— PROLOGUE —
Symbol:
So especially like Black barbershops is where brothers go and they cut it up with each other, you know, it’s a lot of love that come into the barbershop. You run into all walks of life there, cause everybody needs a haircut, right? It’s nothing like going to a barbershop and knowing everybody that’s in there. It’s like another home for me, honestly.
Kristen:
In this episode, we’re asking ourselves this big question about digital marketplaces. Why aren’t the digital marketplaces for getting a photographer, a mechanic, or a hairdresser as big as the ones for getting a rideshare or a burger delivered to your house? Speaking of barbers, we talked to one. His name’s Rick the Barber. We asked him about the art of cutting hair in his community, and why it’s hard to put his service on an app. A huge part of Rick’s business is his Instagram page. So we’re also talking about why that is. And why in the future, social media networks and digital marketplaces might just become the same thing.
— INTRO —
Hey, I’m Kristen Di Mercurio.
Lately, so much of our work has gone online. So I’ve been thinking about freelancing, marketplaces, and the future of work. That’s what our new show, Geek Economy will help you understand.
We’ll also show you how the gig economy moving forward, is going to change our lives and our culture. I would say I know a thing or two about this industry. I’m a professional actress, singer, voice over artist, and I’ve been in my fair share of podcasts. As an actress, I’ve had all kinds of survival jobs. I’ve worked for Task Rabbit, Post Mates, event staffing, and temp agencies. Basically, in my world, getting the next gig is kind of the name of the game.
Geek Economy is brought to you by Bunny Studio. Trusted by more than 50,000 companies every year, Bunny Studio helps businesses scale their creative needs with a vetted crowd of freelancers.
— ACT ONE —
Kristen:
When it comes to digital marketplaces, Uber and Airbnb have completely changed the game. But once you get an Uber, you’re not going to see that driver again. That person drove you from point A to point B, and that’s it. It’s a short-term relationship.
That’s why a few people in Silicon Valley have wondered to themselves, what about those more complicated relationships in your life? Between you and your handyman, your accountant, or your barber– people who you’ll want to see again, and whose work has a bigger impact on your life.
Most people would agree that Uber and Airbnb are the two biggest companies in the “sharing economy/two-sided marketplace industry”. They are currently valued at 84 billion US dollars.
Did you know there is an industry that most people use regularly… And it’s worth more money than these two giant tech companies combined? It isn’t a digital marketplace… AND… It’s not traditionally known to use technology.
The industry is… HAIR.
Whether it’s too much or not enough – hair products and services based around them are booming. In 2018 the hair care industry was worth around 88 BILLION US Dollars… Eighty-Eight… BILLION!
That’s Four BILLION more than UBER and Airbnb. And it’s predicted to hit 112 billion by 2026.
Now let’s look at a barber specifically. For some people, the experience of getting your hair cut is similar to getting an Uber. Doesn’t matter who does it, you jump in the seat, make minimal small talk, and then 20 minutes and 15 dollars later you’re done. And for black and Latin communities around the USA, getting your haircut means something else entirely. It’s a complicated thing, and wouldn’t be easy to just have that experience in an app.
Andia:
The barbershop, in my estimation, prior to being a regular barber customer was… it’s a focal point for the community, whatever that community is, however big or small. People gather to get their hair done, but they also gather for information, dissemination. They gather to check in with folks, mental health, financial health in some ways, people talk about all kinds of things, sports, news and events, women, whatever.
Kristen:
That’s Andia Winslow. She calls herself an…
Andia:
… adventurer, but in the past, I would call myself an athlete, an activist, an artist, an actor, I never wanted to limit myself by a definition, by a noun. You know, I got lots of nouns.
Kristen:
Andia is the definition of someone who has thrived well in the Gig Economy- being a true generalist. Because she used to have longer hair, she didn’t need to go to the barbershop every week. But eventually, when she cut her hair short, she discovered the importance of the barbershop in her culture.
