The On-Demand Economy

2014 ODE Report The On-Demand Economy

@sherpa

OUTLINE

1

3

4 The Village Economy

ODE Now 1.  ODE Transportation 2.  ODE Real Estate

ODE Next 1.  ODE Labor 2.  ODE Retail

2 5 Introducing ODE The On-Demand Economy

Conclusion The ODE Effect

2

It sounds like the beginning of a joke,

but it’s the beginning of something much

bigger

3

TWO VENTURE CAPITALISTS WALK INTO A BAR…

4

IN THIS PUB IN A REMOTE VILLAGE IN IRELAND, WE NOTICED BUSINESS

CONDUCTED IN AN EXTRAORDINARY WAY

No Twitter handles or Web addresses

Just someone’s name and phone number implicitly

beckoning, “Call me and I’ll bring you what you need…”

This is the Village Economy: On-demand service, as you need it

5

THE PERSONALIZED, EFFICIENT QUALITY OF THE VILLAGE ECONOMY HINGES ON THREE KEY CONDITIONS

The very nature of the village economy drives a more personalized, accessible, and valuable customer experience

Trust •  No need for

brokers •  Buyers and

sellers interact directly

Geographic proximity •  All products

and providers next door

Collaboration •  Community

pools resources •  Competition has

little relevance

6

Creating a foundation of trust that enables sharing, face-to-face transactions and customized service

21st Century Village

Economy Pervasive Connectivity

Payments Platforms

Reputation Networks

7

AND SHIFTS IN TECHNOLOGY ARE BRINGING THE VILLAGE ECONOMY BACK – AT SCALE

COMMERCE HAD BEEN MOVING AWAY FROM THE VILLAGE MODEL FOR YEARS

Price and selection have increased while trust, service and personal relationships have decreased

8

General Store Main Streets Big Box Store

Source: United Nations, Department of Economic and Social Affairs

•  37% of the world population was urbanized

•  3 10M-person cities

1975 2009 2025 Estimate

•  50% of the world population is urbanized


•  57% of the world population will be urbanized


AT THE SAME TIME, WE ARE MOVING CLOSER AND CLOSER TOGETHER

9

Source: United Nations, Department of Economic and Social Affairs

AT THE SAME TIME, WE ARE MOVING CLOSER AND CLOSER TOGETHER

10

Alternative slide 9:

Animated build

1975 2009 2025 Estimate

ODE CONNECTS OUR VILLAGE PAST TO OUR ECONOMIC FUTURE

11

Creating a new generation of entrants to the Fortune 500 and unlocking new levels of economic productivity

THIS IS THE ON-DEMAND ECONOMY (ODE)

WHERE ATOMS MEET BITS

•  Cheaply reach the mass market

•  Remove anonymity + establish trust - reputation systems

•  Efficiently mobilize supply chains and workforces

•  Enable collaboration and asset sharing

13

Mobi le

Socia l

Transact ional

DEFINING ODE OR: The pervasive, instant-access marketplace of goods and services tailored to individual needs, often facilitated by asset-sharing and distributed supply chains.

14

Instant, pervasive access to goods and services, tailored to individual needs, often without the burden of long-term ownership or commitment Combining the best of the village economy with the best of modern commerce

ODE BRINGS THE VILLAGE TO SCALE

Trust •  Reputation Networks

Geographic Accessibility •  Pervasive mobile

connectivity unites people in urban areas

Collaboration •  Shared Resources •  Networked Devices

Choice •  Wide variety of

selection

Price •  Operates at

scale •  Eliminates

middleman to bring cost-savings to the consumer

15

ODE SELF-REGULATES

Algorithms determine value, trust and reputation

• A system of distributed supply adjusts to demand

•  The marketplace turns individuals into entrepreneurs

• Buyers and sellers can interact directly in relationships of trust

• A “PeopleRank” algorithm determines the best suppliers and the best customers, based on reliability and reputation

– Workers are liberated from bureaucracy as the best performers command the highest demand

– Customers who behave badly have fewer choices

16

Marginalizing regulatory frameworks

TECHNOLOGY AND CULTURAL SHIFTS THAT LAID THE GROUNDWORK FOR ODE

Ris

e of

Cul

ture

of

Con

veni

ence

: 19

60s-

80s

Onl

ine

Mar

ketp

lace

s:

1990

s

Inst

ant V

ideo

Del

iver

y.

Virt

ualiz

atio

n &

Dig

itiza

tion:

Ear

ly 2

000s

Ris

e of

Soc

ial

Net

wor

king

:200

7-12

Perv

asiv

e M

obile

C

onne

ctiv

ity: 2

013

VHS

VCR

2013 1999 2001 2007 2009 2010 2012 1970 1995 1998

4 MM Foreclosures

filed (2.2% of

U.S. Households)

Sharing Economy: Publication of What’s

Mine Is Yours

Facebook Reaches 1

B Users

iPod Introduced

1st DriveThru McDonalds

Microwaves in 25% of

U.S. Homes

Ebay & CraigsList Founded

Paypal Founded

Netflix founded

TiVo Introduced

Netflix Standalone Streaming

iPad introduced

3.5 B Connected

Internet Devices

Uber AirBnB

Popu

lariz

atio

n of

the

Shar

ing

Econ

omy:

2010

iPhone introduced

iTunes hits 2B song

downloads

Carnegie Mellon releases first study

of digital loneliness

Lone

lines

s C

risis

: 20

04-2

013

17

INSTANT ACCESS TO DIGITIZED AND VIRTUAL GOODS RESHAPED CONSUMER BEHAVIORS

Media

Software

Reservation Booking

Financial Transactions

Matchmaking

18

NOW ODE CREATES INSTANT ACCESS TO PHYSICAL GOODS AND SERVICES AS WELL

Transportation Real Estate

Labor & Services Retail and Products

Now

Next

19

THE ODE EFFECT IS WIDE-REACHING

Consumers New levels of convenience, value and service to consumers

Markets Expanding underlying markets

Employment Entrepreneurize broad swaths of the workforce

Cultural and Social Impact Change the landscape of how we live today

Industries Displacing incumbents

Middlemen and Regulators Killing value-leaching intermediaries

20

Growth Contraction

EXPLOSION OF VC DOLLARS INVESTED IN ODE

Source: Crunchbase

$0.1 $0.4

$0.5 $0.5

$1.3

$0.1

$0.1

$0.2 $0.2

$0.3

2009 2010 2011 2012 2013 # of Companies:

US-Based Companies

Non-US Based

17 30 55 78 117

VC Investment in ODE: Physical ($B)

21

REPRESENTING AN INCREASING SHARE OF VC DOLLARS

VC Investment in ODE: Physical ($B)

