- Stories.The rise of the 'gig' economy
- USA.WeWork indefinitely cancels its IPO
What happens to WeWork? Is there a crisis in the company? Survive to? What is WeWork? Who is Adam Neumann? The bombardment of questions about WeWork in recent weeks has been a constant among analysts, experts and media around the world. In a matter of days, the company has gone from being the queen of coworking to accumulating ballots to become the next big business fiasco in the US: announced its IPO, days later it delayed it, then canceled it and finally ended up firing Neumann, co-founder and until then CEO. Your true story begins now.
WeWork's decline coincides with the end of a decade in which a group of companies born as a result of the last major financial crisis have reached adulthood and must inevitably consider what they want to be when they grow up in order to survive. Lyft, Airbnb, Deliveroo, Cabify or Uber are some of the greatest exponents of what has been called platform economics , although the phenomenon transcends beyond platforms and acquires all its connotations under the concept of uberization . Uberization by Uber , of course, one of the pioneers and the paradigm of this stage.
Almost all cases replicate, with more or less epic, the same scheme: a casual idea among friends gives rise to a start-up and it begins to gain weight based on rounds of financing and injections of large funds and investors; They have few assets in ownership and promise fabulous forecasts of global growth due to their scalability . The context in which they were born - in the middle of the crisis - favored their vertiginous expansion, taking advantage of people's need to spend less and get cheaper goods and services.
The equation seemed perfect, but variables were missing. "The market became irrational at the time of its appearance. There was a lot of liquidity available and a lot of appetite on the part of investors, so that these companies became the perfect target for all that money and all those intentions," says Alejandro Lago , IESE Operations Professor.
Technology was the definitive claim. Anything associated with the internet and the digital world caused other factors to be overlooked and thus, they all began a process that, broadly speaking, is characterized by an almost excessive network growth at the cost of leverage and profitability . Paradoxically, that profitability to which at first they did not give so much importance is now being one of its main ballasts, both for those who have already gone public and for those who raise it.
Lyft , Uber's main rival in the US, debuted on the New York parquet in March and since then his shares have lost 50%. The premiere was surrounded by a few expectations, however, the enthusiasm vanished and investors are taking time to give their confidence.
More or less similar is the case of Uber , which started its stock market in May. Their titles are now trading at around $ 29, 28% below the premiere price, and analysts do not predict a change in trend. In fact, in a recent Goldman Sachs report, its experts only glimpse negative challenges for the company led by Dara Khosrowshahi : business model, driver ratio, competition and, again, profitability.
"The expectations have not changed from the side of the companies, only the tolerance of the investors has changed, who are reducing their appetite for the companies that anticipate losses in the future. After talking with the management teams of several of these firms , it is clear that the markets are sending them a message (selling or reducing their positions) and they will respond, as evidenced by the recently announced layoffs at Uber and Wework, "says Peter Bourbeau , manager of the Legg Mason ClearBridge US Large Cap Growth fund.
Airbnb , the giant of tourist apartments, has set the year 2020 for its premiere; Glovo , one of the most powerful in the delivery sector (home delivery ), has also ruled out this route in the short term and Cabify , which also operates in the rental vehicle sector, does not consider it as a firm alternative at this time.
"The IPO is not an objective in itself, it is one of the different options we have to continue developing our project, as well as the potential rounds of financing that could occur in the future, if they occur," they point out from the Spanish company
Not all are the same
For Bourbeau, "some of these companies have a better business model that will lead them to profitability faster than others." And not all platform companies are the same. The Spanish Association of the Digital Economy ( Adigital ) and Sharing Spain (a group that groups collaborative economy firms) classify them into three categories, depending on the role played by the platforms and the role of users within them.
- Collaborative economy companies , in which the digital platform acts as an intermediary to facilitate the exchange of existing and underutilized goods and services, without necessarily having an economic consideration, although it may occur (for example, Airbnb, Blablacar or Verkami ).
- Economy-on-demand companies , in which the platform also acts as an intermediary for a professional and a consumer among whom a commercial relationship is established with economic consideration ( UberX, Cabify, Glovo or Etece ).
- Access economy companies, in which the digital platform does not intermediate, but provides the underlying service, as Bluemove or Car2Go do. In these cases, a company makes available to users some goods or services for temporary use and for commercial purposes.
"All these models will continue to exist and will be more relevant because new technologies allow doing things that were previously unthinkable," says Alejandro Lago. The key, in his opinion, is the ability to monetize services . "Those that are based on labor will suffer more than the rest because their model must prove more efficient than the traditional ones to justify commissions. In addition, they are more likely to be placed in the focus of the regulator."
