FUNDAÇÃO GETULIO VARGAS ESCOLA BRASILEIRA DE ADMINISTRAÇÃO PÚBLICA E DE EMPRESAS MESTRADO EXECUTIVO EM GESTÃO EMPRESARIAL CREATING VALUE WITH DIGITAL PLATFORMS – THE CASES OF UBER AND AIRBNB DISSERTAÇÃO APRESENTADA À ESCOLA BRASILEIRA DE ADMINISTRAÇÃO PÚBLICA E DE EMPRESAS PARA OBTENÇÃO DO GRAU DE MESTRE CARLOTTA MARIA BARRACOSA PUGLIESE Rio de Janeiro - 2016 CARLOTTA PUGLIESE CREATING VALUE WITH DIGITAL PLATFORMS – THE CASES OF UBER AND AIRBNB Master’s thesis presented to Corporate International Master’s program, Escola Brasileira de Administração Pública, Fundação Getulio Vargas, as a requirement for obtaining the title of Master in Business Management. PROFESSOR ALEXANDRE LINHARES Rio de Janeiro 2016 2 Ficha catalográfica elaborada pela Biblioteca Mario Henrique Simonsen/FGV Pugliese, Carlotta Maria Barracosa Creating value with digital platforms: the cases of Uber and Airbnb / Carlotta Maria Barracosa Pugliese. – 2016. 33 f. Dissertação (mestrado) - Escola Brasileira de Administração Pública e de Empresas, Centro de Formação Acadêmica e Pesquisa. Orientador: Alexandre Linhares. Inclui bibliografia. 1. Planejamento estratégico. 2. Empresas novas. 3. Inovações tecnológicas. 4. Valor adicionado. I. Linhares, Alexandre. II. Escola Brasileira de Administração Pública e de Empresas. Centro de Formação Acadêmica e Pesquisa. III. Título. CDD – 658. 4012 3 4 Acknowledgments I would like to first acknowledge to my advisor, Professor Alexandre Linhares, as without his experience, knowledge, enthusiasm and confidence, I would not be able to deliver this thesis in only two months. I would also thank Kaillen Givigi, who was always very helpful to the development of this work, by assisting me in every issue I needed, during my work with Professor. Also, to all my friends back in Portugal, here, in Brazil, and from all over the world, who kept supporting me during this Master Program. I would like to give a special acknowledge to the close friends, here in Rio de Janeiro, who were my family during my time here. Last, but certainly not least, to my family that never doubted of me and always cheered for me, I am forever grateful. They are the most important people to me and I thank them for investing in me and in my education and always encourage me to be the best I can. Without these people this journey would not be possible. Thank you. 5 “Some people see the glass half full. Others see it half empty. I see a glass that's twice as big as it needs to be.” George Carlin 6 Table of Contents LIST OF FIGURES 8 ABSTRACT 9 1. INTRODUCTION 10 2. LITERATURE REVIEW 11 3. METHODOLOGY 15 4. ANALYSIS 16 UBER 16 COMPANY OVERVIEW 16 PRICING 20 COMPETITION 21 FINANCIALS 22 FOUNDERS 22 AIRBNB 23 COMPANY OVERVIEW 23 PRICING 24 COMPETITION 25 FINANCIALS 25 FOUNDERS 26 CREATING VALUE 27 5. CONCLUSIONS 29 6. ANNEXES 30 7. BIBLIOGRAPHY 31 7 List Of Figures Figure 1: Illustration of the “platform for shared value creation” model 28 8 Abstract This thesis is intended to analyze a new business model, which bases the main activities of a company in a digital platform. To do so, two companies – Uber and Airbnb - were studied in depth. An overview of each company, an analysis of how is their pricing model and some financial data is shown. In order to provide conclusions concerning the main question of this study, how is value created through digital platforms, it is important to deliver some information regarding the major theoretical concepts, such as sharing economy, trust or network effects. The most fundamental for this work was, certainly, the sharing economy one: the fact that this type of economy is emerging and allowing people to connect with each other and generate activity is very important. Later in the thesis, a model is used to give a more clear perspective of which elements generate value, when a platform is in use. The platform allows transactions, which therefore enable the participating organizations to create value. A presente tese destina-se a analisar um novo modelo de negócio, que baseia as principais actividades de uma empresa numa plataforma digital. Nesse sentido, duas empresas – Uber e Airbnb – foram analisadas em detalhe. Uma visão geral de cada empresa, uma análise de que tipo de modelo de preços e alguns dados financeiros são apresentados. De forma a conseguir proporcionar conclusões acerca da questão fulcral deste trabalho, de como é que, através de plataformas digitais, se consegue criar valor, é necessário examinar alguns conceitos teóricos, tais como a “network effects”, confiança ou “economia partilhada”. O conceito com mais peso para o desenvolvimento deste trabalho foi, certamente, o da “economia partilhada”, visto que este tipo de economia está em crescimento e permite às pessoas conectarem-se umas com as outras e, dessa forma, gerarem actividade, o que é muito importante. Existe um modelo que é utilizado nesta tese, de forma a oferecer uma perspectiva mais clara de que elementos geram valor, no caso da utilização de uma plataforma. A plataforma permite que haja transações, o que leva à criação de valor. 9 1. Introduction In a world where connections are becoming more digital and where companies are starting to become leaner, by focusing on delivering the highest value to customers, while having zero waste, the question of how they do it arises. Companies like Uber or Airbnb, are successful cases of this “new” business model, which is becoming more common and seen as one to follow. Creating a company is not by itself a hard thing, however having a successful business is something every entrepreneur tries to have, and therefore analyzing what are the strategies used in this kind of companies may help others to achieve that objective. Furthermore, observing the common strategies adopted by these different firms and comparing them to the traditional ones used in “old” business models will allow to comprehend the main weaknesses and opportunities (or pains and gains) that stand in this model. Although these companies rely on digital tools, the fact that neither one of them owns the “core” business assets (Uber does not owns cars; Airbnb does not own real estate) is very interesting to examine. Digital platforms are increasingly beating products, as they offer customers lower transaction costs while using them and the value of those is brought by external entities, outside of the community, such as people who are both customers and suppliers. Taking the definition of “network effect”, this can explain how value for each user increases over time: the more Uber or Airbnb is used either by consumers or by drivers/renters, the more value it has for each one of them. An example always used to explain this concept is the “telephone”, because the more people who use it, the more value it has. The very first telephone had no use; neither the first email account. Moreover, both companies mentioned before are good examples of the recent expression “sharing economy”. It is the peer-to-peer-based activity of obtaining, giving, or sharing the access to goods and services, coordinated through community-based online services. This is also an interesting aspect of these companies and something, which startups are looking at and willing to use. Both the information and interaction are the source of value creation in this Collaborative Consumption model. 10