Andia:
So when I first came to the barbershop, I felt like I was intruding in someone else’s space, even though I did grow up around a lot of men and a lot of activities I’ve done in my life, I’ve had no problem being around men. That wasn’t the issue. The issue was, I felt like I was intruding on their sacred space.
I learned that… that was not true. Conversations do get altered when you’re there, but if you go often enough, you become part of the family, part of the community, and it’s just normal. So barbershops, just like salons, are a place where people come to air grievances, to reclaim identity, to I guess, fashion new narratives for themselves once they step out. But, at the end of the day, when I walk out of the barbershop and looking extra clean, I feel a certain way. I feel proud. I feel empowered, and I love it.
Kristen:
There’s something special about the barbershop in black and Latin cultures. We talked to Symbol about it. He’s a musician and songwriter based in Silver Spring, Maryland. Which is not too far outside of Washington DC.
Symbol:
You know, for the culture it’s just real big, you know, because there weren’t many places that we can congregate, you know, as black men, without being harassed. And so the barbershops was one, you know, one of those places that we were actually able to do that.
Kristen:
The barbershop doesn’t just have a cultural place in black culture, but a historical one. And so it’s also easy to understand that over the years, the work barbers do in the community is increasingly complicated.
There are hard parts, shape-ups, line-ups, sponge twists, twisted curls, waves, and of course, the fade. Here’s Omar– he’s a Billboard-charting House Producer and DJ from the Bronx, New York City.
Omar:
I think the barbers that can master doing a perfect fade, that’s an art. Creating the right fade is a freaking art of work because, I’ve been to so many barbers in my life, still trying to look for the right fade, and I think Black barbers might’ve mastered that and it’s like, yo, you guys figured out the fade.
Kristen:
For a lot of black and Latin men and women, a barber isn’t just a worker like a cashier or an Uber driver. They’re a craftsperson, an artist. In startup jargon, they’re ‘complex service providers’. And in communities all across the US, some barbers have become something even bigger than that: celebrities.
Here’s Rick, he’s Symbol’s barber, from just outside Washington, DC. He’s been cutting hair for more than a decade now, he’s a big deal in the area.
Rick the Barber:
I mean, as I said earlier, your clients are your billboards and that’s where most of my business comes in cause you know, word of mouth, or just people see my work out in public. I’ve had even a couple of weeks ago I had a client call me, he was standing with a barber. He said a barber stopped him in the mall like: “Who the fuck cut your hair?” And he was like, he was like “Excuse me?” he was like, nah, he was like “That’s a sharp ass haircut,”. He’s like “can I get your barber’s information?” And he like called me while he was standing there with him and the dude was like, “Bro,” he was like, “you do some really good work, I just, added you on Instagram. Can you follow me back?” I was like, yeah.
Yeah. I mean, I like seeing the support and like getting messages from clients and you know, making people feel their best and look their best, you know, I liked getting that type of gratification. That’s what makes me love the industry.
Kirsten:
So let’s jump back to the big question from earlier. Why don’t you use an app to book a barber in the same way you use an app to book a ride to the airport?
Find out after the break!
Break:
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— ACT TWO —
Kirsten:
So… why don’t people use an app to book a hairstylist in the same way you book an uber?
Well, one answer is that there are all kinds of apps to do exactly this. We talked to Sjoerd Handgraaf to find out why these apps haven’t taken off yet.
Sjoerd:
I always say it like, it’s like Stuart”, but then instead of the first T, you would say as if there were a J like, “shoe-art”. Sjoerd, Sjoerd.
Kirsten:
Sjoerd is the Chief Marketing Officer at Sharetribe. They’re a company based in Helsinki that are like the WordPress or Shopify of marketplaces. Their platform provides all the software and infrastructure people need to make their own digital marketplace.
Sjoerd:
I would say that compared with simple relationships like Uber, Airbnb service marketplaces are definitely on their way to reaching the same heights, it has just taken them a little bit longer because those kinds of marketplaces are slightly different to the ones like Uber and Airbnb, because, first of all, the total addressable market is a lot smaller, so they will never reach that insane size.