0.5% 1.5% 1.7% 2.0%

4.6%

2009 2010 2011 2012 2013 % of dollars

Source: PWC Moneytree, Crunchbase

*Note: Moneytree data estimated for Q4 2013

22

LET'S TAKE A CLOSER LOOK AT 4 KEY ODE SEGMENTS AND HOW THEY ARE SHAPING THE FUTURE

23

Transportation

Real Estate

Labor

Retail & Products

1

2

3

4

A CLOSER LOOK AT ODE NEXT: TRANSPORTATION DEMAND

24

Transportation

Real Estate

Labor

Retail & Products

1

2

3

4

TRANSPORTATION ON DEMAND: KEY AREAS

25

Car Services and Taxi Hailing

Car Sharing

Mass Transit Alternatives

Other Vehicle Sharing

TRANSPORTATION ON DEMAND: A CLOSER LOOK AT CAR SERVICES

26


Car Sharing



CAR SERVICES STARTUPS: OVER $1B RAISED GLOBALLY FROM 2009-2013

Source: Crunchbase 27

US Competitors International

$265M

$37M

$115M

N/A

N/A

$14M

$11M

$9M

$6M

$4M

$308M

$23M

$83M

$20M

$51M

$42M

YC Seed

N/A

Capital raised

Capital raised

Didi Dache

Kuaidi Dache

Yaoyaozhaoche

THIS COMES AS NO SURPRISE TO EARLY INVESTORS IN ON-DEMAND CAR SERVICES

Better Driver Experience

Better Passenger Experience

Transportation Network Companies (TNCs) like Uber have already established a foothold in key markets and are now taking share from traditional car services options

28

TNCS TURN ANYONE WITH A CAR INTO A CHAUFFEUR AND ANYONE WITH CELL PHONE INTO A POTENTIAL FARE

29

HOW IS THIS IMPACTING THE TRADITIONAL TRANSPORTATION MARKET?

30

•  The 3 leading US Transportation Network Companies (TNCs) – Uber, Lyft, Sidecar – all began in SF

•  Each city is a self-contained marketplace •  TNCs have had to most time in SF to reach a scale of supply (drivers), demand

(passengers), and liquidity (rides) that might be measurably impacting incumbent providers.

Why San Francisco?

•  Dozens of interviews with SFMTA officials, taxi company executives, industry consultants, and service providers

•  Raw taxicab fare data –  Approximately 10% of the city’s taxi fleet –  Every transaction that runs through the taxi meter –  August, September, and October 2010 through 2013 –  In total, millions of trips representing tens of millions of dollars in fares

•  Database of TNC Drivers –  Collected by the SFCDA

•  Sherpa TNC Survey –  Over 100 TNC and taxi driver interviews and test trips

Unprecedented Data Discovery

A proprietary deep dive in San Francisco

LEGAL US CAR SERVICES MARKET ESTIMATED TO BE ~$50B ANNUALLY

Source: SFMTA Taxi and Accessible Services Division; “Managing Taxi Supply” and “Taxi User Survey” Hara Associates

Estimate is based on our analysis of 2M taxi trips and other nonpublic data sources

Annual US Car Services Revenue ($B)

$10 $21

$16

$0 $5

$10 $15 $20 $25 $30 $35 $40 $45 $50

IBIS World Sherpa Estimate

Billio

ns!

300 Most Populated Cities

Remainder of Urban US

Taxi & Limousine Service Industry

Limo Services

$10

31

BEFORE TNCS, SAN FRANCISCO HAD THREE CAR SERVICE OPTIONS

32 Source: San Francisco Public Convenience and Necessity Report (February, 2006)

Bandits (Gypsy cabs) Limo Service

•  Charge by the minute/mile

•  Prices + supply set by SFMTA

•  Notoriously unreliable –  43% of calls to taxi

dispatcher result in a car showing up*

•  Illegal taxicabs •  Charge premium to

legal taxis •  Patronize at your own

risk

•  >$60 per hour + tip + gas

•  Require advanced booking

•  Often require multi-hour minimums

Taxicabs

THE COMBINATION OF CONSISTENT PATROLS AND TNC ALTERNATIVES HAVE NEARLY ERADICATED BANDITS

Source: SFMTA Taxi and Accessible Services Division

Estimated # of Active Bandits

0 20 40 60 80

100 120 140 160

Jun-11 Dec-12 Dec-13

Low Estimate

High Estimate

Citations Issued:

13 40 54

Q2 ‘13: Regular Patrols

Implemented Q3 ‘11: SFMTA

Begins Enforcement

33

SF TAXI REVENUE WAS RELATIVELY FLAT IN 2013, AFTER A DRAMATIC RISE FROM 2010 TO 2012

Source: SFMTA Taxi and Accessible Services Division; “Taxi User Surveys” Hara Associates

$270

$340 $368 $358

$0

$50

$100

$150

$200

$250

$300

$350

$400

2010 2011 2012 2013

Milli

ons!

+8% (3%)

SF Taxi Industry Revenue ($M)

34

TNCS IN SF PRODUCED AN ESTIMATED ~$140M IN REVENUE IN 2013

$48 $28

$9

$38

$19

Uber Lyft SideCar

Source: Based on Sherpa’s analysis of data sources discussed on slide 20

2013 TNC Revenue Estimate ($M) (SF Only)

SF Share of Co’s Overall Revenue: 15% 76%

UberSUV

UberBLACK

uberx

$106

35

WHILE THE TAXI MARKET WAS ESSENTIALLY FLAT, TNCS GREW NEARLY 450%

Source: SFMTA Taxi and Accessible Services Division; “Taxi User Surveys” Hara Associates

SF Taxi vs. TNC Revenue ($M)

$368 $358

$32

$143

2012 2013

$100

Taxi

TNC

36 Note: 2% weekly growth rate assumed for all TNCs throughout 2012

$75 Limo

WHAT’S DRIVING THIS TNC GROWTH?

