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01/08/2013

Our Changing World � Movement Toward A Shared Economy

The news that Avis Budget Group will buy Zipcar for $491 million has evoked strong reactions in the marketplace. (Zipcar offers hourly rental of autos in several U.S. metropolitan areas.)

Yet despite the cheers and howls, nobody knows what will become of the marriage. But the early-January deal reinforces Steve Case�s belief that we�re moving toward a sharing economy. The AOL co-founder, through his Revolution LLC fund, is Zipcar�s largest investor. Revolution stands to make about $96 million from the sale, according to Bloomberg News.

Case bought into Zipcar back in 2005, because he saw �a generation shift from ownership to sharing experiences.� The key, as Zipcar showed, is to make it easier to share by giving people 24/7 access to vehicles parked in convenient locations at a reasonable price. (Even the gas is included.)

What�s driving the boom isn�t just that it is easier to share vehicles, but that it is often a hassle to own one.

Case has also invested in widely-ranging ventures such as Exclusive Resorts, a high-end vacation club that gives members access to luxury homes worldwide, and LivingSocial, which encourages collaborative consumption with incentives for friends who buy together. Case is not alone in his thinking. Witness the growth of Airbnb.com, which lets users rent their homes, and ParkingPanda.com, a new site that lets people rent out their precious parking spots when not in use.

That said, many investors are skeptical about the trend in sharing everything from cars to homes. Some dismiss it as a fad that young hipsters will ditch once their incomes rise. Insurers have certainly balked at the idea of covering whatever damage is done by strangers using a policy-holder�s stuff. Landlords and municipalities can ban people from sharing for money, or at least demand part of the income. But such complications also give an edge to businesses that have the resources, infrastructure, and scale to compete.

As Zipcar�s new owner, Avis Group brings more than capital to the table. It also brings the welcome asset of more cars. Zipcar has about 10,000 cars located throughout ten cities at the moment, which is also the number of locations Budget and Avis boast worldwide. Therefore Zipcar�s expansion looks to be dramatic. Moreover, since Avis relies heavily on corporate clients whose demand for vehicles is lower on weekends, it makes expansion with Zipcar a natural.

If Avis can share both its fleet and expertise in managing it with Zipcar, and Zipcar can give its new parent more access to a hip/urban clientele, that could take the sharing economy to a whole new level.



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