Kirsten:
So simple marketplaces have products like house rental or ridesharing that everyone can use, whereas complex marketplaces are, by their nature, more niche. For example, you might only get your hair cut every few months, but you might get a rideshare every week. It’s a smaller market. Sjoerd also makes this really interesting point about the success of companies like Uber.
Sjoerd:
Like they lost close to two billion in the second quarter of this year and you could say “Oh yeah, maybe that’s because of COVID”, but like last year, the same quarter, they lost more than five billion. So, success is kind of a relative term. Airbnb was doing a lot better, previously, I think they’re even close to making profit at some point but also right now, not that much.
So, at the same time there are several really successful marketplaces that actually revolve around services. So there’s, Upwork, which is, a marketplace for digital freelancers. There’s Fiverr, which is kind of like the same, but more of like a lower level. I think Fiverr just turned, last book year, like a profit or a break even, and they have a market cap of like, almost four billion. So I would say like there’s several unicorns in that space and are there’s Thumbtack, for example, as well. Rover that’s a dog walking one. is basically a unicorn. I think they had a close to one billion valuation in 2018.
Kirsten:
Sjoerd says complex service marketplaces will take a lot longer to build because if you look at the supply side, they often deal with recruiting individual providers. It’s a lot more complex to get barbers or plumbers on your marketplace than uber drivers.
What he’s saying is that while there are tons of people who have a spare room in their house they want to rent out, finding people to do complex services is hard.
Sjoerd:
So with marketplaces, there is like a demand side, which is the person buying, renting, or booking the service.
And then the supply side: a person selling or renting out or providing a service and Airbnb and Uber, they have a much larger potential supply side, which is like, everyone with a house, or a car could be an Uber driver, or an Airbnb host. While most service marketplaces, they’re quite niche, you need specialists of some kind, so that means that not everyone is a hairdresser for example, or can easily become one. And that same, supply-side thing, because you need these specialists, also makes a lot of these service marketplaces quite difficult to scale them because you need to start really locally. Like for example if you think about the hairdressers…
Kirsten:
Speaking of hair professionals, let’s go back to Rick the Barber. He’s at Phoenix Salon Suites in Laurel, Maryland – USA. He’s also a busy guy.
Rick the Barber:
I mean, your work ethic is everything. So I mean, you can make as much money as you want to. Like me personally, I just got a crazy work ethic. So the days I don’t have my son I’m in the shop from seven AM until nine, ten PM at night.
Sjoerd:
If you think about the hairdressers example, it’s a lot harder to onboard them. You would like, you would need to really go probably into each city and just go door to door and get them on there until you reach a really, really widely known brand name. And then maybe automatically start onboarding while with a house in a car it’s a lot easier to do.
Kirsten:
The other thing that’s hard for marketplaces to sort out is the fact that barbers like Rick provide a complex service.
Rick the Barber:
I cut hair, I do facials, I do thermal scalp scrubs, beard presses. I’m more than just a traditional barber. I offer a lot of services that most barbers don’t.
Sjoerd:
You book a hairdresser, you know, do you want to have it washed? Do you want to have it cut? Do you want a massage? Do you want to have it colored? It’s a lot more difficult than “Hey, I’m here now, I need an Uber” or like, “Hey, I’m booking one night in Barcelona” like, I think that sort of complexity of the transaction is probably also the reason why service marketplaces are just a couple of years behind in terms of getting online.
Kristen:
So, we asked Rick if he’s on any of these fancy new digital marketplaces. And he isn’t. Instead, he uses a really simple app site called Square Appointments. There is usually a link right on his Instagram and people make a booking directly with him. But it’s not a marketplace, it’s just for bookings. That’s it.
So when we asked him why he doesn’t use StyleSeat, a really successful marketplace for barbers in the US, this is what he said.