37

•  Commonly use lead generation services to source customers

•  Uber is a lead gen tool that enables real-time booking

•  SF has always had an insufficient number of taxis

•  Any fixed supply system = woefully inadequate during peak demand periods

•  Typical wait times for taxis >20 minute; system breaks during demand spikes

•  Avg. wait times for Uber are 4-6 minutes

•  As of Jan. ‘14, uberX costs over 40% less than taxis

•  Limos now able to charge by the minute rather than only by the hour or several hours

•  Passengers starving for any reliable, real-time car service

•  TNCs’ dynamic supply model capable of matching passenger demand patterns

•  People using TNCs even when they could have taken taxis

•  People using TNCs when they wouldn’t even have considered taxis

Limo Companies Converting Fleets To UBER Un-Met Taxi Demand

Car Service Market Share Theft + Expansion

THERE’S ANOTHER SIDE TO THIS STORY

38

SEVERAL INTERMEDIARIES COME BETWEEN A DRIVER AND A TAXICAB

Medallion Owner (Senior Taxi Drivers) Taxi Company

•  Drivers Purchase Medallion From SFMTA For $250K

•  Lease To Taxi Company –  Multi-year

contracts –  Current lease rate

is $2.6K per month

–  5-10 year payoff

•  Own + Maintain Fleet of Taxis

•  Run Dispatching System

•  Charge Drivers Per Shift –  $104 Gate Fee –  $7-$15 Tip

Driver Taxicab

Gov. Regulators

•  Set Medallion Supply + Purchase Price

•  Set Gate Fees •  Set Fare Prices

Net Result: Drivers pay ~$115 plus gas for each shift whether they end up making that much or not

39

TNCS ARE AN ATTRACTIVE ALTERNATIVE FOR DRIVERS

Taxi

TNCs

Safety

•  Carry no cash •  Every passenger “known”

•  Taxi + Limo driving more dangerous than firefighting –  21.3 fatalities per 100K vs. 17.4

respectively –  Primarily assaults + car crashes

•  60% of fares paid in cash –  Median driver has >$200 in cash at

the end of a shift •  Street hails = anonymous passengers

•  Median driver spends the first 5 hours of a 10 hour shift paying off Gate fees and tips before he earns a cent

Pricing Model

•  Flat percentage fee –  80 cents of every

dollar goes into the drivers pocket

•  Weekly schedule of 10-hour shifts

•  Seniority, tips determine access to the best shifts + vehicles

Schedule

•  Wherever, whenever driver wants to work –  No more fighting over

who gets to work Saturday night

*SFCDA Report **Sherpa TNC Driver Survey

•  In last 12 months, one-third of SF taxi drivers moved to TNCs* •  20% of TNC drivers are former taxi drivers**

40

WHILE MANY TAXI DRIVERS STILL MAKE GOOD MONEY, NEARLY 40% FAIL TO EARN $20 PER HOUR

Source: SFMTA Taxi and Accessible Services Division 41

*Note: Excludes fuel cost, assumes 10 hour shift; $117 for Gate Fees, Payment Processing, and Tips

$36

$31 $27

$25 $22

$20 $17

$14 $10

90% 80% 70% 60% 50% 40% 30% 20% 10%

2013 Driver Hourly Earnings* By Decile

TNC DRIVERS EARN VIRTUALLY THE SAME AMOUNT AS THEIR TAXI COUNTERPARTS

*Note: Excludes cost of fuel, insurance, vehicle maintenance and financing; assumes 20% marketplace fee from all TNC services except for uberX which was 15% in 2013 (currently 5%)

42

2013 Estimated Driver Earnings Per Hour*

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

UberBlack uberX Lyft Sidecar

Max

Weighted Avg.

Min

Median Taxi Driver

$18 $19 $25

$35

THE TAXI DRIVER SHORTAGE HAS BEGUN

$368 $358

+$45

Source: SFMTA Taxi and Accessible Services Division

*Note: Excludes cost of fuel, insurance, vehicle maintenance and financing; assumes 20% marketplace fee from all TNC services except for uberX which was 15% in 2013 (currently 5%)

43

Change in SF Taxi Revenue, $M

-$14 -$41

12% More Taxis 4%

Lower Driver

Earnings

11% Fewer Drivers

2012 2013

% = YoY Change

IN FACT, A TAXI DRIVER SHORTAGE HAS BEEN BREWING SINCE 2011

4%

15%

7% 7%

1% 0%

12%

-4%

-11%

2011

2012

2013

Source: Sherpa TNC Survey 44

# of taxis Earnings/shift Shifts worked

UBERX FARES WILL CONTINUE FALLING AND COULD EASILY REACH 70% BELOW THE COST OF A TAXI

*Source: Sherpa TNC Survey

*Note: Excludes cost of fuel, insurance, vehicle maintenance and financing; assumes 20% marketplace fee from all TNC services except for uberX which was 15% in 2013 (currently 5%) **Note: Assumes 15% tip per taxi fare

2013 Driver Earnings / Hour* Car Service Ride Cost (Normalized to $20 Taxi Trip**)

$25 $22

uberX Estimate Taxi Actual

$20.0

$6.7

Taxi uberX

22 Minutes of Fares / Hour

$13.4

Assumes 44 Minutes of Fares / Hour – Holding Driver Income Constant

UBER AGGRESSIVELY DROPPING PRICES AS FARE DEMAND INCREASES

Actual results for trial period reveal 1% increase to driver income

46

THE NETWORK EFFECT OF UBER’S MODEL IS POWERFUL

47

First order effect

Second order effect

Driver Fares / Hour Rise

Uber Lowers Prices

Passengers Join

More passengers

More drivers

WHAT HAPPENS TO EVERYONE ELSE?

•  500 more taxis added by 2017 (25% increase)

•  Fare + Gate Fees remain static •  Cannot compete with TNCs

–  Market-based prices –  Dynamic supply –  Accruing reputation system

•  As utilization falls, so do future lease rates (medallion cash flows)

•  Medallion values approach zero

Taxi Service Medallion Owner (Subset of Taxi Drivers)

Owners end up under-water on medallion financing

Currently 10% APR à total costs ~2X purchase price

Decline in driver quality

•  Increasing difficultly recruiting and retaining drivers

•  Causing utilization (taxi shifts covered / taxi shifts available) and profitability to plummet

Taxi Company

Companies saddled with expensive medallion leases

will fail

48

SF TAXI MEDALLION LEASE RATES ARE FALLING PRECIPITOUSLY

Source: SFMTA Taxi and Accessible Services

SF Taxi Medallions Issued Vs. Monthly Lease Rates (‘000)

$1.6 $1.6 $1.7 $1.7 $2.0

$2.4 $2.7

$3.1 $3.4

$4.0

$4.6

$5.2

$3.9

$2.6

$0

$1

$2

$3

$4

$5

$6

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2000 2002 2004 2006 2008 2010 2012

Monthly Lease Rates

Medallions issued

49

SUMMARY

The personalized, on-demand nature of TNCs have virtually eliminated the car services gray market in San Francisco and is now driving a fundamental shift in the underlying economics of the market for car services, with the total market expanding, while taxis themselves are losing ground.

