On-demand startups are prevalent now in every vertical. Whether it's flowers, massages or dried herbs, everything is available within a few taps of the appropriate app on your phone. That feeling when the thing you want is booked within a few minutes of your desire for it really highlights the powerful experience of the on-demand world.
I think we'll continue to see new startups in existing and new verticals that aim to create this on-demand experience. We're still in the early years of this space and a telling statistic will be how many of these companies are still around in the next three years.
Button and The On Demand Economy recently put together a mobile consumer survey, with some particularly interesting findings:
- on a weekly basis, consumers use only 1/4 of all the apps installed on their phone
- with the exception of Uber, 45% or less of people knew any of these apps (in fact, of the apps shown on the list, even I hadn't heard of one of them)
- 85% of users that have ever purchased on mobile do so at least once a week
To me, what this says is that a few apps will quickly float to the top and maintain that level of stickiness. The rest will be relegated off the phone's first screen and quickly forgotten about because they lack one or both of the two critical pillars in the on-demand world.
When it comes to on-demand services, there are two key drivers of success - frequency and immediacy. A successful company either becomes the primary choice for actions which people already take frequently, or it creates frequency where it didn't previously exist (much harder!).
For example, through introducing UberX, Uber successfully broadened the space of the market and introduced it as an alternative to walking, public transportation and driving yourself. Did it actually make people want to go out more? Maybe. But regardless of whether it changed the absolute number of social interactions, it became a larger percentage of the already existing need for regular transportation.
In a different vein, Airbnb made travel a much more attractive proposition by lowering the prices, encouraging travelers to either stay longer or travel more. An Airbnb study shows that the average San Francisco hotel guest visits for 3.5 days and spends $840, while the average San Francisco Airbnb guest visits for 5.5 days and spends $1,045. While they're spending more overall, on a per-day basis, Airbnb visitors are spending $50 less/day for their experience. Other cities have similar metrics. I would also think that Airbnb availability means people are more willing to travel to multiple places for shorter periods of time (e.g. an overnight stay on a weekend). And overall, there is a large marketplace of travelers who travel around the world throughout the year.
Time will tell who has long-term viability but looking at the frequency and immediacy factors can provide a quick way to evaluate new startups in this space.
Links to studies referenced above: