Last Updated on December 4, 2024 by Stacy Earl

Over 72% of Americans have now participated in the shared economy in some capacity.

What’s even more remarkable is the sheer scale of its growth- the global shared economy is projected to reach over $335 billion in value by 2025.

Many have already discovered the benefits of the shared economy, using it to supplement their income, pursue their passions, and reclaim their financial freedom.

And the best part? This is just the beginning. 

It is also projected to be valued at $794 billion by 2031.

Eventually, what started as a grassroots movement has blossomed into a full-fledged economic force. 

The ripple effect of the shared economy touches nearly every industry, from transportation to housing.

 But how did this come about?

This article will go beyond the surface to explore how the shared economy works, how it grew and where it’s headed next.

The shared economy, also called the collaborative or gig economy, is a decentralized model where individuals share or exchange goods, services, and resources through digital platforms.

The idea is simple: rather than buying something you’ll use infrequently, you can either rent or borrow it from someone who already owns it.

Unlike traditional business models, where companies own assets and deliver services, the shared economy allows people to rent out what they already own, such as cars, homes, or skills, creating a more efficient use of resources.

Likewise, it enables individuals and communities to share or access goods, services, and resources, often facilitated through digital platforms and peer-to-peer interactions.

The key characteristics of the shared economy include:

  • Access over ownership: Rather than owning assets outright, consumers can access goods and services on an as-needed basis, often through rental or subscription models.
  • Peer-to-peer transactions: The shared economy leverages technology to enable direct exchanges between individuals, cutting out traditional middlemen.
  • Efficient utilization of resources: The shared economy aims to maximize the utilization of underused assets, creating value from previously idle resources.
  • Community-driven platforms: Shared economy businesses often build their models around online communities and user-generated content, fostering a sense of connection and trust.
  • Technology-driven platforms: Companies like Uber, Airbnb, and TaskRabbit serve as intermediaries, matching users with providers.
  • Trust and reputation systems: The success of the shared economy relies heavily on trust. To build confidence, platforms incorporate ratings, reviews, and verification processes.
  • Flexibility: Users can access goods or services on demand without the long-term commitment of ownership.

The shared economy, while often viewed as a modern innovation, is rooted in age-old practices of collaboration and resource-sharing. 

Historically, communities depended on barter systems and the informal exchange of goods and services. 

These systems allowed people to share what they had, whether it was food, tools, or labor, in return for what they needed. This form of sharing thrived in smaller, more tightly-knit communities where relationships were built on trust and reciprocity. 

For example, farmers might share machinery during harvest seasons, or neighbors might exchange skills like carpentry for food.

As the world shifted towards industrialization, communal sharing systems became less common, replaced by formal businesses and institutions that owned and sold goods and services. 

The idea of individual ownership and the traditional market economy took hold, and sharing became more of a personal or familial activity rather than a community-wide practice.

The concept of the shared economy as we know it today was fundamentally transformed with the rise of the digital age. The development of the internet and mobile technology reformed how people could connect and exchange goods and services globally. 

The birth of e-commerce platforms in the 1990s, such as eBay, showed early signs of a growing interest in peer-to-peer (P2P) exchange, as people started selling second-hand goods online.

However, the real turning point came after the 2008 global financial crisis, when economic challenges spurred a renewed interest in cost-saving measures and alternative forms of income. 

During this period, people struggled to maintain their standard of living and began seeking more flexible ways to supplement their income. 

Simultaneously, consumers were growing more skeptical of large institutions, which had played a central role in the economic downturn. This led to a cultural shift toward valuing access over ownership—why own a car when you can simply rent one when needed?

In 2008, Airbnb was launched as a platform that allows people to rent out spare rooms or their homes to travelers, offering a more affordable alternative to hotels. 

At the time, the idea of staying in a stranger’s home seemed unconventional, but it quickly gained traction, particularly during the recession when both homeowners and travelers were looking for cheaper alternatives. 

Uber, founded in 2009, introduced a similar model, allowing people to use their own cars to provide rides for others.

Instead of owning a fleet of vehicles, Uber transformed everyday individuals into drivers for hire. These platforms were the first in a series of digital companies that would turn ordinary people into part-time entrepreneurs.

The rise of smartphones and GPS technology further accelerated the growth of the shared economy. Mobile apps enabled instantaneous connections between consumers and service providers, allowing for seamless, on-demand transactions. 