50

TRANSPORTATION ON DEMAND: A CLOSER LOOK AT CAR SHARING

51


Car Sharing



AS WITH TAXIS, WE HAVE A TOLERATE / HATE RELATIONSHIP WITH RENTAL CAR AGENCIES

52

ZIPCAR WAS AN IMPORTANT INNOVATION IN ON-DEMAND DELIVERY OF RENTAL CARS

20 locations run by 7 different companies

140 locations via Zipcar

Vehicle Locations

Pickup Process

Rental Increment By the day By the half hour

53

LEVERAGING A PEER-TO-PEER SUPPLY STRATEGY, GETAROUND HAS BECOME A STRONGER ZIPCAR

140 locations, ~300 vehicles*

~100 locations + vehicles*

Vehicle Locations

Pickup Process

Rental Increment As low as $8.25/hour + Annual Membership Fee

As low as $5.50/hour

54

10-15 vehicle types Dozens of different models

*Note: Cars available in early January 2014 as of mid-December

AND TOMORROW GETAROUND WILL SUPERSEDE ITS CAPITAL INTENSIVE ELDER

55

Growth improving customer access and

value

Meaningful owner earnings driving rapid supply growth

value

ADVANCEMENTS IN ON-DEMAND TRANSPORTATION WILL CHANGE THE LANDSCAPE OF URBAN LIFE

Outlying Neighborhoods

Gain Accessibility

Fewer People Will Buy Cars

56

NEW VARIETIES OF URBAN TRANSIT ARE ALSO REDUCING THE NECESSITY OF CAR OWNERSHIP

Private Company Busing Gov-sponsored Bike-Sharing

57

58

WHAT IF OUR CITIES WERE NO LONG CLUTTERED WITH PLACES TO STORE CARS?

AND THE GROUND FLOOR OF EVERY TOWNHOUSE NO LONGER HAD TO BE A GARAGE?

59

AND THE GROUND FLOOR OF EVERY TOWNHOUSE NO LONGER HAD TO BE A GARAGE?

60

TRANSPORTATION ON DEMAND: IMPACT

Winners

•  Cheap + reliable car service

•  Cheap + ubiquitous car rental

End User: Passengers

•  Safer + more flexible employment

•  Keep more of what they earn

•  Enormous job growth

End User: Drivers

Losers

•  Medallion values approach zero

Medallion Owners

•  Passengers shift auto spend from ownership to services + rental

Taxi Companies

Commercial Garage Owners

Car Manufacturers + Dealers

Societal Impact

•  Development + gentrification of outlying neighborhoods •  No more garages à repurposing of space •  Less + greener consumption

61

A CLOSER LOOK AT ODE NEXT: REAL ESTATE ON DEMAND

62

Transportation

Real Estate

Labor

Retail & Products

1

2

3

4

REAL ESTATE ON DEMAND: KEY AREAS

63

New Hospitality Products

Parking & Storage on Demand

Metered Business Rentals

REAL ESTATE ON DEMAND: A CLOSER LOOK AT NEW HOSPITALITY PRODUCTS

64




THE HOSPITALITY INDUSTRY HAS LONG HAD AN ESTABLISHED SET OF PRODUCT OFFERINGS

Motels Hotels Resorts

•  Development takes years and enormous capital, requiring high leverage ratios •  Supply managed to 80%+ occupancy •  Multi-decade replacement cycles

65

ONLINE MARKETPLACES ARE NOW CHANGING THAT PARADIGM BY FACILITATING PEER-TO-PEER RENTALS

66

HOMEAWAY HAS BUILT SIGNIFICANT SCALE IN VACATION HOME RENTAL

Source: Company filings

1 Note: Assumes HomeAway paid listings generate $13K in sales 2 Note: Estimated Q4 listings growth by annualizing Q3 2013 results

67

$4.4 $5.6

$6.7 $8.3

$9.3 $10.3

$0

$2

$4

$6

$8

$10

$12

2008 2009 2010 2011 2012 2013

19% CAGR

20% CAGR

Sales Estimate1 (B)

Only ~13% of US Vacation homes Listed On HomeAway

2

Paid Listings Globally, 000’s

338 433

517

640 712

773

0 100 200 300 400 500 600 700 800 900

LONG A STAPLE OF CRAIGSLIST, NEW PLATFORMS ARE MAKING SHORT-TERM RESIDENCE RENTALS MAINSTREAM

$284M

$140M

$25M

$60M

$23M

$16M

$2M

$2M

VC Funding

68

OF THESE, AIRBNB IS THE CLEAR LEADER

550

300 290

111

Airbnb Wimdu HouseTrip 9Flats

Total Listings Globally (As of January 2014; ‘000)

69

AIRBNB: PULLING AWAY FROM THE PACK

33.9

20.5

9.6 7.3 6.7 6.2

2.9 4.7 3.7 3.6 5.1

0.4 1.4

5.4

1.3 2.7 4.1

0.8 1.0 1.9 1.1 1.5

NYC Paris Berlin London Rome SF

Note: Annualized Nov. ’13 – Jan. ’14 listings growth rate

Total Listings By City (As of January 2014; ‘000)

Annualized Growth Rate Across 6 Cities Above1: 54% 43% 10%

70

AIRBNB: SIGNIFICANT GLOBAL SCALE

1 Note: InterContinental rooms + stays for 2012; assumes guests stay average of 3 nights per check in 2 Stays last 6.4 nights at nightly cost of $180 (inclusive of fees)

1 3

6

2008-2011 2012 2013 Inter-Cont

120

300

550 676

2008-2011 2012 2013 Inter-Cont

Airbnb Listings By Region

53

Implies ~$7B in Revenue2

Airbnb # of Listings (‘000) Airbnb # of Stays (M)

1 2

71

AIRBNB HAS QUICKLY DWARFED CRAIGSLIST

1 Note: Assumes 1/3 of Airbnb stays in US, stays last 6.4 nights at nightly cost of $150

US Sales ($B)

$1.9

$0.6

2013 Airbnb Sales 2013 Craigslist Supply

Annualized Esti-mate of Sublets/Temporary Supply (Dec. ’13)

Avg. Stay: ~1 week ~6 weeks

1

72

AIRBNB: VASTLY BETTER CUSTOMER EXPERIENCE THAN CRAIGSLIST

73

Craigslist

•  Transparent listing availability and location

•  Professionally photographed listings •  Comprehensive listing descriptions •  Instant booking •  Credit card acceptance

Airbnb

VS.

AND MORE TRUSTWORTHY

•  Social connections visibility

•  Prior guest reviews and references

•  Offline ID verification •  Credit Card

Acceptance/ Collections

•  Customer service hotline

•  3% Host Fee •  6-12% Guest Fee

74

VS.

HOW ARE THESE SHORT-TERM RENTAL MARKET-PLACES IMPACTING THE HOSPITALITY INDUSTRY?

