The economics, structure, and behavior of platform ecosystems and organizations

A recent NPR/Marist poll suggests that 20% of US jobs are filled by contractors, workers that are hired on to a particular project, for a specific period of time, or on a discontinuous basis, and not as full-time, permanent employees. This ranges from Uber drivers to your cleaning lady, and also includes highly skilled-knowledge workers in tech companies. More than 120,000 of Google workers are contractors, compared with just over 100,000 full-time employees. This trend is growing, and not going to go away. Yes, there will have to be major social readjustments -- since these contractors generally receive no benefits, and are skimping on saving for retirement -- but the economic rationale for workforce agility and flexibility for employers currently holds sway.

In her annual Internet Trends presentation, venture capitalist Mary Meeker explored this trend and the emergence of on-demand work platforms that promise to take the friction out of companies finding contract workers. Before zooming into that, though, I thought I’d share one high-level slide from her deck, to set context.

Meeker borrowed this chart and quote from Astro Teller, who believes that technological change is happening at a pace faster than the human capacity to adapt.

Meeker’s deck is 333 slides long, but I am looking closely at only a few other slides. Meeker sets up the idea of on-demand work as creating internet-enabled opportunities and efficiencies.

Meeker shows the rapid growth of the on-demand workforce:

Almost 7 million of the US workforce is now on-demand platform workers. This is about 4.4% of the US workforce. The discrepancy with the NPR/Marist figure of 20% is explained easily: not all contractors are finding work through platforms, although that number is likely to rise, as we shall see.

Most of these companies and their stories were familiar to me, but if I had heard of Wonolo in the past, I had forgotten about them. Here’s that section of the slide above, enlarged:

Wonolo has grown exponentially since 2016. Meeker did not single out the company for commentary in her talk, so I decided to see if there is a general lesson to be learned in this example on-demand platform.

Yes, there is.

Wonolo was described by Noam Schieber in this way, back in 2014, soon after its founding by co-founders Yong Kim, CEO, and AJ Brustein:

Perhaps the most ambitious worker-on-demand startup to date is a company called Wonolo (short for “Work. Now. Locally”), the year-old brainchild of two San Francisco entrepreneurs. The idea is for companies to post job listings to an online platform the same way people in need of a house-cleaner post a job to TaskRabbit. After it’s posted, one of the app’s users (known as “Wonoloers,” which the app vets extensively) can claim the job and report to work as soon as a few minutes or hours. Suppose, for example, that an online retailer suddenly realizes it’s short a few order-fulfillment jockeys — the people who roam warehouses and locate the goods that need to be boxed and shipped. The retailer can post the jobs on Wonolo and bulk up its workforce that same day.

Another way that Wonolo differs from other work platforms is that the employers state what their going rate is for the work being offered, which Wonoloers decide whether or not to accept. They don’t have to haggle, and each posted opportunity is not a race-to-the-bottom bidding war among Wonoloers.

Wonolo’s growth has led to strong investor interest. Indeed, the company raised its Series C of $32 million last fall, led by Bain Capital, only a few months after a Series B of $13 million.

The entire sector is hot:

These days, the rise of tech and an increasing prevalence of the contractor model has brought in a second track of competition — from Silicon Valley. Shiftgig is another startup that has created an efficient platform for would-be contractors to post their availability, and would-be employers to snap them up. (As a point of comparison, Shiftgig had some 15,000 workers and 1,500 companies/employers registered on its platform as of its last funding.) Uber has been trialing Uber Works for service contractors (wait staff, security and so on). There is Flexy in the U.K. And I wouldn’t be surprised at all if we see Amazon eventually turning its own temporary and contract staffing efforts into a wider business, given the pattern it has taken so many other products that it built first for its own internal use.

Wonolo is an interesting player, because their goals seem to be grander than merely taking a slice from every transaction on their platform:

“Wonolo is reinventing the way people find hourly work. Their technology platform creates more flexibility for underemployed workers and fills hiring needs for understaffed companies insanely fast and at a disruptively lower cost,” said Jamison Hill, senior principal at Bain Capital Ventures, in a statement. “We are excited to support the Wonolo team in pursuing their grand mission of bringing flexible and fulfilling work to everyone.” Hill is joining Wonolo’s board with this round.
Interestingly, while it seems that contract employment is a model that is here to stay, Wonolo appears to be focused also on giving people the experience and connections to eventually try to catapult themselves into more full-time positions.
“We thought we could address [the idea of being able to deal with unpredictability] better than temp staffing, and we realized the antidote was flexibility on the worker side,” co-founder AJ Brustein told us in April of this year. “We could match them with these jobs that would unpredictably pop up. When we dug into it, we realized flexibility was something that was just completely lacking for workers. We took a very different approach to the way that people will often recruit talent for staffing agencies or their own employees. We are looking at character traits.”

The character traits orientation shows in reviews of both companies and workers based on the ‘5 Ps’: prepared, professional, positive, polite and punctual.

Wonolo is demonstrating a non-exploitative, ecosystem-oriented set of principles that benefit all involved in the ecosystem they are growing on their platform. They explicitly seek to help the hourly workers deal with the unpredictability of hourly work (see Continuously Discontinuous, for thoughts on that).

Perhaps that philosophical grounding represents the future for on-demand work platforms, where the on-demand platform establishes a foundation of principles that benefit all involved, not just the platform owner and  the employers. By working to make the platform fair for the on-demand workers -- as well as providing the employers with prepared, professional, positive, polite and punctual workers -- everyone’s interests can be balanced. And that is likely to be a better situation for all involved than direct employer-to-contractor negotiations. Because Wonolo -- and other on-demand platform companies -- have access to lots of data, they can weed out less-than-wonderful workers and block exploitative employers.

In that way, the on-demand platforms are playing a role more like a regulatory agency of government than simply a marketplace. We should expect to see a continued expansion of this sort of governance in other platform ecosystems, just as we have found it in Wonolo. And countering the problems that on-demand workers have may explain why so many on-demand workers are streaming onto the platform.