The Evolution of a Sharing Platform into a Sustainable Business Ioanna Constantiou Copenhagen Business School ic.itm@cbs.dk Ben Eaton Copenhagen Business School Westerdals Oslo ACT be.itm@cbs.dk Virpi Kristiina Tuunainen Aalto University virpi.tuunainen@aalto.fi Abstract A number of sharing economy start-ups have taken both digital and physical product markets by storm. These start-ups operate on two-sided platforms and enable sharing of physical products or services based on physical assets. Interestingly, they are subject to both the dynamics of the digital world (i.e., network effects), and the constraints of the physical world (i.e., issues of accountability when physical property is destroyed). We investigate how Airbnb, a sharing platform, evolve into a sustainable business with an in-depth case analysis based on data retrieved from a number of blogs providing information about Airbnb’s actions. Our analysis with insights from platform economics and information infrastructures depicts two phases in the evolution process: creating the user base and augmenting the platform. With the two complementary theoretical perspectives we can offer a deeper understanding of the evolution of sharing platforms into sustainable and competitive businesses. 1. Introduction A number of digital start-ups focusing on different forms of sharing have been established during the last decade. These digital platforms serve as means of connecting different parties who wish to share or exchange information, products or services. Some of these start-ups have become digital giants and have developed ecosystems, which encompass a number of players and offer more than a marketplace for exchange. A good example is Facebook, a social networking platform that has become popular among Internet users globally as well as a subject of academic and practitioners’ research. Besides start-ups, incumbent players such as Apple, Google, Amazon and Ebay, provide digital platforms, which have become ecosystems offering different value creation opportunities and generating value to a variety of participants. Ecosystem relations are characterized by complexity and value is co-created by the platform provider and other participants, such as, third party providers, suppliers and customer groups [1]. This underlying complexity of the digital ecosystems requires sophisticated approaches to discovering and exploiting business opportunities. In the highly competitive digital environment, we have recently witnessed the emergence of new types of platforms that focus on the sharing of physical products or the provision of services based on physical assets, such as, accommodation (e.g., Airbnb) or car rides (e.g., Lyft). These platforms are subject to the dynamics of digital environments that derive from the underlying network effects and seem to follow similar strategies in attracting users as the social network platforms or the other digital ecosystems. Despite the similarities with digital platforms, sharing platforms have additional features that make them distinctive. While digital platforms and ecosystems like Facebook and Apple’s AppStore only involve digital assets, sharing platform networks most often include physical products and other assets in service provision. These platforms facilitating collaborative consumption that involves “people coordinating the acquisition and distribution of a resource for a fee or other compensation” ([2] p. 1597). The expected benefits of sharing economy are, for example, efficiency gains in resource allocation, lower barriers to market entry, better work-life balance and advancement of access-based rather than owner-based economy. The most often cited challenges, in turn, include increased uncertainty, lack of regular employee benefits and the various tensions between professionals and freelancers. Not many sharing economy platforms survive and only a few are (or will be) economically successful. The success of these platforms in developing from start-ups to sustainable businesses depends on their ability first to mobilize initial user networks and then to maintain users’ active participation and ensure growth of the user base sufficient for sustainable revenue generation. In this study, we investigate the case of Airbnb, which has attracted a lot of attention both from academics as well as practitioners. Airbnb is a sharing platform network in the hospitality industry and has managed over the last five years to draw a considerable number of participants to both sides of its two-sided platform. It has by now moved clearly beyond the start- up phase and evolved into a viable business. Our aim is to understand how Airbnb has succeeded in this, and our 2016 49th Hawaii International Conference on System Sciences 1530-1605/16 $31.00 © 2016 IEEE DOI 10.1109/HICSS.2016.164 1297