If you’ve at all followed the Airbnb story, in which the rent-a-room startup is in trouble with New York and other cities for allowing people to turn their apartments into hotels, you could sniff out the problems in this Fortune piece from the headline and deck alone:
Behind Airbnb’s legal fights, grassroots activism
In courtroom battles against the room-rental service, elected officials find themselves facing a surprising opponent: the people.
“The people” and their “grassroots activism” Fortune‘s referring to are organized by Peers, the lobbying group founded by big Silicon Valley corporations to protect their fortunes from existing law and regulation.
And even the regular people Fortune refers to here are effectively mini-corporations themselves—ones that skip the taxes and other regulatory requirements competitors face. I’d bet few of these Airbnb activists breaking into groups and heading to Albany to lobby legislators are folks who rent their flat out for a few days a year while they’re on vacation. They’re much more likely to be people who make serious money doing it. Fortune reports that some Airbnb users bring in more than $400,000 a year in sales.
Airbnb created Peers earlier this year and one of Airbnb’s executives is its co-director cofounder. Ebay billionaire Pierre Omidyar’s foundation is the “major backer,” according to this Fast Company story (the Omidyar Network is also a funder of CJR). Omidyar’s foundation is an investor in a for-profit Airbnb-like site and Omidyar’s eBay has taken up the antitax mantle from Jeff Bezos and Amazon, fighting against an Internet sales tax in a bid to keep his sellers’ unfair price advantage over bricks-and-mortar retailers.
The so-called sharing economy would be more accurately called the sublet economy, which would be more neutral, to boot. Who could possibly come out against sharing? Subletting, however, is a more complicated term. It raises questions about the rights of neighbors and of owners not to have their building turned into a hotel—not to mention the ability of the government to tax these transactions.
Naturally, Airbnb, whose valuation at last check was $2.5 billion and surging, is facing legal and regulatory scrutiny as its business grows exponentially. Those democratically imposed woes need to be fixed before it goes public in order for Airbnb’s investors to get their highest possible return on investment.
Perhaps it will turn out that people want these kinds of services so much they’ll insist their elected representatives repeal hotel ordinances that threaten Airbnb and the types of taxi regulations that cramp Uber’s style. In the cyberlibertarian paradise of Silicon Valley, fusty old representative government must adapt to market whims and the “disruptors” who stand to change the world make billions off them.
Fortune‘s on board with that, of course:
The Internet is disrupting traditional businesses by providing more effective and better designed services. Over the course of history, lawmakers have set up rules and regulations that are designed to help those traditional businesses — hotels, for example, or taxi services — operate successfully while keeping consumers safe. As new Internet-enabled businesses like Airbnb and the on-demand driver service Uber are introduced, those laws will need to be reexamined.
Letting an astroturf group present its corporate advocacy as organically springing forth from the people is just bad journalism.
Worse: Fortune knows that Peers is a fake grassroots organization, but it stuffs that critical information in the second-to-last-paragraph of the story. Even then it allows the group to spin that uncountered.
Perhaps they should have talked to Tom Slee.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.