The On-Demand Economy Continues to Grow

THE ON-DEMAND ECONOMY GREW 58% IN 2017, according to new data from the National Technology Readiness Survey (NTRS) by Rockbridge Associates.  The study has tracked technology behaviors and beliefs in the U.S. since 1999. The most recent study, conducted in November 2017, surveyed 1004 U.S. adults sampled at random from a consumer research panel.

For two years in a row, the NTRS included questions designed to capture awareness and purchasing trends in the on-demand economy.  In this study, on-demand services were described as follows: “Some consumers may purchase services or products from an ‘on-demand’ platform that uses a website or app to connect them directly with the person who provides the service or product.”  To accurately estimate usage and spending for this innovative type of service, a comprehensive set of questions were used that captured purchase incidence, frequency and spending by category, while also adjusting for potential errors in classifying services.  For example, if a consumer indicated they used an on-demand “housing” service, more weight would be given to their responses if they said “Airbnb” versus “Hilton”.  Results were projected to the U.S. adult population (18 years and older) with internet access in the home.

Participation in the on-demand economy has increased by two-thirds (66%) since 2016, and an estimated 41.5 million consumers purchased on-demand goods or services in 2017 (compared to 24.9 million in 2016).¹ At the current growth rates, we estimate that the total consumers in the U.S. will be about 56 million by 2018 and about 93 million by 2022.

About the National Technology Readiness Survey (NTRS)

The NTRS has tracked consumer technology trends since 1999.  It is authored by Rockbridge Associates, Inc. and A. Parasuraman, and is co-sponsored by the Center for Excellence in Service, Robert H. Smith School of Business, University of Maryland.  The study is conducted online among a representative sample of consumers in a national panel, and represents the views of U.S. adults ages 18 and older.  The sample size was 1,032 in 2016 and 1,004 in 2017.  The margin of error is +/- 3 percentage points.

We estimate total spending for on-demand products and services at $75.7 billion in 2017 (compared to $48.0 billion in 2016)¹, an increase of 58%. The categories in the on-demand economy that have seen the most growth include housing (from $5 billion in 2016 to $10.6 billion in 2017), transportation (from $6.8 billion in 2016 to $14.2 billion in 2017), and food delivery (from $3.9 billion in 2016 to $8.2 billion in 2017).  Long term revenues in the market will depend on the types services that consumers gravitate toward and the new service categories that arise.

Awareness of on-demand services has nearly doubled in the past year, with 34 percent of consumers indicating they have heard of these services in 2017, compared to 20% in 2016.¹  Consumers increasingly see advantages in using on-demand services, the major benefits including: ability to find the product or service online using a website or app (70%), the ability to pay and track progress online (62%), and being connected directly to another person instead of a company (52%).  These perceived advantages have increased from 2016 to 2017, particularly the ability to use a website or an app.  While connecting service providers and buyers directly is a unique feature of the on-demand economy, the value proposition for stems more from the functionality that is provided by on-demand platforms.

On-demand economy consumers tend to be younger, more educated and affluent, and more concentrated in urban areas.  Specifically:

  • 55% are between 25 and 44 years old
  • 59% are male
  • 45% have a four year college degree or higher
  • 54% live in a suburb and 18% live in an inner city
  • 68% report an annual household income of at least $50,000, while 47% report an annual household income of at least $75,000

The on-demand economy has a considerable room to keep growing due its innovative nature.  The adoption rates can be compared across Technology Readiness Segments that range from the most “techno-ready” (and early adopters) to the least “techno-ready” (laggards).  In 2017, penetration in the early adopter Explorer segment was 41%, more than double the penetration of 19% the previous year.  Further, penetration in the next most likely to adopt segment, Pioneers, was 24% (up from 19%), and was only 6% among the least techno-ready segment, Avoiders.  This means that there is potential for the less techno-ready segments to catch up to the more techno-ready segments, driving growth along an adoption curve.  Notably, the high penetration rate and one year growth rate among Explorers suggests the long-term size of the market may be substantial.


Source: National Technology Readiness Survey, Rockbridge Associates, Inc. & Robert H. Smith School of Business

¹ Accounting for measurement noise, we believe that the lower and upper bounds on estimates of the size of the number of consumers is between 16.6 and 33.1 million in 2016, and 27.9 and 54.3 million in 2017.

² Accounting for measurement noise, we believe that the lower and upper bounds on estimates of the annual revenues is between $31.1 billion and $67.3 billion in 2016, and $49.2 and $106.3 billion in 2017.

³ Question: Some consumers may purchase services or products from an “on-demand” platform that uses a website or app to connect them directly with the person who provides the service or product.  Have you heard of these?  Results: in 2016, 19.5% said “yes” and 18.5% said “maybe”.  In 2017, 34.3% said yes and 17.4% said “maybe”.

Written by: Kelly Bell, Director and Charles Colby, Chief Methodologist