It is another point that generates more controversy: regulation. Or, perhaps better, its absence . "The problem is that the new business models do not adapt to any labor figure. There are several recommendations and some directives that begin to regulate the relationship between suppliers and platforms, but nothing definitive," says José Luis Zimmermann , general manager of Adigital. In addition, many of these companies operate in already regulated sectors at local or regional or national level and these regulations are progressing in an atomized manner. "The regulation is not able to create a framework as wide as possible so that the user and who offers the services on these platforms have the highest possible security, so the creation and consolidation of a digital single market is absolutely imperative. It is the only one way for Europe to compete with other markets, "says the head of Adigital.
Autonomous or workers?
And then there is the biggest controversy: the fit in the labor market and how the role of operators-producers who offer their goods and services through platforms is interpreted. Are they or are not employees of the company? They have the same rights?
The doubts in this area are many and their answers depend on the casuistry. Many cases have been prosecuted and there are already sentences that determine a thing and its opposite. Without going any further, a week ago the Superior Court of Justice of Madrid ruled against a Glovo dealer and in favor of the company in determining that it was autonomous, so that right now there are as many sentences in favor of riders as in favor of the company and its business model (nine in both cases).
"It is a very recent phenomenon that we associate with distributors, but the issue of digital platforms extends to many sectors and puts the right of work in check as we know it. The model they follow, based on autonomous and false autonomous, does not contemplate any rights, "says Carlos Gutiérrez , secretary of Youth and New Realities of Labor at CCOO .
Many voices agree that these models have contributed to the precariousness of the labor market in recent years. One of them is Gonzalo Pino , secretary of Trade Union Policy of UGT , who defends that "the main basis of the platforms is the precariousness of workers. They do not recognize themselves as companies, but as intermediaries among their collaborators , they don't even talk about workers. The platforms are all at zero cost: the workers depend on an app to decide how they should work, at what time, with what salary ... ".
However, there are those who during the worst years of the recession found in these types of positions the way to earn income and stay hooked in some way to the world of work. For Carlos Gutiérrez, "they have taken advantage of the situations of greatest need and vulnerability of those years," and for Gonzalo Pino, " precariousness cannot be a way to reintegrate a worker ." Now, the impact is undeniable.
Only the delivery sector was responsible in Spain for 14,337 jobs in the value chain of restoration and commerce in 2018, according to Adigital in its report The economic contribution of delivery platforms in Spain , presented last month of January.
Deliveroo , for example, has 1,500 riders in Spain and more than 30,000 globally; It is present in 13 countries and has 2,500 employees in all its offices, of which about 200 are in our country. In the case of Cabify, it has 1,000 employees worldwide and generates 200,000 indirect jobs in the 12 countries in which it operates, while Uber has more than 20,000 employees worldwide and accumulated 3.9 million drivers in the last quarter of 2018, according to the data provided by the companies to EL MUNDO .
The particular relationship established between platform companies and their [non] workers is a point of tension. In Spain, the unions consulted agree that "nothing is being worked on specifically."
Matching the situation of these companies with that of traditional companies would millionately increase their costs ... and their risks. In that hypothetical scenario, would they all survive? How? What strategies are you drawing to secure your future?
Looking at the future
Uber was born in 2008 as a rental vehicle company, but today that is only one leg of the gigantic mobility platform it intends to become. Bicycles, scooters, motorcycles, food delivery, helicopters and, most recently, the sale of tickets and tickets for public transport in some US cities have joined cars. The idea of the company is that users have access to all types of mobility options from a single mobile application and that based on hiring one option or another, the repetitions are translated into income that will lead to the signature of the red numbers ( In the first half of 2019, losses grew to 6,629 million dollars - about 5,644 million euros -).
"These companies have been born with a more dynamic DNA and their ability to pivot towards other parallel businesses where their added value may be greater," says Alejandro Lago.
Cabify sources explain that their efforts are focused on propping up a long-term sustainable business model. "From a financial point of view this means that we have been working to enter the path of profitability as soon as possible. We hope that this moment arrives sooner rather than later, although it would be risky to give a specific date, but of course, we are very far of the situation of other global platforms in terms of losses. In fact, in 2018 we doubled our turnover in Spain, to 144 million euros , and reduced operating losses by more than 70% until we reached almost the point of equilibrium ", they assure.
José Luis Zimmermann glimpses the future with optimism. "It is a booming model. They are still incipient markets and activities with a lot of potential to develop. Everything remains to be seen."
The heritage of the platforms in the global economic system remains to be seen. Many were presented as an opportunity to change traditional models , but reality has not yet confirmed. "They have opened different suppliers to the market, there is a more differentiated offer, barriers to entry into different markets have been removed and there is also more transparency," Zimmermann lists.
But there is also a face b . "In every revolution there are winners and losers and every technological change ends up giving more power to some than others. The short-term broker has more power than he should have and the temptation to use power abusively exists, but that has always past with monopolies. Network economies are another tool to create natural monopolies, so the role of regulators is fundamental. The problem is that the collaborative economy has been linked to the social economy and is not the same, "he argues. Alejandro Lago
The desuberización now has ahead the challenge to define his own characteristics and many of them will depend, as in the case of WeWork, of which all the questions find the suitable answers.
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