The dream of any peer-to-peer platform owner is getting into their customers’ heads to know what they think, what they want and what makes them buy. Just imagine how wonderful it would be to have an advisor who could tell you to increase the price of your product or service without the risk of losing your clients, or to take additional security precautions to protect your website, or help your clients find what they are looking for. Sharing economy giants like Airbnb, Uber, Etsy, and others use Artificial Intelligence to solve these and many other challenges.
Without any fortune-telling, Artificial Intelligence in business can help you:
- Set the best prices
- Enhance user experience
- Ensure security.
Let’s discover how top companies use AI in the sharing economy!
How Can AI Suggest the Best Price?
There are two main concerns of peer-to-peer marketplaces in terms of pricing:
- Determining a competitive price
- Real-time price changing.
Determining a competitive price
Some p2p marketplaces depend on the subjectiveness of pricing. According to Airbnb, their newly registered hosts manage to complete all information to set up their listings, but always get stuck when it comes to pricing, as they can not determine how much their rooms should cost. They are usually afraid of making a mistake while trying to find the golden number between:
- A price that is too high and may result in fewer bookings
- A price that is too low and may result in less profit than competitors
To help their hosts overcome this hurdle, Airbnb created a service called Pricing Tips. This is an AI mechanism that can predict and recommend daily prices on account of the likelihood of renting your listing.
The best rates are formed by comparing 10 billion data points a day, such as location, capacity, room type, seasonality, reviews, etc.
For example, you want to get $100 per night for your listing and be confident that you will have 30 nights booked a month, but Price Tips AI suggests you set $150/night as a more winning strategy even if only 25 nights will be booked.
|Rate||$100 (set by your own)||$150 (suggested by Price Tips)|
|Booked per month||30 nights||25 nights|
|Total per month||$3,000||$3,750|
|Total per year||$36K||$45K|
So, you can actually make $9,000 more for the same suite or home.
Airbnb statistics say that people who set a price within 5% of the suggested price were almost four times more likely to have their lodging booked, compared to those who set the price outside of the 5% recommendation.
Still, experienced hosts suggest you continuously analyze your prices manually, while also using automated ML solutions for the best decision making.
Dynamic Price Change
You can also use AI in a sharing economy for real-time price changes. Predictive mechanisms can help automatically regulate prices, analyzing the current market situation. For such companies like Uber, that hit the negative margin of $2,8 billion in 2016, it is extremely important to take a chance and adjust prices in real-time, based on the market situation.
For example, booking Uber on a peak hour, when getting a ride is in increased demand, you are more likely to get higher rates than any other time of the day. Yes, that seems frustrating for clients, but they understand that comfort usually costs more.
With Airbnb, Machine Learning mechanisms can foresee the greater demand for your lodging for future months. For example, on event days like a football championship or IT Conference in your location. And such dates are usually booked far in advance, so you may not be aware of the event and then kick yourself for a missed opportunity to increase your price and earn more.
How Can AI Enhance Personalized Search and Matching?
Platforms like Etsy and Airbnb provide their customers with options to select among more than 40 million unique listings. Just try to imagine the amount of possible search request combinations: seller description tags multiplied by buyer searching preferences!
It’s quite obvious that search optimization and adequate matching is important for the competitiveness of huge marketplaces like these.
Not so long ago, Airbnb and similar platforms used to hardcode the rules for search rankings to make matching only on basic features like the number of rooms or location. Now, much more aspects are included in the search with the help of AI.
What kind of setting is it in? What kind of decor is in the house? These are things Airbnb can use to feed into the model to come up with a better prediction of which listings to show you first.
In 2017, it was announced that Etsy started using the power of Deep Learning Artificial Intelligence technologies for personalized searches and recommendations, taking into account rankings, user search and purchasing histories, preferences of similar user profiles, etc. The system learns continuously and becomes more and more precise in predicting what users may like. The technology includes the following features:
- AI makes a robust analysis of data and different kinds of variables to increase the relevance of recommendations.
- Natural language understanding helps on complex search queries.
- Deep Learning helps with image recognition, categorizing photos and making better matches.
- Spelling correction and predictive typeahead allow for faster searching.
Such complex solutions allow the system to analyze hundreds of ranking attributes and factors at any given time.
How Can AI Prevent Security Breaches?
Trust makes the basis of the shared economy concept.
Would you buy a watch from a stranger in the street, even if he said it was solid gold and came from his grandfather? Probably not.
When you rent or buy from a stranger on a p2p marketplace, it is almost the same thing – you need to believe a stranger, whom you have never met in person.
When it comes to buying ‘blindly,’ customers can get anxious about many factors, including:
- Payment security
- Fake photos and information
- Suspicious accounts
- Spam messages
As reputation means everything for peer-to-peer platforms, AI can help in this area, allowing for fraud prediction and prevention.
Some Machine Learning algorithms can learn from historical data marked as either fraudulent or non-fraudulent, to be able to recognize anomalies in activity. Others adapt to determine new hacker attack patterns and suspicious account behavior.
Using AI, Airbnb routinely screens guests and hosts against criminal backgrounds, terrorist hazards, and sanction watch lists.
How to Apply This to Your Business
Why do clients come to Airbnb, Etsy or Uber? The main drivers are price, variety, convenience and trust. Otherwise, they would continue riding a regular taxi, booking hotels, and buying things in boutiques.
Still, the price of things such as artwork, accommodation, or car rentals is very subjective and newly registered users are often puzzled on how to ‘win’ when it comes to determining the rate. Using Machine Learning mechanisms that can analyze multiple factors simultaneously, it is possible to suggest the adequate price as well as quickly adjust it to the changing market conditions.
Personalized searches and recommendations provided by AI will increase retention as people quickly get addicted to good service.
AI can also predict and prevent fraud on different levels – from fake provider information to security breaches. This can increase the trustworthiness and add points to the p2p platform reputation.
These are just a few cases that can be addressed with AI, but they already cover a big part of our current daily challenges.
We hope that this article helps uncover some aspects of AI sharing economy trends. If you want to continue the dialogue, you can always reach us at greenice.net.
Co-author: Kateryna Reshetilo, Head of Marketing and Business Development at Greenice, web development agency. She explores business opportunities, develops and executes marketing strategies.