For example, riders could hail a car in minutes with Uber, while travelers could book a last-minute stay with Airbnb. The level of convenience and immediacy was unprecedented, and it played a huge role in the widespread adoption of shared economy platforms.

By 2015, the shared economy had taken off, particularly in sectors like transportation, accommodation, and gig work.

Freelance platforms like Fiverr and Upwork allowed people to monetize their skills at their own pace, while services like TaskRabbit provided a marketplace for everyday tasks like furniture assembly or running errands. 

According to PwC, by 2013, the shared economy was valued at $15 billion, but this was just the beginning.

The real boom came over the next few years as more sectors adopted the shared economy model. In Europe, the sharing economy contributed approximately 19.2% of the global sharing economy  revenue in 2022, reaching over $40.2 billion. The US alone accounted for over 57.2%.

While the shared economy had been growing steadily, the COVID-19 pandemic had a profound impact—both positive and negative—on its evolution. 

Certain sectors, like travel and accommodation, were hit hard as global lockdowns and restrictions grounded flights and closed borders. Airbnb, for instance, saw its bookings plummet in 2020 as tourism came to a halt. 

However, platforms related to gig work, food delivery, and remote freelancing experienced unprecedented demand during the pandemic.

As people stayed home, services like DoorDash, Instacart, and Postmates became essential for delivering groceries and meals. 

In fact, the demand for food delivery services grew by over 96% during the pandemic. Similarly, gig platforms like Fiverr and Upwork experienced a surge in demand as companies shifted to remote work and sought freelance talent to fill gaps in their operations. 

According to a survey by Davinci Pyments, gig work participation in the U.S. grew by 33% between 2020 and 2021, with many people using these platforms as a way to supplement their income during economic uncertainty. Over 2.1 million gig workers entered the gig economy by the end of 2020.

One of the most important factors that enabled the shared economy to flourish was the development of trust mechanisms on digital platforms. When you’re getting into a stranger’s car or staying in someone’s home, trust is important. 

Platforms like Uber and Airbnb introduced ratings and review systems to foster trust between users. 

After every ride or stay, users are asked to rate their experience, leaving both positive and negative feedback that others can view. Transparency like this helped build a sense of accountability and security, making the shared economy more reliable to a wider audience.

As the shared economy evolved from an informal, community-driven idea into a tech-fueled global phenomenon, it became clear that regulations designed for traditional businesses didn’t always apply. 

Early platforms like Uber and Airbnb operated in a legal gray area, often bypassing existing regulations for taxis, hotels, and employment. This allowed them to scale quickly, but it also attracted scrutiny from governments and competitors in traditional industries.

Initially, regulators struggled to keep up. By 2010, major cities like New York, San Francisco, and London began clashing with shared economy platforms over issues like zoning laws, safety standards, and worker rights. 

For example, Uber faced backlash from taxi unions that argued the platform’s drivers were operating illegally, without licenses required for professional drivers.

Likewise, Airbnb hosts were often in violation of local housing or zoning laws, leading to lawsuits and regulatory crackdowns in popular tourist cities.

However, this regulatory pushback also marked an important evolutionary stage for the shared economy. 

Over time, governments worldwide began to adopt laws and introduce frameworks that allowed platforms to operate more transparently. 

In some cases, platforms themselves introduced self-regulation mechanisms to improve safety and compliance, such as background checks for Uber drivers or insurance coverage for Airbnb hosts.

Significant milestones in this regulatory evolution include:

  • In 2017, the European Court of Justice ruled that Uber operates as a transport service and must comply with local taxi regulations.
  • In 2019, California’s Assembly Bill 5 (AB-5) sought to classify gig workers like Uber drivers as employees, not independent contractors, to ensure they received labor protections such as minimum wage and benefits.
  • In 2019, Airbnb agreed to share data on its listings with New York City to help enforce local rental laws following legal disputes.
  • In 2023, New York passed a law (Local Law 18)  restricting short-term rentals in certain areas to limit Airbnb’s impact on housing shortages.

Regulatory adaptations signal a maturation of the shared economy. What started as a disruptive and largely unregulated movement has evolved into a more structured industry that balances innovation with legal oversight.

The shared economy offers a future where resources are maximized, industries are disrupted, and individuals have more control over their time and income.

What are we getting from this shift? A world where collaboration, flexibility, and sustainability are the cornerstones of everyday life.