Rick the Barber:
The only thing about StyleSeat is you gotta download the app, you gotta create an account and it’s a little bit better than what I’m using because you can read reviews on barbers, you can look at their portfolios and their pictures of their work. It’s nice but liked the functionality of the Square Appointments. Cause once people click on my link, it just takes them directly to the site and they don’t have to download anything. Me personally, I don’t like all that, you know, you gotta download this and then create an account just to schedule an appointment.
Kristen:
And I think the most interesting thing about this is he’s saying, “I don’t need some other app to be the source of business for me. I am the source of business. So why would I introduce all this friction into the process by making my customers sign up to someone else’s app?”.
And the reason that that’s so interesting is that it gets to this key thing Sjoerd is saying, which is that when a marketplace links two people up, and they form a complex business relationship, a lot of the time they both ask themselves, ‘why are we giving this marketplace a cut?’ and they leave.
Sjoerd:
For any marketplace that has a recurring, and that’s kind of the golden egg for a marketplace, that you have this thing called, like Repeat Purchase Ratio so that you get someone who uses your marketplace and then uses it again and again and again… like Airbnb, for example, I think once most people have tried their first Airbnb that’s their first choice next time they book something.
If a booking happens all the time between the same, demand side, same customer, and the same provider, there is a risk of this thing called Platform Leakage or Disintermediation.
And it’s one of the biggest fears of marketplace entrepreneurs, because if you know that the customer is paying the platform, let’s say a hundred dollars of which ten dollars every time disappears to the marketplace, why wouldn’t you agree with them to make the transaction happen off platform? And then you can also pocket that ten dollars or maybe split the difference?
There’s lots of ways that marketplaces try to do that and a lot of it has to do with scaring people from doing that. But the best way that we have seen when analyzing like hundreds of marketplaces is that the best way is to simply just provide enough value within the platform to keep it in the platform. So that can be very simple things like, for example, with Airbnb, that if you book through Airbnb, there is the insurance, there is this escrow payment handling, meaning that the money won’t get released to the hosts until you’ve actually stayed there.
And then for the more complex marketplaces and that’s happening a lot, especially with the beauty services and other small provider markets is that the marketplace just provides a whole bunch of software too, that helps them run their business. So that handles their bookings, that does the marketing for them, right? Like you can imagine a thing like StyleSeat does a really good job at SEO, so you can very easily find the StyleSeat beauty people close to you. And so, marketplaces should really try to offer as much value as they can.
Kristen:
That’s what makes marketplaces difficult – they need to constantly provide value to everyone involved. Otherwise, they might wonder why they’re still there.
But, not all service market supply-side vendors are evading the apps once they book a client. It seems Booksy, who is a competitor to Styleseat, is doing something right with Andia’s new barber.
Andia:
So I got. By-coastal arrangement for my haircuts in Brooklyn, it’s Marlin and an LA it’s Maurice. But when I came to Phoenix, Arizona quarantine with my parents, I needed to get sharp because I had a live virtual event. I was hosting in May and I was looking, ooh, rough.
I wasn’t feeling my most confident. So I went on Booksy and I found dill and Phoenix, and he’s amazing and hooked it up. And I was confident and well-spoken for my event. So, I use Booksy for the first time. He was only taken appointments that way. And usually, I just text him or phone, but he’s like, Nope, let’s go through the app. We did. And it was a seamless experience. He had all the COVID precautions set up. He was very thorough and I felt safe and I looked nice.
Kristen:
Let’s think back to earlier, where Rick basically said, ‘my Instagram is my main platform. Why would I send people to another app?’ I mean, when you think about it, Rick’s already on a digital marketplace: it’s called Instagram. He has thousands of followers on there. So it gets to this other really interesting thing which Sjoerd told us.
Think about it this way. If you’re booking a complex service, whether it’s a barber, a video editor, or a painter, you don’t just want to press a button. You want to shop around, look at some pictures and videos, see what other people think, and see who’s popular. And that’s just called a social network.
