What is peer-to-peer business model
We’re all more familiar with this model than we might realize.
Let me break it down for you.
The peer-to-peer (P2P) business model is a decentralized system where individuals (peers) can transact directly with each other—usually through an online platform.
What makes it different? It cuts out the middlemen, like corporations or traditional retailers.
But here’s the interesting part:
If P2P platforms eliminate intermediaries, how do they themselves make money, considering they’re acting as the middle ground?
The answer lies in the value of convenience.
Take Airbnb as an example.
Renters are looking for places to stay, and property owners are looking to rent them out. But both parties need a centralized, user-friendly platform that connects them, ensures trust, manages bookings, and facilitates payments.
That’s where Airbnb comes in.
Both the guest and the host benefit from the service, and both are willing to pay a commission fee for the convenience, security, and reach that the platform offers.
As long as users are willing to pay for this kind of seamless, efficient connection, the P2P model remains sustainable and potentially very profitable.
This model has been widely adopted across various industries. Some well-known examples include:
- Airbnb – for short-term rentals
- LendingClub, Prosper – for peer-to-peer lending
- Upwork, Fiverr – for freelance services
- Etsy, eBay – for P2P e-commerce
How peer regulation impact the P2P business model?
In a traditional business model, regulation and quality control are typically handled by centralized authorities.
However, in the peer-to-peer model, much of this responsibility is shifted to the users.
Peer regulation refers to a system where users within the network monitor, review, rate, and hold each other accountable.
For instance, a guest books a stay at a host’s apartment through Airbnb. The experience includes check-in, cleanliness, communication, and overall satisfaction.
After the stay, the guest rates the host on various criteria.
The host also rates the guest on behavior, cleanliness, and how well they followed house rules.
These ratings and written reviews are made public, and influence how other users perceive both parties.
Top players using the peer-to-peer model
1. Uber - P2P taxi booking
Uber is a P2P Taxi booking app that connects the rider and driver to achieve the goal of transportation.
It was founded in 2009 and pioneered the whole taxi booking industry. Unlike traditional taxi services, Uber has completely changed the way of booking a taxi.
Additionally, they have implemented countless safety measures to ensure the well-being of the driver and rider. The measures include in-app safety and background verification for drivers.
2. Airbnb - P2P vacation rental
Airbnb is a platform that allows people to list and find a place to stay. Airbnb acts as a middleman by assisting travelers and property owners throughout the process.
Founded in 2008 by brian Chesky, Joe Gebbia, and Nathan blecharczyk. They have listed various properties like houses, apartments, and hostel beds on the platform.
Moreover, it is the best alternative to traditional vacation rental platforms.
Convenience and flexibility are the causes that made them stand out from the competition.
3. TaskRabbit - P2P handyman service
TaskRabbit acts as an intermediator and help connects both the Tasker(service provider) and Taskposter(service seeker) to the platform. It was founded in 2008 and acquired by IKEA in 2017.
TaskRabbit offers a home service where users can manage daily chores like carpeting, painting, plumbing, and more.
The Task poster can view the profile of any tasker and book them to do the required task. And the payout process is done safely and securely by the platform.
The business is active in various countries across the United States, and the United Kingdom and is well-known for its flexibility and convenience of its booking.
4. eBay - P2P e-commerce
eBay is an American-based multi-national e-commerce company based in San Jose, California. More importantly, it is a well-known marketplace where consumers can sell or auction off their old goods.
It all started in 1995 by Pierre Omidyar. To look at it now, it turned out to be a multi-billion dollar business with operations in more than 30 countries.
Here, the users both buy and sell goods that include electronics, clothes, and more goes on the list. Besides, the platform offers auction-style listing, fixed-price sales, and classified ads services.
The revenue of eBays is based on the seller-pays model, meaning the seller needs to pay a commission if the products are sold through the platform. The fees vary depending on the total product cost and the seller membership level.
5. LendingClub - P2P lending platform
LendingClub is a lending platform that allows individuals to borrow and lend money. It is part of the Peer-to-Peer business model but differs from the traditional banking system in which people borrow money straight from the bank.
Founded in 2006, the LendingClub is well-known for being the world's largest and most authorized lending platform.
Their headquarters is in San Francisco, California, and had a presence in the United States and Canada.
Here in this platform, the lender has the authority to set the interest rate while the borrower can filter the lowest interest rate possible.
And this becomes quite annoying for banks and other financial lending companies.
6. Upwork - P2P freelance marketplace
Upwork, formerly known as Elance-oDesk, was founded in 2013 and rebranded in 2015. In March 2022, the company was listed as one of the 100 Most Influential Companies of the year.
It is the platform for freelancers to find work in various fields, including writing, graphic design, web development, and more, while the client can hire numerous professionals on the platform.
Freelancers are getting paid hourly, while the platform charges a small commission for facilitating the transaction.
In addition, the platforms provide various tools and features for communication and collaboration between users, such as in-app chatting, time tracking, and project proposal and sharing.
Well, it's time to say goodbye!
The advent of the peer-to-peer (P2P) model has redefined convenience and accessibility.
As long as we find value in connecting directly with each other, this model will not only thrive but evolve.
See you all in another blog.