75

STILL TOO NASCENT TO NOTICEABLY IMPACT HOTEL REVENUE

$6.2 $2.3 $0

$20

$40

$60

$80

$100

$120

$140

$160

2012 US Lodging Industy

2013 HomeAway

Estimate

2013 Airbnb Estimate

Overall Share:

$21.7

$0.4 $0

$5

$10

$15

$20

$25

2012 Hotels Aug. '12 - July '13 Airbnb

$156

NYC

$18B Growth In 2012

1 Note: Assumes HomeAway paid listings generate $13K in sales and 60% in US, annualized Q3 listings growth from Q3 2013 2 Note: Assumes 1/3 of Airbnb stays in US, stays last 6.4 nights at nightly cost of $180 (inclusive of fees)

Source: American Hotel and Lodging Association, Company filings

US Sales ($B) NYC ($B)

2

1

95.0% 3.8% 1.4%

76

BUT A RECENT STUDY ARGUES THAT AIRBNB LISTINGS NEGATIVELY IMPACT LOCAL HOTEL REVENUE

•  Based on the number of Airbnb listings in Texas •  1% increase in Airbnb listings results in a 0.05% decrease in hotel revenue •  1% increase in hotel supply results in a 0.29% decrease in hotel revenue •  Doubling of Airbnb produces the following revenue shortfalls:

–  Budget hotels -2.1% –  Economy hotels -2.6% –  Mid-price hotels -0.9% –  Upscale properties are insignificantly affected

77

STILL, THE STORY IS BROADER THAN SHARE THEFT. AIRBNB IS A FUNDAMENTALLY NEW HOSPITALITY PRODUCT

Hotel Establishment The Gray Market

78

STAY ANYWHERE, NOT JUST THE COMMERCIAL DISTRICTS AND SAY GOODBYE TO 2-STAR ACCOMMODATIONS

Hotels Noted In Orange

79

AIRBNB GUESTS STAY ALL OVER NYC, NOT JUST MIDTOWN WHERE THE HOTELS ARE CONCENTRATED

80

WHAT ARE GUESTS BOOKING ON SHORT-TERM RENTAL MARKETPLACES?

1 Includes Wimdu 9.5% fee; Supply and bookings estimates exclude Wimdu fee Note: Assumes listing unavailability due to new booking through Wimdu, assumes methodology captures 100% of bookings

$182 !

$28 !

$40 !

$0!

$50!

$100!

$150!

$200!

$250!

Total Supply! Bookings!

$234

$33

Apartment $190 Private Room $115 Vacation Home $259

Total Nights: 1.4M 205K

85% of bookings are for apartments, with an average price of $190 per night

Avg. Price1

Source: Sherpa proprietary research; ScrapingHub

Wimdu Rome (Jan. ’14 Run Rate; $M)

81

Note: Inclusive of Wimdu booking fee

RESIDENCE RENTALS OFFER A MORE HUMAN EXPERIENCE AT VASTLY BETTER VALUE THAN HOTELS

260 sq ft Queen - $165/night

915 sq ft 3 Bed, 1 Bath - $164/night

•  Accommodates 7 (3.5X bigger than Hilton) •  Full kitchen •  Washer/Dryer •  Wi-Fi

Rome, Italy

540 sq ft Studio - $164/night

•  Accommodates 3 (2X bigger than Hilton) •  Full kitchen •  Washer/Dryer •  Wi-Fi

1,400 sq ft 3 Bed, 2 Bath - $164/night

•  Accommodates 6 (5.4X bigger than Hilton) •  Full kitchen •  Washer/Dryer •  Wi-Fi

Median Price for Wimdu Rome Apartment: $164/Night1

82

FACILITATES FAMILY/GROUP TRAVEL LIKE NOTHING THAT’S EXISTED BEFORE

•  Larger residence as opposed to multiple hotel rooms – 50% savings

•  Private kitchens to prepare meals – 50% savings over restaurant restaurant patronage

•  No additional fees for internet, entertainment access

•  Living rooms enable congregating outside of hotel lobbies

•  On premises washer/dryer enable lighter packing

•  Rentals outside of hotel districts where consumer staples more accessible + less expensive

83

AIRBNB ALSO REMOVES TRADITIONAL HOSPITALITY’S POTENTIAL FOR MORAL HAZARD

84

Guests behave more responsibly à Hosts more willing to offer residences à Guests more willing to rent them

Don’t break anything, but otherwise behave as badlyas you want

Anonymous Transaction

Treat my stuff as you would your own or face ostracism

Village-Based Commerce

FLEXIBLE SUPPLY CREATES ENORMOUS VALUE DURING LARGE EVENTS

Airbnb adds 2,400 units of supply

Austin Hotel Availability 1 Week Before SXSW

85

Fully Booked

Huge Premium

FOR HOSTS, SHORT-TERM RENTALS CAN BE AN ECONOMIC LIFE LINE

•  Substantial earnings power –  1 stay per month (6.4 nights,

$165/night) = $13K per year •  Entirely incremental revenue

(under-utilized space) •  In major markets, 2/3 of Airbnb

hosts do not work full time •  Airbnb UK Study:

–  Typical hosts earns $4,627 on Airbnb renting some or all of their residence 33 nights/ year

–  63% of hosts report using Airbnb income to pay bills they would otherwise struggle to have paid

86

Need new photo

PROFESSIONAL HOSTS PROVIDE A LARGE PORTION OF INVENTORY

15% 16% 19% 20%

9% 9% 7% 8% 8% 6% 6% 9%

33% 17% 17%

16%

31%

25% 23% 14%

26% 28% 34%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Istanbul Barcelona London Rome

1 Listing

2 Listings 3 Listings

4-9 Listings

10-49 Listings

>50 Listings Professional Property Managers

Wimdu Listings by Host Size (# of Listings Managed) (Jan. ‘14)

Source: Sherpa proprietary research; ScrapingHub 87

THESE HOSTS ARE SMALL BUSINESSES

•  15 Wimdu listings •  25 Wimdu reviews over 2 years •  126 TripAdvisor reviews •  1,557 Facebook Likes

•  67 Airbnb listings •  Run by former HomeAway

executives

88

THIS IS ONLY THE BEGINNING OF THE PEER-TO-PEER RESIDENCE RENTAL WAVE

89

Could you send a new image for

this

Rent for $164 / night

Break even w/ 14 nights booked per month

$1,500 gross margin w/ 24 nights booked per month

PROFESSIONAL HOSTING IS SIMPLE AND LUCRATIVE

1 Note: Median price for central Rome apartments; Inclusive of Wimdu booking fee

Central Rome (italy) location 800 sq ft 1 Bed, 1 Bath

Furnished $2,000/month

+ $100/month utilities

90

3.1%

1.8%

1.3% 1.1% 1.0%

0.4%

Paris SF Rome Berlin NYC London

EVEN IN THE MOST MATURE CITIES, PENETRATION IS STILL VERY LOW

Source: Sherpa proprietary research

Total Listings / Housing Units (Sum of Airbnb, Wimdu, HouseTrip, and 9Flats Listings)

Hosting is equally lucrative across all cities

91

ECOSYSTEM DEVELOPMENT: HOSTING AUTOMATION

Tech-Enabled Cleaning Services

Full-Service Hosting Outsourcer + Concierge

Partnered with dozens of property management companies

92

IT’S ONLY A MATTER OF TIME BEFORE THESE BECOME ENDANGERED SPECIES

93

SUMMARY

A burgeoning new market in short-term, peer-to-peer rentals is creating a new kind of travel offering that is more flexible, more personal and better priced than traditional hospitality options. At the same time, this marketplace is creating a new breed of hospitality entrepreneurs.

