Is the on-demand app economy good for us?

17 Aug 2015

From Hassle to Hailo and Handy, from Airbnb to Uber and Deliveroo - on-demand apps potentially mean more offline jobs in cities like Dublin.

Irish entrepreneurs like Jules Coleman from Hassle and Handy’s Oisin Hanrahan have a proven grip on the on-demand economy typified by Hailo and Uber. And as new players like Deliveroo and Zipjet enter the Irish market, and potentially create local jobs, John Kennedy asks is the on-demand economy good for us?

Living in the countryside, I’m nowhere near the target markets of players like Uber or Hailo, but I have to say when I’m in the city they best illustrate how the whole thing works. Take Hailo, for example, a few taps and within moments your taxi arrives to take you where you want to go, and if the app is linked to your credit card the whole transaction is cashless.

You could say that the on-demand app market – delivering services from food and taxis to cleaners and laundry – is a consequence of the smartphone’s development and I can honestly say I look forward to the day they are more pervasive and not just confined to urban centres.

The rise and rise of app players like Uber has been compelling to watch. Founded in 2009, Uber has turned the entire taxi business on its head, sparked frictions (even violence) in cities like Paris and Hong Kong, but claims to be creating economic opportunities for many and is now valued at around US$50bn.

Ireland has done well out of the on-demand app business so far. In recent weeks, Irishwoman Jules Coleman’s company Hassle – which provided cleaners on demand in Dublin and London – was acquired by Berlin-based Helping for around€32m. Coleman established the company in London in 2011 with friends Alex Depledge and Tom Nimmo after teaching herself Ruby on Rails and attending the TechStars programme in London.

Across the bigger pond in the US, Irishman Oisin Hanrahan’s on-demand company Handy, which connects consumers with handyman services, recently raised US$15m in a new funding round, bringing to US$64m the amount it has raised so far to spread across the US and to the UK.

In recent weeks, Uber revealed that in order to cope with its global expansion it is to create 150 new jobs in Limerick city by the end of 2015 at a customer Centre of Excellence centre, with 300 jobs in total at the facility when it is fully up and running.

And earlier this year Airbnb, the on-demand provider of private accommodation, announced 200 new jobs at its operations in Dublin.

In Coleman and Hanrahan’s case, they are creating jobs for people in non-tech roles to do the cleaning, repairs and plumbing that busy people don’t have the time or the skills to handle themselves, all at a reasonable cost and where defined standards are adhered to.

Dublin lately has also been benefiting from an influx of on-demand app providers who see the city’s compact size and large population of smartphone-toting cash-rich, time-poor young workers from companies like Twitter, Facebook, Google and more as fertile hunting ground for new customers.

In recent weeks Deliveroo, an on-demand provider of high-quality restaurant meals, revealed that is likely to create up to 30 jobs for executives and drivers in just one district of Dublin in its first phase. Deliveroo has raised US$70m in a Series C investment round led by Greenoaks Capital and Index Ventures as well as Accel and Dylan Collins’ Hoxton Ventures. The company has mushroomed to employ more than 300 drivers in the UK, where it has more than 50,000 customers.

The company launched in Ireland in recent weeks and as a result food from restaurants like Carluccio’s, Brother Hubbard, Asador, Unicorn and Dillinger’s can be delivered in Dublin within an average time of 32 minutes.

On another front, Berlin-headquartered ZipJet – a kind of Uber for laundry services – has selected Dublin as the first city for its global expansion.

The move will involve ZipJet forging alliances with local launderettes to deliver services within 48 hours and this will also mean potential jobs for drivers to deliver freshly laundered and pressed clothes to punters.

A spokesperson said that the company is busy getting the structure set up in Dublin and explained that the operation has five full-time staff and four drivers so far. He said the company will interview and hire more people as demand increases.

So on-demand app businesses, a consequence of the smartphone revolution, are not only creating tech jobs for founders and programmers, they are potentially resulting in offline jobs for drivers, cleaners, laundrettes, handymen and more.

