Investing in the Gig Economy? There’s an ETF for That

It’s your partner’s birthday, and you want to do something special for the occasion. You whisk them away in an Uber to a charming little Airbnb ( ( ABNB ) – Get Airbnb, Inc. Class A Report ), order a romantic dinner delivered by DoorDash( ( DASH ) – Get DoorDash, Inc. Class A Report ), and then gift a stunning pair of artisan earrings that you bought on Etsy. Sound familiar? Welcome to the gig economy. Contents

What Is the Gig Economy?

According to the IRS, the gig economy includes an activity where people earn income by providing on-demand work, services, or goods, often through a digital platform like an app or website [1] . Gig work can include things like renting out a room or home on a short-term rental site, driving for a ride-hailing company, selling goods online, tutoring or performing a specialized professional service. For some people, gig work is a side hustle, something they do in addition to their day jobs to earn some extra cash. For others, it is their day job–it’s how they make a living.

The gig economy encompasses a wide range of goods and services, however, they are generally divided into four primary categories. Graphic: F our primary categories of the gig economy 1. Transportation-Based Services

Transportation services make up a whopping 57.8% of the gig economy in the US [2] . The main players in the field are ride-hailing platforms like Uber and Lyft, but upstarts like Juno and Via are also making their mark. 2. Asset-Sharing Services

This is the number two sub-section in the gig economy, coming out at a bit over 30% of the total market value. Airbnb is the clear market leader, as well as the dominant economic player. Since going public in December 2020, the share price of Airbnb has increased 200%, and Airbnb’s market cap of $130 billion is larger than all other online travel booking sites [3] . Airbnb isn’t the only player either–co-working companies and other vacation rental platforms are also generating significant revenue. 3. Handmade Goods and Miscellaneous Services

Etsy ( ( ETSY ) – Get Etsy, Inc. Report ) is the dominant platform for handmade goods, but marketplaces like IndieCart and iCraft also have devoted consumers. The miscellaneous services category encompasses sites like TaskRabbit, Fiverr, and DoorDash as well as tutoring, home care, and anything that doesn’t fit in the other categories. Yet despite the variety, this category makes up only 8.2% of the gig economy [4] . 4. Professional services

The professional services market gets a lot of attention, but surprisingly, it only makes up 3.8% of the gig economy [5] . It includes all types of professionally trained freelancers, but the design and tech fields are dominant, for example, graphic designers, website builders, writers, QA professionals, and more. There are a variety of field-specific platforms that support professional services gig workers, and general platforms like Upwork that support many types of professional freelancers.

There is some disagreement about what should or shouldn’t be considered part of the gig economy. However, no matter how you define it, there is no question that the gig economy is huge, and it’s growing at a staggering rate. Experts estimate that over half of US companies rely on freelancers or independent contractors for some aspect of their business. A 2020 survey commissioned by Upwork found that 59 million Americans had freelanced within the previous 12 months [6] . According to predictions, as much as 60% of the workforce will be independent by 2027 [7] . History of the Gig Economy

The gig economy isn’t new–people have always offered various assets and services for pay without a formal employment setup. However, in the internet age, through various online marketplaces, it’s possible to offer services on a much wider scale than in the past.

Craigslist was the maverick in the field. Originally created in 1996 as a way to advertise local events, within a short time it became a marketplace for everything, including gig work. Then, in the 2000s with the advent of smartphones, gig economy apps started sprouting up like mushrooms after the rain. The gig economy exploded with massively successful platforms like Uber, Lyft, Airbnb, Etsy, and TaskRabbit that made the gig economy accessible to both buyers and sellers 24/7, from wherever they are. When the 2008 economic crisis hit, the gig economy got an additional boost. With people strapped for cash, and employment harder to find, the gig […]

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