94

REAL ESTATE ON DEMAND: A CLOSER LOOK AT BUSINESS RENTALS & CO-WORKING

95




LAPTOPS AND ALWAYS-ON CONNECTIVITY FREE US TO WORK ANYWHERE

96 WORK IS NO LONGER A PLACE

EXPENSIVE OFFICES ARE NO LONGER NECESSARY, NOR ARE THEY A MARKER OF SUCCESS

97

CO-WORKING SPACES ARE PROLIFERATING RAPIDLY

Source: deskmag Global CoWorking Survey

1,160

853

245 141

600

1,320

2,072

0

500

1,000

1,500

2,000

2,500

October-10 February-12 October-12 February-13

2,490

European Union

North America

Asia South America Australia Africa

Implies $750M - $1.5B in Gross Sales Globally (Assumes: 41 desks/space, 55% utilization, and rental fees of $50-$100/day)

Global CoWorking Spaces

98

REAL ESTATE ON DEMAND: IMPACT

•  Travelers no longer solely reliant on hotels for travel accommodations

Motel Owners

End User: Guests

•  Broader choice and better value in hospitality

End User: Hosts

•  Birth of a new profession w/ excellent hourly wage

•  Ideal for enabling “passion career” pursuit

Cities •  Increased tourism •  Able to host bigger destination

events •  Moderate tax revenue growth

End User: Start-ups & solo-preneurs

•  Access to professional space to start-up businesses, meet clients

Losers Winners

Non-Business Hotels

Generic Resorts

Societal Impact

•  More transient population •  New way to mix cultures/communities •  Facilitating entrepreneurship spurs economic growth

99

A CLOSER LOOK AT ODE NEXT: LABOR ON DEMAND

100

Transportation

Real Estate

Labor

Retail & Products

1

2

3

4

LABOR ON DEMAND: KEY AREAS

101

Freelance Market-places

Local Providers

Managed Services

NEARLY HALF OF THE U.S. WORKFORCE IS COMPRISED OF SOME FORM OF ON-DEMAND LABOR

52%

10%

38%

Full-Time Employees

Consulting Firms + Professional Services Agencies

•  Unclear or no long-term need •  Difficult to source quality talent •  Long lead time

•  Time-consuming to source independent labor •  Same quality challenges as full-time talent •  Staffing Firms + Temp Agencies deliver on demand but

command significant markups •  Free of ongoing obligation

•  On-demand delivery •  High quality of work •  Exorbitant per hour fees

Freelancers, Contractors + Temps

ODE

Source: US Census, Staffing Industry Analysts, “Online Staffing”– January 2, 2014; SelectUSA

$5T US Labor Market

102

THE SELF-EMPLOYED US WORKFORCE HAS BEEN GROWING ONLY MODERATELY

12.5% 13.1% 12.9% 14.9%

16.1%

3.8% 3.4% 3.2%

0% 2% 4% 6% 8%

10% 12% 14% 16% 18%

1994 1997 2002 2007 2011

Nonemployers / Total US Workers

Nonemployer Sales / Total US Firm Sales

Avg. Income Per Nonemployer:

15.4M 17.0M 17.7M 21.7M

22.5M

Source: Bureau of Labor Statistics, US Census

1 Nonemployer firms have no employees and may be organized as a sole proprietorship, partnership, or corporation. A sole proprietorship is an unincorporated business owned by an individual. A sole proprietorship has no existence apart from its owner. Business debts are personal debts of the owner.

Nonemployer1 Firms vs. US Labor Force

$38K $43K $44K $46K $44K

103

BUT THE TYPES OF ACTIVITY INDEPENDENT WORKERS ARE ENGAGED IN SEEM TO BE SHIFTING

Biggest Losers Biggest Gainers

More white-collar and locally-sourced categories

104

PERPETUAL, HOURLY EMPLOYMENT IS OFTEN DEEPLY INEFFICIENT FOR ALL PARTIES INVOLVED

105

New image

needed

THE COST SAVINGS AND FLEXIBILITY OF CONTINGENT LABOR APPEALS TO EMPLOYERS

We've had a never-ending streamof projects of the last 5 years, which strains our in-house resources. With freelancers, we can augment our workforce and tap specialized knowledge for 3 different departments: IT, operations, and finance.

– Hiring manager from leading printing software company

To hire a full-time employee, you have to have a long-term need. But a lot of the time, we only have immediate need. It's much easier to budget for a contractor.

– Representative from a leading biotech company

•  60% of companies expect to hire more freelancers in 2014 •  20% of companies expect to significantly increase their

freelance staff

Source: Tower Lane “Surveying the New World of Work” 2013 106

THE INDEPENDENCE AND PRODUCTIVITY THAT COME WITH FREELANCING MAKE WORKERS HAPPIER

Source: Elance “The State of the Freelance Market,” September 2012 107

40% OF TNC DRIVERS USE THEIR EARNINGS TO FUND THE PURSUIT OF “PASSION CAREERS”

Source: Sherpa TNC Survey

TNC Drivers

23%

38%

40%

Reason For Becoming a TNC Driver

•  Professional Drivers –  Former Taxi, Chauffeur, and Shuttle drivers

•  Supplemental Income For People w/ Few Alternatives –  Low-paying full-time jobs –  Slow earnings seasons – Unemployed

•  Subsidizing Passion Careers or Benefiting Beyond Income –  Students and homemakers –  Actors, artists, photographers, etc. that can’t live off sparse

earnings –  African soccer agent trying to improve his English – Retiree that likes having an activity and the conversation

108

ACCESS TO AFFORDABLE HEALTHCARE AND RETIREMENT PROGRAMS CREATES MORE OPTIONS FOR WORKERS

ACA and a variety of independent savings programs offer key benefits once available only through full-time employment with a large firm

