The incredible vanishing asset

ROME – Back in the late 1980’s, I attended a conference on “revenue management,” or the art of pricing airline seats to get maximize yield. Too high, and you lost business; too low, and you got less than people were willing to pay. Most of the speakers were from the airline industry, which already knew the tricks. Many of the listeners were from the hotel business; they were just learning. As a customer, I felt as if I had penetrated the enemy’s strategy session. Over the years, I watched as more and more markets picked up two related concepts: time-based pricing and more efficient use of so-called “vanishing assets” – or capital goods that generate revenue only as they are used. In the old days, before computers, it was hard to manage complex pricing – or, for that matter, to reach the right customers with specific time-based or location-based offers. Hotels and airlines were a special case: their business is dependent on shared use of capital assets.Of course, some businesses do use blunt versions of time-of-day or seasonal pricing. We take it for granted that health clubs charge more for memberships that include peak hours. But, in general, an asset is an asset, and you still hear complaints from people who don’t understand why the guy next to them in an airplane paid a lower price. As real-time information about customers’ needs and vendors’ offers combines with a new concern for efficiency and optimization, there is a widespread shift to make use of the opportunities to personalize offers around location and time. The cost of complexity and targeting has dropped, even as the demand for return on assets has increased. You can see this in housing rentals, hotels and hospitality, and rental and leasing in general. Zipcar, for example, lets people share cars. (Let’s hope the Chinese discover this before everyone in China buys their own car!) And Worktopia is an online marketplace for business meeting rooms. Overall, I see a broad shift from understanding assets as something you have, to looking for a stream of utility. To illustrate, here are three start-ups that take the concept to individuals or small businesses; call it peer-to-peer timesharing. (Yes, I am betting on this trend: I am an investor in one, LendAround, and considering an investment in the other two.) LendAround, in the United States, enables individuals to lend their DVDs to strangers, with the company charging a transaction fee for managing the process. A DVD is about the smallest, cheapest item for which the logistical costs do not outweigh the value. This market probably won’t last forever, but I suspect that LendAround ultimately may move on to other items. For now, DVDs are a convenient, commodity-like object to start with: once you specify which title, there’s no variation in quality (unlike with houses or other goods) or terms and conditions. Next is Xtify, founded by long-time entrepreneur Andrew Weinreich, which is focused on time-of-day pricing targeted at people who are nearby and reachable on their mobile phones. To some extent, Xtify is an echo of Weinreich’s other venture, MeetMoi, a real-time dating site that uses mobile-phone location technology and interest profiles to help users find like-minded strangers. Xtify lets its users – mostly small retailers and service providers – offer real-time pricing or discounts with the added precision of targeting by real-time geo-location. With Xtify, service vendors can appeal to customers who are conveniently placed in both space and time – so they can come in now for, say, a discount latte. The latte’s ingredients will remain available, but the space in the shop and the work of the people who will prepare the latte are vanishing assets. Xtify’s challenge will be to get distribution; users will need to add the app to their cell phone in order to be targeted by anyone from a manicurist to an airport massage booth. Finally, there is Rezz.it, focused on larger, planned transactions – but, again, transactions that might not have happened because willing sellers would never have found eager buyers. The basic idea is that people can post items they have to rent, with a broad variety of descriptions and conditions. You can limit the visibility to people you know. The function may be to make money, or simply to remind your brother-in-law that you need the lawnmower back. If he forgets, Rezz.it will remind him so that you don’t have to. And if you want him to pay, Rezz.it will help you to collect without feeling like a cheapskate. Or you may have a set of under-used dining room chairs. You don’t particularly want to lend them out every day, but if someone is willing to pay, say, $200 to rent them for a dinner party, the trouble might be worth it. So you can set a high price to offset the inconvenience and make money on the side. And you can post different prices for different times: $20,000 to rent my house in London during the Olympics, $10,000 over Christmas, or $1,000 any other time. At the other end of the spectrum, you could rent baby clothes for three months at a time. In the end, Rezz.it is unlikely to replace current real-estate rental sites, but its software may provide enabling technology for some of them. And it will enable other markets – for everything from lawnmowers to clothing, handbags, and cooking equipment – to become more efficient. The first impact of monetizing vanishing assets could be to lower demand for such goods, since one lawnmower, for example, can serve many people. But it will also lower the cost of using them. Just imagine if there were no way to use an airplane other than by owning it. By sharing capital equipment, we make it more accessible to more people – and ultimately increase demand. Esther Dyson, chairman of EDventure Holdings, is an active investor in a variety of start-ups around the world. Her interests include information technology, health care and private aviation and space travel. www.project-syndicate.org

Opinions

The incredible vanishing asset