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What didn’t go right at Neighborgoods?

| Quick Shares | July 13, 2012

Neighborgoods closes websiteTrailblazing US sharing site – Neighborgoods – is shutting down at the end of July. It failed to get traction, apparently. Founder, Micki Krimmel in a comment post on Shareable said – “we built the Amazon for borrowing… but we learned that model does not work”.

Using the world’s most successful marketplace for transactional consumption as a model for a social sharing platform might seem to many misguided. Of greater concern, I believe, is what she actually means by failure in this context.

According to Neighborgoods they attracted 25,000 users sharing ‘over $4.5 million of inventory’ in a little under three years. Now the $4.5 million inventory is simply an estimation of the stuff listed on the site and not a measure of the amounts actually shared, but still it doesn’t sound like abject failure to me. In a previous interview Micki had said about Neighborgoods that they had

..lots of inventory and people willing to share and not enough people wanting or looking to borrow.”

It is really important for the future of sharing systems like Sharehire that we try to understand why Neighborgoods threw in the towel. Is there a fundamental cultural barrier or are we struggling to find the right model?

Micki has concluded that the model is the problem – “People share with friends and neighbors for social reasons – not financial reasons”. For her the challenge now is to figure out how to get people to pay for the value they receive through the social transaction of sharing and this is the basis of her new venture Favortree.

Personally I don’t believe that we have a problem with the concept of sharing as a society. Cars, books, videos, tools, dinner suits and so on are routinely rented and eBay has done much to enhance the image of used and secondhand goods. As Kip Harkness, Assistant City Manager of City of San Jose, astutely commented

Sharing is a cultural behavior – maybe we just have to focus on practicing it.”

So that leaves us the Facebook problem of finding the right model.

How do you make money out of an essentially social phenomenon?

Sharing is a social transaction and it stands to reason that it ought to progress as such – be open and free and adaptable.

Many p2p sharing systems introduce a mediating layer between the sharer and borrower robbing the system of its flexibility. This mediating layer is there to ‘monetize’ (urghhh) the transaction but it actually stifles the whole process of making contact with someone and arranging to borrow something.

Neighborgoods social sharing platformThe last time a neighbour borrowed my drill it was with me attached. The reason they didn’t own a drill was because they didn’t know what to do with it. The neighbour wanted a shelf up and we did it together. Where are the fields on your online form for that?

My second observation is that a social sharing system needs to have social and moral leadership at its core. Collaborative consumption and sharing are a response to increasing environmental and societal problems not an opportunity to profit. As such the focus needs to be education.

Why couldn’t Neighborgoods figure out the answers?

Neighborgoods closed up shop because they couldn’t see how they were ever going to secure the profit that their investments required.

I would argue that there is actually a larger failure that has not been fully acknowledged – the failure to go the distance and find out how to make a sharing system work. With 25,000 users Neighborgoods was arguably best positioned to work out the answers.

Amazon was, perhaps, a better role model than Micki Kremmel realised. Amazon is a data driven business, specifically customer data driven. If Amazon had been running Neighborgoods they would have experimented, analysed and implemented their way to the solution.

Perhaps a more controlled geographic rollout rather than spreading the service too thinly nationwide would have helped develop solutions. Taking time to figure out what was needed to make the community thrive perhaps would have been a better use of time that seems to have been actually spent trying to figure out how to ‘monetize’ the service and gain something called traction.

By way of contrast it took Craigslist five years to move beyond their San Francisco roots to their second city, Boston.

Availability and Trust are key determinants of propensity to share

How much was done to understand the barriers to sharing such as trust and availability? What control mechanisms were developed and tested?

Some recent research carried out by Cait Poynor Lamberton of the Katz Graduate School of Business at University of Pittsburgh, and Randall L. Rose of the Moore School of Business at the University of South Carolina looked at what drives participation in commercial sharing systems. The researchers highlighted

..perceived risk of product scarcity is a major driver of sharing propensity in commercial sharing systems.”

In essence users need to believe that there will be availability of the things they want to share more or less when they need them.

Was this a problem for Neighborgoods users? If so what mechanisms were put in place to ensure that there was adequate availability of shared resources? How did Neighborgoods address these issues in their communications with users?

Another study carried out this year by marketing agency Campbell Mithun, in partnership with Carbonview Research cited trust as the primary barrier to sharing – “Some 67% of respondents expressed trust concerns as the primary barrier to joining a collaborative consumption service.”

This is not news to anyone involved in sharing or collaborative consumption but it isn’t cited as a reason for Neighborgoods failure by its founder. Was trust a non-issue on the Neighborgoods platform? What reputation mechanisms did they develop and test? Probably none, in fact like many sharing systems whilst acknowledging the issue they probably proceeded to stick their heads in the sand.

So, does Neighborgoods failure matter?

I don’t know Micki Krimmel personally and I have no inside knowledge in respect of Neighborgoods so I have probably done them a huge disservice so far in this article. But I can’t help feeling the real tragedy is that come the end of July we will have lost access to a resource that may have been tantalisingly close to answers about how best to organise social sharing. With the right strategy and management approach this large and committed user base of sharers may have yielded a lot of information about the future of the sharing economy.


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2 Responses to “What didn’t go right at Neighborgoods?”

  1. Many factors went into our decision to close NeighborGoods. As we learned more and more about sharing systems and how to design them effectively, we headed down a different path – and Favortree was born. As a small company with limited resources, we cannot support both communities. With regards to the rest of your points above, I would have been happy to answer any questions you had while writing this post but it seems like you’ve got it pretty well figured out.

    • Adam

      Micki, thank you for taking the time to leave a comment it is hugely appreciated. We desperately need the big ideas like Neighborgoods to work and I hope that you find a winning formula with your new venture Favortree, it will be exciting to see it develop. I wish you all the best with it.

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