, it has spent to expand the number of hosts on its platform. For its second quarter Airbnb had sales and marketing costs of $292 million, which is the highest it’s been since the first quarter of 2020.

Travel could slow down again if the Dela variant continues to spread, presenting a risk to the spending strategy at Airbnb. It is something Airbnb warned in its annual letter to shareholders. It said spikes in hospitalization in Florida, Texas, and other parts of the country could lead to lower bookings and cancellations.

Drivers in Demand

DoorDash is also seeing costs rise as it competes with Uber (UBER), Lyft (LYFT), and Instacart for drivers. Sales and marketing costs in the second quarter increased 150% year-over-year with much of the money being spent to recruit drivers. DoorDash also experienced higher advertising costs during the quarter as other gig-economy companies also ran recruitment ads.

Meanwhile, Uber said it has been spending more to recruit drivers. The company does expect the heavy spending in the second quarter to recede a bit as it was aggressive with hiring during the quarter.

Demand for gig-economy services is skyrocketing at the same time companies are struggling to meet demand. It will be interesting to see how long this supply/demand imbalance lasts and how the gig-economy companies respond.

Things are changing daily within the financial world. Sign up for the SoFi Daily Newsletter to get the latest news updates in your inbox every weekday.

Sign up

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store SoFi Android App, Get it on Google Play

ABOUT Meg Richardson Meg Richardson is a writer specializing in markets, technology, and personal finance. She loves breaking down seemingly complex ideas and making them readable and interesting for everyone. She holds an MFA in writing from Columbia University. When she is not writing about finance, she enjoys running in Central Park and drawing cartoons.

TLS 1.2 Encrypted
Equal Housing Lender