“On-demand economy” is a term coined to describe an app-enabled marketplace that instantly matches those who need a product or service with those who can provide such products and services. The largest and most visible example of a real-time, on-demand marketplace is the ride-sharing company Uber. So many startup companies are modeled on Uber (for markets other than ride-sharing) that tech and finance pundits refer to them as “Uber for X” businesses. Other terms used to describe the on-demand economy, or facets of it, include the “sharing economy,” the “access economy,” the “gig economy,” the “1099 economy” and others.


Long before the iPhone was created, marketplaces existed to connect those who had a need for a product or service with providers of such services and products. How long before? It started in pre-historic times. The week after fire was discovered, someone got venture funding for a “fire delivery” service.

At its core, the concept of matching buyers with sellers is what the entire market economy is all about. Even in the web era—but before the age of the smartphone app—online talent marketplaces existed for anything from computer programing to voice-over narration.

How smartphone apps enabled online marketplaces to become the on-demand economy

With location-aware smartphone apps connected to the Internet, new types of marketplaces were possible: Soon came the introduction of real-time, any-place fulfillment platforms that could power marketplaces that met the the instant-gratification and instant-fulfillment expectations of the digital age.

So long temps and freelancers, hello gig economy and 1099 workers

One of the business model theories on which the on-demand economy has been established is that providers of services are not employees of the app creator, but are independent workers (sole proprietors, freelancers, etc.). Because the providers in these marketplaces are self-employed, the on-demand economy has also been dubbed the gig economy and the 1099 economy (for the Form 1099 used when filing self-employed tax returns).

Uber for X

The largest example of the kind of company that enables on-demand economic activity is the ride-sharing company Uber. The company’s technology matches those who need a ride with a driver who is willing to provide a ride. Using the technology provided by the Uber App, the driver and passenger are paired instantly and the driver follows a GPS map to pick up the passenger.

Uber’s success and astronomic growth (150,000+ drivers, $50 billion valuation) have inspired an explosion of startups that are trying to create similar marketplaces for apartment cleaning (Handy); the delivery of groceries (Instacart); having ones clothes washed (Washio); and flowers delivered (BloomThat); etc., etc.

Uber’s success has led to an entire industry of startups nicknamed “Uber for X” companies.

Uber and Uber for X companies are trying, in one way or another, to efficiently allocate human beings and their possessions, rather than information.

Reality vs. Perception

In March 2014, Wired magazine ran a long feature by one of its reporters who spent time working at several “gig-economy jobs.” Her experience did not match up with the levels of income the companies used in promoting to potential service providers.

On the other hand, SmallBusiness.com contributor Steve King has explored the potential for a “talent war” where higher and higher prices will be demanded by fewer and fewer service providers.

Legal issues

Another challenge on-demand startups are facing is on the legal front and related to the classification of workers by the IRS (employee or independent contractors). If the IRS rules that service providers participating in on-demand marketplaces are actually employees of companies like Uber, one of the foundations of the entire on-demand concept could dissolve, changing the economics of such startups dramatically. Many of the on-demand economy startups, including Uber, are involved in major lawsuits over this issue. Uber and other companies have already found it necessary to address these issues, as well as the liability issues related to protecting the lives and safety of passengers.

Related Articles

Growth in Uber-model On-Demand Economy Startups is Spurring a Secondary Wave in ‘Pick Axe’ Startups

A look at the growing array of startups that want to provide support services for on-demand economy companies.

Lawsuits are Clouding the Future of On-demand (Gig) Economy Startups

The difference in the definition of independent worker and company employee is becoming an important factor in the future of on-demand economy startups like Uber.

What’s Behind the Backlash Against the On-Demand Economy and Independent Workers?

The majority of independent workers prefer being independent. However, a sizable minority don’t like their work and would prefer traditional employment.

The On-Demand Economy May Be Headed for a Talent War

Are there enough independent contractors to meet the demand for the on-demand workers necessary to operate these companies?

“Are Uber Drivers Employees of Uber?” and Why The Answer is Important

Agencies like the California Labor Commission have issued rulings that Uber drivers are employees, not contractors. What does that mean to the future of the “on-demand economy.”

