This weekend I came across an amazing new initiative: Peerby. It is one in the same category as Airbnb and BlaBlaCar: an online marketplace that connects individuals who have something directly with those who need that something, cutting out the middle man. There is a big difference though: with Peerby there is no money involved.
Peerby allows people to borrow something from others in their neighbourhood. It can be anything at all: from electronics to gardening tools, and from sports gear to furniture. Are you throwing a dinner party for eight but have only six chairs? There’s a decent chance someone near you has two chairs you can borrow. Do you want to join a hike but don’t have a tent? Maybe your neighbour from across the street will lend you hers.
The advantages of borrowing and lending
Peerby is about borrowing and lending, not about renting things. There should be no price tag on the items you borrow, although the founders “encourage you to give your friendly neighbour some home baked muffins as a thank you”. At present the service offers no solution to the problems of freeloaders and dishonest users. It would not be hard to implement something like that, though, and Peerby’s makers have hinted at such plans for the future.
What’s so great about all this? I think that Peerby accomplishes three things:
- You don’t have to buy things in order to have access to them. No one uses an electric drill all the time, but many people buy one just for the occasional home improvement need. By borrowing rather than buying, you save money, and prevent yourself from becoming overburdened with stuff.
- You get to meet people in your neighbourhood. Remember the age old pretence of “borrowing a cup of sugar” in order to chat up that hot girl on the floor below? Well, Peerby gives you a whole bunch of new people to meet through borrowing something. Given that they own a specific item that you need, there’s a decent chance that you have some interest in common.
- You are doing good for the environment. By borrowing and lending things, fewer items are needed in a neighbourhood. This prevents waste and the use of the planet’s valuable resources in producing things.
Peerby’s business model
One big question is: how is Peerby going to sustain itself. It was founded as a business venture rather than a social initiative. For the near future, the company has enough seeding money coming in from a number of foundations and prizes. But as time goes on, it will have to find a way to generate revenue on its own.
The problem is that many ways to make money aggravate the subscriber base. Two obvious business models would be: 1. to charge a membership fee; 2. to ask a commission for each fulfilled borrowing request. But there’s a problem with this: the company would be making money off of something that its members are offering for free. That could cause a lot of bad blood with pioneering members of the community. (We saw this happen to CouchSurfing, which lost a large part of its core member base when it attracted millions from venture capitalists to develop a for-profit business model.)
A more innocuous way to make money is by placing ads on the site. Ads are annoying, but most people accept them as an inevitable part of free online services. The question is whether the site can gain sufficient economy of scale to make this model work. For untargeted ads served to generic traffic, the value of an ad can be as low as $0.35 per thousand impressions (CPM). Well-targeted ads in valuable niches can go as high as a $17 CPM (source: Michael Johnston). Even at the high end of the spectrum this model requires a LOT of traffic.
The company itself hints at a different model: offering premium (paid) services through its platform. An example would be insurance on items lent through the site. (The example is poorly chosen: who would want to pay money to insure an item in order to lend it out, when they could just keep it in their home safely and for free? Offering insurance is more likely to scare off potential lenders than it would be to generate substantial capital.) Different services might pay off, though, such as transportation for large items or the sale of supplies for certain tools. After all, someone who just borrowed a hammer is likely to need some nails. The key here is to match the lending transaction to a value offer in a sophisticated and well-targeted way.
Despite the challenges of developing a sustainable business model, I think Peerby is a great initiative. It can save you money, bring you closer to your neighbours, and unburden planet Earth a little. Do you want to give it a try? Be a pioneer and sign up here.