That’s why over the next 10 years, social networks are going to look a lot more like marketplaces, and marketplaces are going to look a lot more like social networks. It’s this really interesting concept bigwig silicon valley types talk about called ‘market networks’.
Sjoerd:
So the term was coined by James Currier of NFX, which is a venture firm specializing in these network effects kinds of businesses. And he’s saying that, market network, it’s basically a hybrid model combining the main elements of networks, such as social networks and then marketplaces, and then often with some SAS built-in. Compared with traditional marketplaces, like for example, Uber and Airbnb. The center point of the market network is not a transaction.
It’s rather like a longer-term project, which is ongoing, it could be a wedding or a scientific research project, around which multiple transactions occur with different, individual providers. So let’s take the example of a wedding planner. So there is a market network called HoneyBook, where wedding planners buy all the services they need to plan a wedding. And so you can imagine that they go first book a venue, so that happens through there. So part of the providers are venue provider’s. Then they go for the music and they find a musician through the platform, and they find a florist, catering, furniture, etcetera.
And that’s really a market network where there is this ongoing project, like a wedding for which over the lifetime of this project, multiple transactions occur with these different individual providers. And that’s different, if you compare it to Airbnb where you just book one night with one person and that’s it, that’s the end of the story. And then, often to make it easier and more attractive for the service providers, they use a whole SAS workflow on top so that could be, for example, just an availability calendar for if you have a venue so that you can very easily see when is it available so that getting a booking through there is very easy.
You can imagine that if you are often called into the same project as another provider, so let’s say you have a venue for a wedding and you like to work with a certain florist because he comes on time and he has great looking things and all of the guests are always very happy with that. You get these relationships between the different providers that sort of really form the network aspects there.
— ACT THREE —
Kristen:
Let’s get back to our big question from the beginning of the episode. Why aren’t complex service marketplaces as big as the big marketplace giants? Sjoerd thinks that they already kind of are- they just aren’t as big and flashy as those two companies.
Sjoerd:
I think there is actually loads of niche marketplaces that could be typed as a service marketplace in industries that we just simply don’t know about because they’re just not sexy for the press. Like, no one cares that there is some company called Scientist dot com, which is a marketplace for outsourcing scientific research. Well, who cares? Right. That doesn’t make headlines, like, and also most of them they treat their employees really well so there’s no headlines about how scientist researchers get exploited the same way that there is with like Uber drivers.
Kristen:
Basically, Sjoerd thinks that the future of marketplaces are a lot more complex than they were in the beginning, but that doesn’t mean they won’t be as fruitful.
Sjoerd:
This lower barrier enables people all around the world to build these platforms, so there is, for example, in a couple of places, there are like local alternatives to Uber where former taxi drivers and other people they have just formed their own cooperative, invested some money and then build their own platform. Where they can set their own rules and set safety for their work environment and get paid a decent wage and those kinds of things.
And I think that these decentralized small local marketplaces are really what will drive the future of this, so there is no reason why there should be one global marketplace for hairdressers, like never, ever will you book a hairdresser that is on the other side of the planet. Except maybe for a very, very small elite.
So, that’s really what we’re really excited about. That we sort of take back the share economy and that, of course, there is a place for some global players. Airbnb will probably always stay, but that more accessibility and sort of this democratization of technology enables also these smaller players and local marketplaces to pop up and provide jobs for themselves and for their community.
Kristen:
Marketplaces are complex. In the future, they’ll probably look more like Instagram than like eBay. But that’s not going to happen automatically. If they aren’t able to create connections between buyers and sellers, and give them a rich, meaningful experience, service marketplaces are not going to blow up in the same way Uber and Airbnb have.
But as Sjoerd says, change is definitely happening. We’ll just have to see how it goes.
— OUTRO —
Thanks for listening to Geek Economy: The show that helps you understand how the gig economy is going to change our lives and our culture.
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