'Everything Is Automated': How Web Start-Ups Attack the Offline Economy

The founder of a new used-car app explains how a wave of new online companies are using big data to make the economy more efficient and productive

It's no secret that most information is now internet accessible, including scientific facts, movie schedules, even the shape of personal networks. The degree to which the offline has online representation may have reached a tipping point, however, and a wave of startups are reacting to take advantage of it.

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AirBnb's documentation and brokerage of spare bedroom capacity is worth one billion dollars. ZocDoc allows the research and reservation of physician services. And any eatery from Michelin cuisine to the lowly taco truck has not only a digital footprint with hundreds of reviews, but increasingly delivery and ordering integration with startups such as OpenTable and ZeroCater. In short, the ecosystem of real world objects that can be tracked and manipulated electronically has reached the critical mass to allow totally new methods of product selection and purchase. I run a used car search engine, Carsabi, and in getting the company off the ground, I've learned three lessons about the new online economy.

1) Everything Can Be Automated

With the physical world increasingly visible online, software can replace large teams to creating scalable business. Autotrader took decades to assemble the relationships required to list 1.6 million vehicles (about 64% of the market) in its web catalog -- presenting dealership inventory involved individual outreach to each franchise. However, because most dealerships and classifieds are now online Carsabi can crawl them directly and automatically, resulting in more than 1.8 million vehicles per month from the effort of two engineers and a few computers.

2) Middlemen Are Out

As perfect information allows the efficient pairing of supply and demand, businesses built around providing market liquidity will have an increasingly hard sell. In the automotive space, dealerships must price used vehicles for thousands more than cost to break even on storage and payroll while a buyer is found. As Craigslist and other mechanisms of efficiently matching sellers and buyers grow, expect to see legacy distribution channels lose value as consumers find ways to trade directly and securely with each other. To give some scale, consumers would gain around $50Bn per year if all used cars went through private sellers.

3) Meritocracy Is In

Products are increasingly differentiated by the one-two punch of crowd-sourced review and easy factual comparison. Everything from personal trainers to national parks are favored or shunned by their digital reputation, and companies such as Dollar Shave Club have made a killing by tapping into viral marketing. Sites such as Hipmunk and Padmapper display airfare and apartments in a visual manner that makes it effortless to optimize price, time, and location. In the automotive space, Carsabi no longer relies on sources such as Kelley Blue Book for pricing. It's more direct to show what every other listing of that model, year, and mileage is actually selling for. Model comparison can be made similarly straightforward by direct calculation: the data reads plainly that the F-250 is America's most durable truck, Camry the fastest selling car, and Mazda the most value holding brand. As the internet brings immediate feedback to the marketplace, there is a real opportunity for product success based primarily on worth rather than advertising budget - a proposition great for strong new businesses, digital or otherwise.

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