Gig Economy

Care.com Deal Offers A Premium, But (Trust) Issues May Linger

Care.com IAC deal

This is a platform that will take some, well, care.

As reported Friday, Dec. 20, IAC, which operates several media brands, announced a pact to buy Care.com for about $500 million.

The Wall Street watchers may be focused on the mechanics of the all-cash deal, where IAC will pay $15 a share, and the premium over Care.com shares, which fetched $13.25 a share on Thursday.

But behind the payout lies the fact that there is still work to do, where trust, that most precious of commodities in business, needs some shoring up.

As has been widely reported, controversy surrounded the company earlier this year, when the Wall Street Journal reported that there were lapses in background checks of caregivers and that in at least some cases, unlicensed people — and in some cases, individuals with criminal records — were taking care of youngsters or the elderly.

The Journal also reported at the time that hundreds of daycare centers were listed on Care.com, falsely advertised as having state licenses in place. In at least one case, an individual’s listing the site remained up for weeks after a police report was filed against him for child molestation.

Care.com had responded that only “preliminary screenings were in place” — though parents and other subscribers to Care.com could opt for more detailed background checks, which cost hundreds of dollars more.

Back in August, Founder Sheila Liro Marcelo resigned as CEO, and activist investors pressed for a sale.

So now the sale has been inked, and in an interview in the wake of the announcement, IAC CEO Joey Levin told CNBC in an interview that “safety is going to be a top priority for us. It is on all of our platforms.” and added that “you’ve got to do things like background checks, and you got to give tools to both sides of the market place to make sure people are safe,” he added.

Levin has stated that caregiving is a “huge marketplace” worth as much as $300 billion just in the United States, and the company, with 374,000 paying families in place as of the third quarter of 20189, will be undergoing a number of operational changes.

That includes a number of “transaction adjustments” that were not defined in more detail, at least upon last week’s announcement. But Levin said that the moves would entail not just showing who is available to give care, but match supply and demand and “make that transactional on the platform.”

In only two examples, a few years ago Uber paid $28 million over its “safe rides” fee and faced criticism over reports that it hired several drivers that had criminal convictions that would have prohibited them from driving taxis. And in another example, in Canada, Airbnb is being sued over a shooting at a rental that alleges the platform failed to vet the person renting the property and the renter.

The Critical Element

These are isolated incidents amid millions of bookings that occur across these and other sites annually.  But they illustrate the fact that for the two-way relationship between suppliers and buyers to work – no matter the vertical or the focus of the goods and services on offer – trust is a critical element.

A recent report done in conjunction with PYMNTS and Mitek, titled “Who are You? Verifying Digital Identity in the Sharing Economy,” illustrates the role digital platforms must play in creating trust.  Only slightly more than 26 percent of sharing economy platforms require new users to verify their identities by submitting ID documents online. And there is at least some level of comfort and acceptance with friction.  About 68 percent of consumers who are asked to provide proof of their identities online reported being “very” or “extremely satisfied” how they were asked to provide that information. Clearly they do not mind losing a bit of speed in return for peace of mind. In a recent interview with PYMNTS after Airbnb said that within a year, all Airbnb rental properties will be “verified” using a combination of guest and host inputs, Mike Gramz, executive vice president and chief risk officer at Yapstone said that, when it comes to  the sharing economy “if you lose trust, you lose the business.”

And, as the platforms gain traction (there are estimates that 111 million individuals use these platforms) documentation that people are who they say they are, and are qualified to do what they say they can do, is especially important when booking services with a human component.

The two-sided marketplaces that focus on services, we’ve said in this space before, have a responsibility for verification, deep checks on qualifications — and perhaps become table stakes for online marketplaces.

And what becomes table stakes shifts from being an incremental top-line driver that can become only a liability — if you don’t do it right, consumers will vote with their feet, and quickly.

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