The caring, sharing economy?

On one hand you could say this is fantastic – new start-ups creating new jobs that aren’t purely tech-related, but are a consequence of technology.

But the big word that hasn’t been mentioned so far is disruption. Are these new apps leading to a net increase in jobs in traditional areas or are they disrupting existing industries leading to consolidation?

Violent clashes around the world in cities like Paris because of Uber allegedly displacing traditional drivers’ jobs have been well documented. And the Uber economy’s stealthy capture of one US city after another is being viewed increasingly as a masterclass in lobbying.

The potential for the on-demand economy to add to the coffers of ordinary people has also been epitomised by Airbnb, the app platform that allows travellers to book into people’s homes as an alternative to hotels.

The question of whether Irish Airbnb providers could face a hefty tax bill arose last week after Revenue claimed that hosts who rent out their rooms to holidaymakers would have to pay tax on any income earned. This was despite arguments by Airbnb, with assistance from the accountancy firm Ernst & Young (EY), that its hosts would be eligible to avail of the rent-a-room relief scheme, which allows people to earn €12,000 per year tax-free by renting out a room in their home.

However, Revenue’s assistant secretary in its planning division, Declan Rigney, said that it will not be seeking to prosecute hosts because it doesn’t believe it will uncover evidence of large-scale tax evasion.

Is on-demand good for the community?

Either way, the on-demand economy has moved beyond the domain of techies and now is a potential revenue stream for homeowners, plumbers, drivers, you name it.

But is it a good thing when you consider we are still in a country where 91pc of SMEs still aren’t capable of transacting e-commerce? You could argue these new platforms could be a way for laundrettes, for argument’s stakes, to join the online, on-demand economy.

But only time will tell if this will have a material impact on that industry segment, creating more demand for laundrette services or displacement if existing players get pushed out of the market.

It really is too early to say if these services will impact traditional firms. On one hand you could argue restaurants like Carluccio’s will potentially sell more meals, and drivers whose jobs didn’t exist before now can thank their lucky stars for the arrival of Deliveroo, or laundrettes whose business was flagging now have a new revenue stream thanks to ZipJet.

But what are on-demand services doing for our local economy and the fabric of our communities?

During our recent Inspirefest 2015 I talked with Hailo drivers who insisted the app has given them more control and choice over their working hours and said that older drivers who haven’t made the switch and who still sit in taxi ranks hoping for business will struggle. It is all a long shot from the turn of the century when hundreds of punters would shiver on St Stephen’s Green or College Green waiting for an elusive taxi to show up.

Dublin is a city that is often compared to San Francisco because of the presence of the headquarters of giants like Google, Facebook, Twitter and Airbnb to name a few.

Unlike San Francisco, Dublin doesn’t suffer from the gentrification issues that blight districts of San Fran and have shattered communities. But Dublin does have a rent crisis and office space for tech companies is at a premium.

In San Francisco, on-demand services are seen as both a blessing and a curse. A blessing for drivers whose income streams have quadrupled, for example, but a curse for local businesses who are now being bypassed by tech executives who have cash but don’t spend it locally, preferring to consume everything from food to transport and laundry via on-demand apps without leaving their air-conditioned ivory towers.

It was quite telling that when Deliveroo launched in Ireland it showcased its service at a luxury home in Rathgar, that leafy district of Dublin 6, a postcode where tech executives from start-ups to multinationals tend to congregate. That’s a business that knows its market.

It is too early to say if on-demand app services will be economic multipliers or tear at the heart of local economies as they are alleged to have done in the US. I’m betting on the former, as new revenue streams for traditional firms could have a multiplier effect. More jobs ultimately mean more money going into the local economy in the long run. I would also hope we will avoid that planning debacle that has blighted one of America’s most vibrant cities, San Francisco, and that local tech companies play a more mindful role.

On-demand apps and services are growing in popularity. The only truth is it looks like they are here to stay.

Christchurch, Dublin, image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years