Venture capital is targeting what is known variously as the 'collaborative economy' or the 'sharing economy'. Without doubt this trend will impact business models and the broader economy into the future. Unfortunately, neither of these names fully describes the trend without creating a misleading mental framework.

Before continuing, I recommend reading the leading research paper on the subject authored by Jeremiah Owyang of Altimeter Group over on Jeremiah's blog. You can also check out Loic Le Muir's slideshow from LeWeb London 2013 and Episdode #372 of the Six Pixels of Separation podcast for more from Owyang.

What collaboration is.

Collaboration may be the most misused word in business vernacular I know of. But I think in a business context it refers to creating value together within a system optimised for trust1 and co-owned (mutual) benefit.

In my work creating sales and marketing channels for fashion and lifestyle brands, it's been normal to collaborate with clients and partners variously in a brand sense, a marketing / publicity sense, a creative sense and a process sense. For example, my business The New Pop produced six separate fashion films for six fashion brands as part of the Australian phase of the International Woolmark Prize in 2012. We were responsible for delivery stories that adhered creatively to the brand and aesthetic of the six labels, yet within the remit required of us by Woolmark. This content was then provided to Woolmark's media partner Vogue for distribution to its audience.

In this example, designers and filmmakers collaborated personally in a creative sense while the marketing / publicity benefit from the campaign was co-owned by all participants.

The collaboration the collaborative economy refers to.

The platforms2 enabling the collaborative economy certainly create value for participants. They are also naturally optimised for trust. Airbnb is the exemplar of both these elements. When viewed from the perspective of an Airbnb user – who can simultaneously release idle inventory (that spare room) and benefit from the deflationary economics of increased supply – describing the phenomenon as collaboration makes sense.

However, the ambitions or intent of the platform "controller"3 inherently dictates the extent value is extracted from the system for the benefit of the controller.

On this point, I recommend Bill Gurley's awesome post A Rake Too Far.

In other words, the extent to which the platform exerts itself within the system will vastly impact the extent the benefits of participation are co-owned.

Why aggregation is oftentimes a more appropriate conceptual framework.

The best way to explain this point is by way of example. Uber is a leading participant in the collaborative economy.4 Yet like any web-scale company creating value it will create winners and losers in the near-term. It utilises an on-demand workforce it does not employ (inventory) to serve customers it acquires via mobile. Looked at from this perspective, Uber is aggregating the collective value of a disparate or de-centralised inventory and channeling this to customers.

In this sense, its business model is analogous to an advertising network. Advertising networks aggregate the ad inventory from innumerable properties on the web into tranches of audiences for sale to buyers. It is conceivable that publishers regard advertising networks as collaborators, but the gains are never co-owned (revenue-share between 60:40 and 70:30 in favour of the network in my experience).

The final word.

The point here is not that either the term collaborative or sharing is wrong, but rather that neither term adequately explains the breadth of changes taking place. Ultimately, this may be because the taxonomy to describe the various business models that are emerging hasn't been invented yet.

1. And respect at the personal level.

2. I will write more about platforms in future.

3. I use the term "controller" regrettably because I cannot think of a better one. I mean to reference the fact that the majority of firms creating platforms within the collaborative economy are (will be) venture backed. Accordingly, these firms are in various stages of capital raising and naturally the controllers of the companies in the strictest sense – the shareholders – is subject to change.

4. See this article in The New Yorker.