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Peer to Peer Business: interesting idea, but full of danger for the unwary, horror stories about AirBnB and more

Updated on October 27, 2012


Peer to peer business, that facilitates transactions between individuals, appears to be the next frontier of business innovation. After all, why should businesses have all the fun? Ebay allowed almost any one to sell things to anyone else all over the world, but those are physical objects. What if you want rentals? And many businesses started in the past several years to exploit this untapped area.

Unfortunately, they ran into realizations that perhaps peer to peer business isn't as all it cracked up to be.

We will explore the horror stories that happened to two such peer to peer businesses.

AirBnB: rent out your home short-term

Going on a trip? Ever consider renting out your space for a week or two to others? Most people are uncomfortable with this so they don't. However, AirBnB wants to change your mind, as people want to make some money, and if you live in a picturesque spot and/or in a popular city, you can rent out your place for a significant amount of money, and for the renter, it's cheaper than hotel stay.

AirBnB was founded in 2007, and has been around for several years, and they have arranged over 2 million nights of stays, according to them, and people are signing up to provide lodging in droves in this bad economy. They are heavily funded by variety of investors.

So what's the problem? Hmmm... What if the renter turned out to be....


These are real AirBnB horror stories: one guy rented out his place to what appeared to be meth addicts, who destroyed most of his clothing and all the food in the fridge. Another woman rented out her place, only to find it ransacked when she returned, and her heirloom jewelry, which was in a lockbox, in a locked closet, are missing.

Remember, this is your HOME you're talking about. You're about to hand over keys to a total stranger. Do you trust the business, or need the money, that much? Do the rewards outweigh the risks? The victims are very traumatized by the experience, much like a home invasion robbery... or worse, with the memory that they had handed over the keys willingly.

AirBnB is now instituting a 50000 dollar guarantee / insurance if your guests, arrange dthrough AirBnB, damaged your residence. It also has a variety of tools to help you check the reputation of the other party.

Read more about the Airbnb Horror Stories, and consider for yourself

HiGear: renting out your high-end car for a day

HiGear is basically same idea as AirBnB, except it deals with your car, not your home. it is not alone, as there are several such services already, such as JustShareit, RelayRides, and GetAround. However, HiGear chose to concentrate on higher-end models, such as BMWs, M-B, Porsche, Audi, Lexus, and some older classics. Some cars are worth up to $100000 dollars.

Consider that BMWs, Audis, and M-Bs are not offered by most rental spaces like Hertz / AVIS, and so on, this should be a win-win, right? When the prices are 50% lower than the few places that do have them available?


Unfortunately for HiGear, a company that has been around for less than a year, it did not have sufficient security procedures in place. A sophisticated theft ring, with fake IDs and fake credit cards got through the usual credit check and background check of the company, and made off with at least four vehicles. While HiGear was fully insured against the losses, this caused the company president to re-evaluate the business model, and when he determined that it is NOT possible to prevent this from happening again, but merely reduce the likelihood of occurrences, he chose to shut down the business rather than promising improvements.

Analysts said that the other similar peer-to-peer car sharing services are not as vulnerable because they don't have high-value vehicles like HiGear, but more mundane makes like Chevy, Ford, Toyota, Honda, and so on.

Read more about the shutdown of HiGear

Can Better Security Imporve the Business Model?

In both businesses, it is not the peer-to-peer model that has failed, but rather, the inability to distinguish a criminal from a normal renter. As there are no breakthroughs in pre-determining a potential offender vs a normal person (unless you have a "Pre-crime Division" like Minority Report) this really gets us nowhere.

The best one can do is basically put in security measures in place to both filter out those with no reputation or negative reputation, as well as adding disablers and alarms and such devices to limit the damage that could be done. Some sort of home surveillance may have helped in the AirBnB case, whereas some sort of vehicle tracker like OnStar / LoJack may have helped recover the vehicles in case of HiGear. However, both of which are investments that individuals must add to their offer if they want the protection.


Peer to peer sharing is an enabler to cut out the middleman and/or promote more efficient use of the resources. However, the current lack of security should cause you to reconsider whether what is in place to make the business viable.

If you are considering starting up such a peer to peer sharing business, please keep security in mind, else you may be putting someone else's property at risk for your gain.


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