109

NEW SERVICES PROVIDE SUPPORT AND EXPERTISE FOR SMALL BUSINESS AND FREELANCERS

110

•  Freshbooks •  Square •  Apptivo •  QuickBooks

•  Google AdWords •  SquareSpace •  Facebook •  Yelp

•  BaseCamp •  Google Docs •  Skype •  Dropbox

In lieu of dedicated IT, Finance and Marketing Departments, independent workers can now leverage:

Finance Marketing Collaboration Tools

LABOR ON DEMAND: A CLOSER LOOK AT FREELANCE MARKETPLACES

111


Local Providers

Managed Services

IN AN ERA OF VIRTUAL WORK, ONLINE MARKETPLACES PROMISE TO EMPOWER A FREELANCE REVOLUTION

Individual Freelancers, Consultants + Contractors

Businesses with Immediate But Non-Permanent Hiring Needs

Online Freelance Marketplaces Temp + Staffing Agencies Outsourcing Companies

•  Workers are commoditized •  Paid 20%-30% of billing rates

•  Freelancers are fully-empowered entrepreneurs

•  Receive 80%-90% of billing rates

*Note: Staffing Industry Analysts, “Online Staffing”– January 2, 2014

112

FREELANCE MARKETPLACES BRING CONVENIENCE AND TRUST TO HIRING REMOTE WORKERS Craigslist

113

VS.

Freelance Marketplace

Employer Track Record Employee Work History

Lead Generation

Reputation Building

Payment Collection

WITH $750M IN BILLINGS & 50% SHARE, ELANCE/ODESK DOMINATES ONLINE FREELANCE MARKETPLACE

1 Note: Staffing Industry Analysts, “Online Staffing”– January 2, 2014; Excludes Craigslist

$226 $360 $437

$156

$215

$314

$0 $100 $200 $300 $400 $500 $600 $700 $800

2011 2012 2013

Milli

ons!

$383

$575

$750

50% of Online Staffing Market Globally1

Elance / oDesk Billings ($M)

114

BUT ONLINE STAFFING IS STILL A TINY PORTION OF THE INDUSTRY OVERALL

$0

$5

$10

$15

$20

$25

Online Staffing All Staffing

Billio

ns!

Local Gigs

Online Staffing

In-Person Staffing $2T

All Other Players Elance /oDesk

$3.0B $3.0B

Craigslist Short-Term Labor Supply

1 Note: Staffing Industry Analysts, “Online Staffing”– January 2, 2014; Sherpa proprietary Craigslist study

Global Staffing Industry ($B)

115

OUTSIDE OF IT, ELANCE / ODESK IS ESSENTIALLY THE SAME SIZE AS CRAIGSLIST GIGS

Source: Sherpa proprietary Craigslist study, company reports

$0.3 $0.1

$0.2

$0.3

$0.1 $0.1

$0.1

$0.9

$0.1

$0.1

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

Craigslist Elance / oDesk

Billio

ns!

Local Gigs

$1.5B $1.5B 2013 US Supply of Freelance Labor ($B)

Ops

Creative

Marketing

IT

Other

116

ELANCE / ODESK: CONNECTING FIRST WORLD SMALL BUSINESS TO TALENT IN DEVELOPING COUNTRIES

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

Jobs Posted Earnings

US

US

India

Australia

>100 Others

Pakistan Ukraine

UK Canada

UK Canada

>100 Others

Australia

90% of Employers have <10 Employees

2012 Avg. oDesk Wage: $10/hour

Elance Jobs Posted vs. Earnings by Country (Lifetime Results)

117

Total US Companies1

SMALL BUSINESS IS SIGNIFICANT, BUT THE BIG OPPORTUNITY IS IN PENETRATING THE ENTERPRISE

$2.6!

$5.2

$5.0

$6.3

$10.7

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Firms* Sales

4.8M

1.2M

6M $30T

Elance / oDesk Users 700K

Source: 2007 US Census

*Note: Excluding sole proprietorships

1-9 Employees

10-99 Employees

100-999 Employees

1,000-9,000 Employees

10,000+ Employees

•  Enterprise sales and client development

•  Project management

Require

118

LABOR ON DEMAND: A CLOSER LOOK AT MANAGED SERVICES

119


Local Providers

Managed Services

AGENCIES MAKE UP AN ENORMOUS PORTION OF THE MODERN WORKFORCE

Source: US Census, Staffing Industry Analysts, “Online Staffing”– January 2, 2014; SelectUSA

$5T US Labor Market

Full-Time Employees

Consulting Firms + Professional Services Agencies

Freelancers, Contractors + Temps

52%

10%

38% •  On-demand delivery •  High quality of work •  Exorbitant per hour fees

120

CHECK SLIDE -where is the

data?

THE AGENCY MODEL IS VULNERABLE TO CLASSIC DISRUPTIVE INNOVATION

121

Pricing

Core Assets

Business Strategy

Agency Model Managed-Services Model

VS.

•  Prestigious brands enable exorbitant billing rates

•  Staff paid 10%-25%, work extreme hours to make a partner

•  Partners enjoy significant cash flow

•  Clients pay ~50% agency rates, company recognizes ~50% gross margins

•  Agency-level talent –  Abundant over-supply –  Competitive compensation –  Salaried employee, off billable hours treadmill

(vacations)

•  Partners own client relationships personally

–  Easily become “fat and happy” –  Struggle to retain across generations

•  Business as usual for the last 100 years

•  No equity analysts hounding management for growth and new efficiencies

•  Company owns client relationships –  Relentless + hungry sales engine –  Quality-controlled client management

•  Build business processes + software to maximize efficiency

–  Increase labor leverage à decrease cost of goods sold à higher margins/lower prices à more market share

MANAGED-SERVICES COMPANIES HAVE BEGUN TO DEVOUR THE MOST PRESTIGIOUS PROFESSIONS

Lawyers Investment Bankers Management Consultants

122

NEW MODELS OF LEGAL SERVICES ARE DRAMATICALLY REDUCING PRICING

Cost Breakdown

Cost of Goods Sold

Managed Services (AxiomLaw)

$400 /Hour

Gross Margin

Legal Talent Market-

place Fee

Open Marketplace(UpCounsel)

$270 /Hour

Partnership Pool Typical Corporate Law Firm

Associate Pay $600 /Hour

Overhead Costs

123

LABOR ON DEMAND: A CLOSER LOOK AT MANAGED SERVICES

124


Local Providers

Managed Services

WE TAKE FOR GRANTED HOW LITTLE ABOUT THESE SERVICES HAS CHANGED IN THE LAST 50 YEARS

FINDING THEM HAS INDEED CHANGED QUITE A BIT

A Long List of Names

User-Generated Reviews

Vertical Specialization

126

THE NEXT LEAP FORWARD IN ODE FOR LOCAL LABOR IS HAPPENING NOW:

Key Attributes •  Centrally vetted

supply •  Geo-location

specific •  Embedded

payment processing

Cleaning

Laundry

Car Repair

Hair + Makeup

Any Task/Errand

Florist

Doctor

Pet Care

Massage

Home Improvement

Snow Plow

Shipping Storage

Mobile Device Repair

127

Available at the touch of a button

OTHER COMPONENTS OF ODE LOCAL LABOR HAVE BEEN DIGITIZED AND ARE NOW FULLY ON DEMAND

Critical Platforms:

Doctors

Tech Support

Teaching Administrative Assistants

Personal Training

128

SUMMARY

Employers seeking a more flexible workforce that can quickly scale up or down are tapping into a growing market of independent workers, either directly through online marketplaces or indirectly via managed services.

