Task Rabbit Essay

The rapid growth of telecommunications and web technologies has led to the development of new business practices such as freelance employment, remote work, virtual teams, outsourcing and crowdsourcing. In the course of time, business landscape is changing driven by these ideas and Web 2.0 enhancements. The purpose of this assignment is to analyze the idea of crowdsourcing as well as to consider potential pitfalls and legal issues of a startup called Task Rabbit (former RunMyErrand) – the service which connects busy people lacking time to perform certain tasks with people who have extra time and cam help to complete these tasks.
In general, crowdsourcing is the process of outsourcing certain tasks which are commonly performed by contractors or employees to a community (a large group of people with no predefined individuals to execute these tasks). It is supposed that this group consists of experts able to complete the task quickly and at a competitive price. The innovative idea behind crowdsourcing is flexible distribution of time and money and optimization of talent pool according to the set of tasks. The startups utilizing the principles of crowdsourcing implement a win-win situation for employers, or task creators, and for people executing the tasks.
Task Rabbit is one of the vivid examples of successful crowdsourcing ideas. This is basically an online/mobile marketplace for getting everyday tasks done in local community. This project was chosen as one of 25 featured startups at fbFund in 2009 (Roush, 2009). In October 2009 the project has attracted two investors, Maples and Baseline, and the investments comprised $1 million (Roush, 2009). This networking service originated in Boston, and recently launched its departments in San Francisco and the Orange County (Roush, 2010). The greatest need for such crowdsourcing is in the large cites where there are many overworked employees and busy managers.
Participants of the project are Task Posters and Task Runners. Anyone can become a Task Poster and request certain help using Task Rabbit; Task Runners represent the community of people with flexible schedule who are available during the most part of the day and can complete the tasks. The company runs a background check for Task Runners and accepts only trusted individuals to complete the tasks. After posting a task, Runners in the available location are notified of the task and can place bids. Task Poster has to perform the following sequence of steps (TaskRabbit: Terms of Use, 2011):
Posting a task
Selecting the best bid
Waiting for the task to be performed
Online payment and reviewing of Task Runner’s work.
Although the business model seems fairly simple, it has certain distinctive advantages and certain potential pitfalls. First of all, the greatest business advantage of Task Rabbit is the absence of large bulk of inventory and expenses related to hiring full-time or part-time employees. Task Rabbit is not a business agent, but rather a community tool allowing people with time and people with money to help each other.
Task Rabbit should pay more attention to legal issues, and there is a clear need for refining its “Terms of Service” page. First of all, the company should clearly state that it is not an employer, and that Task Runners can be the subjects of taxation. Moreover, if they get a certain monthly/annual income, they will have to sign either 1099 or W2 statement (Hoffman, 2003). If Task Runners fail to comply with the regulations and do not make voluntary tax payments, they will be penalized and sanctions from the State Employment agencies or IRS can follow. Currently the company is transferring the responsibility for tax payments to the Runners (TaskRabbit: Terms of Use, 2011). I believe that Task Rabbit should clearly explain this issue to Task Runners and place notifications of possible liabilities of the Runners where possible, and should try to integrate compliance with taxation procedures into their services.
Another source of potential legal issues is the fact that Task Rabbit can withdraw payment from the Task Poster’s credit card. If there are disagreements between Task Runners and Task Posters, the former can sue the company for illegitimate withdrawal of funds. Rather than allowing the transactions to take place without pre-payment, Task Rabbit might introduce an escrow system (Hoffman, 2003), where the payment will only be transferred if Task Poster and Task Runner reach agreement and the task is already performed, or if the issue is specifically resolved by the company.
Among other potential pitfalls of Task Rabbit are the issues of trust between Task Posters and Task Runners, security of transactions and distribution of personal information of the participants, possibility of posting inappropriate content or illegitimate tasks, and the vulnerability of the business model to replication. Task Rabbit currently performs background checks for Task Runners (TaskRabbit: Terms of Use, 2011), but the process might get complicated when the project enters 10+ large cities. Task Rabbit should include the expenses related to selection and checking the Task Runners into their business plan, since this factor is going to be significant.
Secondly, Task Runners and Task Posters get access to personal data of each other when the bid is accepted, and this is a potential threat to personal security. The company might have to face legal issues related to storing sensitive information, and will therefore be the subject of appropriate laws. In fact, the best method would be not to reveal personal information, and rather to let the participants communicate through a separate system of messages and calls. This is quite an expensive system, but it will further strengthen the business model of Task Rabbit, and will reduce the number of possible legal issues. In addition to this, Task Rabbit has to hire a lot of moderators and editors controlling the tasks and employees with regard to inappropriate content.
Finally, the greatest vulnerability of Task Rabbit is the fact that its business model can be easily copied and a number of competing services are already developing in large cities such as Los Angeles and New York. Large companies with significant budgets available might easily outperform Task Rabbit by aggressive expansion and advertising (Acs & Audretsch, 2010). In order to stay competitive, the company should actively seek for investments, introduce innovative features and expand its services to as many cities as possible. In addition to this, the company should work on adjusting of its business model in terms of personal security, trust to Task Runners and speed of service. The company has strong chances for success, but it should act quickly and constantly innovate in order to stay competitive.