Last week's always excellent O'Reilly Next Economy newsletter asked the question Have We Reached Peak Gig?
They asked this in response to a number of recent negative press articles on the gig economy.
The negative press includes, but hardly limited to, the New York Times editorial The Gig Economy's False Promise, Quartz's The on-demand economy is a bubble—and it’s about to burst and The New Yorker's Is the Gig Economy Working?
So is this true? Is the gig economy on the verge of collapse? Are on-demand services about disappear?
The quick answer is no.
There's no doubt that the gig/on-demand economy has issues, problems and growing pains. But it's also large, increasing in size and going to continue to grow.
What these articles miss is the trends driving this growth are powerful and, if anything, getting stronger.
They also focus on almost exclusively on gig/on-demand economy startups serving consumers. They don't seem to aware of how extensively gig/on-demand economy services have permeated the economy.
The trends driving the growth of on-demand/gig services include:
Consumer demand: It's clear consumers like services like Uber,Lyft and Airbnb. According to the National Technology Readiness Survey, in 2015 22.4 million Americans spent $57.4 billion in the on-demand/gig economy.
Other studies have found even larger numbers of consumers use gig/on-demand services. Pew Internet, for example, found that 72% of adult Americans have used some type of shared or on-demand service.
Consumer demand for on-demand services is not going to go away, which means a large market for these services will continue to exist.
Business demand: Literally dozens of studies over the past couple of years show that businesses large and small are increasing their use of contingent labor. And not just gig economy companies - it's businesses in almost every industry.
A good study example is big 4 accounting firm EY's Is the gig economy a fleeting fad, or an enduring legacy? It found that by 2020 about 1-5 workers at mid to large sized corporations will be contingent, up from 1 in 7 in 2016.
Also see Spend Matters New Study Dissects Organizations’ Ongoing and Future Use of Contingent Workforce. Key quote:
"The overall findings — many of which may not be a surprise for contingent workforce management services procurement practitioners — indicate that the use of contingent work, in various forms, is widespread and increasing ..."
In addition to hiring more gig workers, a wide range of B2B on-demand services are emerging. While the media focuses on consumers, the growing gig/on-demand B2B industry has become very large in it's own right.
Worker supply: Our studies indicate most Americans don't want to be self-employed and/or gig workers. They prefer the predictability and stability of traditional employment.
But the number of Americans who want, or at least are willing to be self-employed is large and growing.
Based on our research, about 60 million Americans are open to and/or want to be self-employed. This is about 1 in 4 adult Americans.
Other studies show larger numbers.
For example, MetLife's recently released 15th Annual Employee Benefit Trends Study found that 51% of employees (about 80 million) are interested in contract or freelance work. This is the highest percentage in the 15 years MetLife has been doing this study.
So there is clearly a large enough supply of potential gig workers.
Gig Economy Business Models Work: One of the main lines of attack on the gig/on-demand economy is the industry is losing lots of money. The implication is the industry's business models are flawed and these companies can't make money.
This argument seems mostly driven by Uber's massive losses, but the food delivery industry is also highlighted as an example of flawed business models.
Our answer to this is GrubHub, which is one of the few public on-demand economy companies. It also happens to be in the food delivery business. As the chart below shows, GrubHub is growing rapidly and is solidly profitable.
Much of the confusion around business models is due to many VC backed on-demand/gig companies losing money and/or shutting down.
What the articles are missing is this is how industries with heavy VC investments evolve. Lots of companies are funded, most lose money and eventually disappear, but a few grow into successful businesses.
A good example is Internet search.
In the late 90s and into the early 2000s there were dozens of VC backed search companies. Almost all of these companies failed. But we doubt anyone today would argue that Internet search isn't a viable industry.
The bottom line is the gig/on-demand economy is here to stay. It will also continue to grow.