129

LABOR ON DEMAND: IMPACT Winners

•  Gain flexibility and efficiency è better able to pursue interests, happiness

End User: Worker w/ Differentiated Skill

•  Scale workforces as needed

•  Pay far lower billing rates

End User: Employer

Losers

•  Talent and labor pools increasingly global and transparent

No-show, wage workers

Workers without differentiated skills

Staffing Companies

2nd Tier Professional Services Agencies

Societal Impact

•  Work is no longer a place •  Lavish offices lose relevance •  Population must learn intrinsic motivation + entrepreneurial instinct •  Lifelong learning becomes a key factor in work success

130

A CLOSER LOOK AT ODE NEXT: PRODUCTS ON DEMAND

131

Transportation

Real Estate

Labor

Retail & Products

1

2

3

4

PRODUCTS ON DEMAND: KEY AREAS

132

Real-Time Access

Pop-Up Shopping

Asset Sharing

POP UP RETAIL IS MEETING CUSTOMERS WHERE EVER THEY GO

133

Old New

AND IS BECOMING ANOTHER FACET OF ODE REAL ESTATE

100+ Manhattan locations rentable by the day

134

ECOMMERCE IS GOBBLING UP MANY CATEGORIES BUT MAKING LITTLE TRACTION IN GROCERY/PHARMACY

Source: US Census, Annual Retail Trade Survey; The Tipping Point (E-Commerce Version) by Jeff Jordan

Online Share of US Retail Sales

Total

Clothing + Accessories Furniture + Home Furnishings

Electronic + Appliance Sales

Media, Sporting + Hobby Goods

2011 Total Sales

$112B

$128B

$125B $263B

135

Food + Beverage

Health + Personal Care $358B

$618B

URGENCY PLUS UNCERTAINTY ABOUT EXACTLY WHAT PRODUCTS WE WANT INHIBIT ECOMMERCE EXPANSION

Source: US Census, Annual Retail Trade Survey; The Tipping Point (E-Commerce Version) by Jeff Jordan

Anticipated Need Urgent Need Certain

Uncertain Under Siege

In The Crosshairs

Cockroaches of Retail

136

IN HYPER-DENSE, DEVELOPING ECONOMIES GROCERY DELIVERY IS TAKING HOLD

Mexico City

Worst commuter city in the world – 2010 IBM Global Commuter Pain Survey

•  Walmart subsidiary grocery chain

•  20% of grocery orders made remotely

•  $3 delivery fee per order, 50% of which goes to freelance driver

Huge Income disparity

137

NEW MODELS OF FOOD DELIVERY WILL THREATEN TRADITIONAL GROCERY AND RESTAURANT PROVIDERS

While not necessarily real-time, scheduled delivery for an anticipated need accomplishes the same goal

Services like Blue Apron and The Munchery offer curated, partially prepared food delivery that take the headaches out of meal planning and prep

138

AND AS GROCERY GOES SO GOES PHARMACY AND A LOT MORE

139

FOR URGENT NEEDS, NEW TECHNOLOGY WILL MEET US PART OF THE WAY THERE

Better logistics platforms will mine new efficiencies from traditional delivery channels

Entirely new delivery channels are on the horizon

140

EVENTUALLY, 3D PRINTING WILL CHANGE EVERYTHING

141

RETAIL LOCATIONS WILL COME TO RESEMBLE SHOW-ROOMS, FREEING UP MORE INNER-CITY REAL ESTATE

142

10M OF THE COUNTRY’S LOWEST-PAYING JOBS WILL BE LOST IN THE PROCESS

Average Hourly Wage

$24.6!$23.2!

$22.0!$21.3!

$19.7!$18.2!

$16.6!$15.9!

$15.1!$12.2!

$11.8!$10.7!$10.5!$10.5!

$9.8!$9.1!$9.0!

$0 $5 $10 $15 $20 $25 $30

Postal Service Workers Electricians US Overall

Social Workers Supervisors of Retail Sales Workers

Secretaries and Admins Construction Laborers

Customer Service Reps Bus Drivers

Retail Salespersons Stock Clerks and Order Fillers

Cooks Home Health Aides

Maids + Housekeepers Cashiers

Dishwashers Fast Food + Counter Workers

3.3M

1.8M 4.3M

1.2M

1303M

10M Retail Jobs

Source: Bureau of Labor Statistics 143

PRODUCTS ON DEMAND: IMPACT Losers

Grocery stores

Brick & Mortar retail staff

Societal Impact

•  Bricks and mortar retail becomes increasingly about the experience

•  What happens to the 10M $10/hour workforce?

•  What takes the place of all that prime retail space?

Winners

•  Huge time savings •  Improved value/access

to durable goods through sharing

End User: Consumers

•  Huge demand for custom delivery providers

Delivery Providers

•  Sales growth, cross sell è profitability

Amazon

144

CONCLUSIONS: TECHNOLOGIES OF TRUST ARE AT THE FOUNDATION OF THE NEW ODE VILLAGE

145

Pervasive Connectivity

Payments Platforms

Reputation Networks

PROXIMITY

COLLABORATION

TRUST

CONCLUSIONS: THE ODE EFFECT

146

TRUST

BUYERS & SELERS

REGUL-ATORS & GOVERN-

MENT

INDUS-TRIES

SOCIETY & ENVIRON-

MENT

CONCLUSIONS: RESHAPING INDUSTRIES

147

ODE will kill middlemen and incumbents and marginalize regulators unable or unwilling to adapt to changing consumer expectations

Major participants in ODE Companies created by ODE

CONCLUSIONS: SPAWNING THE NEXT-GENERATION OF FORTUNE 100 COMPANIES

148

CONCLUSIONS: SHAPING THE CITY OF THE FUTURE

149

Mobile population Fewer cars

Big Office Buildings replaced by home offices and collaborative space

End of destination retail; replaced by showrooms and experiences where

people are

Housing and material consumption become

more streamlined

Workforce becomes more entrepreneurial

More people pursuing passions

@sherpa