Amazon Expands its On-Demand Marketplace of ‘Home Services’ in 15 U.S. Metropolitan Areas

Amazon continues to go local with the expansion of Amazon Home Services, an on-demand marketplace to match customers with home-related service-providers.

What Were They Drinking? Startups Focusing on Same Day Alcohol Delivery

Same day alcohol delivery — wine, beer and spirits — is the last frontier in convenience and on-demand local delivery,

Coverage of an On-demand Economy Backlash Continues to Miss the Positives

The majority of on-demand workers like what they are doing, a fact missing from coverage suggesting there’s an on-demand economy backlash.

Google Testing a Search Tool for the On-Demand Economy

Google is testing a search-engine enabled on-demand marketplace.

Amazon Prime Now Drivers Join in On-Demand Economy Lawsuit Parade

Amazon.com is being sued in California courts by former Amazon Prime Now delivery drivers in a proposed class-action suit.

Amazon Moving Ahead of Google in Home Delivery Race, What That Means for Small Business

Amazon Prime Now is in 20 markets compared to Google Express’ seven.

On-demand Economy Participants Typically Work 12 Hours a Week to Augment Household Income

Augmenting their household income is the primary reason independent workers participate in the on-demand economy.

New Small Businesses Are Emerging From the On-demand Economy

The on-demand business model is growing the segment of small business called “sole proprietors” or “single employee” businesses

The Five Faces of the On-Demand (Gig) Workforce

Participants in the on-demand (gig) economy fall into different groups, different motivations and different levels of satisfaction.

Small Businesses Using On-Demand Economy to Access Tech Talent Pool

Because of the wave of on-demand economy companies, even the smallest of small businesses can use an app to connect with independent tech workers.

Yelp Joins Google, Amazon and a Slew of Startups in Home Services On-Demand Marketplace

Yelp adds Request a Quote feature to participating service providers.

Uber Settlement Defines Drivers as Independent Small Businesses, Not Employees

Uber has agreed to a class-action lawsuit settlement with drivers in California and Massachusetts

Shopify’s Ecommerce Merchants Can Now Offer Local, Same-Day Delivery in 200+ U.S. Locations

Ecommerce software provider Shopify is teaming up with on-demand same-day delivery service Postmates.

Uber Didn’t Create the On-Demand Economy, The On-Demand Economy Created Uber

Uber exists because of the growing need for highly flexible part-time work to supplement incomes.

Voters’ Decision Keeps Austin Too Weird For Uber, Lyft

Uber and Lyft, the ride-sharing, on-demand economy companies, lost a key vote by focusing on the wrong messages.

Employers Prefer Full Time Workers, But Agree That On-Demand Economy is Here to Stay | 2016

Employers have a love-hate relationship with the on-demand economy.

The On-Demand Economy Workforce Continues to Expand | 2017

Two-thirds of on-demand economy participants say they are satisfied with their work

HomeAdvisor Buys Angie’s List to Grow its Home Services On-Demand Marketplace

To compete with the giants creating new, on-demand home services marketplaces, HomeAdvisor acquires Angie’s List.

Gallup: Most Employees Who Work Varying Hours Like Their Schedules | 2017

According to Gallup, the majority of employees who work variable hours each week report no problems or financial hardship with the variable hours.

Two Small Business Trends That Contributed to Ikea’s Decision to Buy TaskRabbit | 2017

Are the acquisitions of TaskRabbit and Angie’s List pointing to the consolidation of the gig economy?

How the On-Demand Economy is Changing Insurance Coverage | 2018

The rise of the on-demand (or “gig”) economy is creating new opportunities for creative insurance brokers.

Taskrabbit, IKEA’s Gig-Economy Home Service Marketplace, Gets Hit By Hackers

The on-demand home-service platform acquired last October by Ikea, announced that it has taken down its site and app in order to investigate a cybersecurity incident.

Why the Bureau of Labor Statistics Estimate of Gig Economy Workers Does’t Add Up

The BLS research excludes millions of people who do gig work as moonlighters or as a second job.

‘Last Mile’ On-Demand Delivery Battle Continues to Heat Up | 2018

The need for on-demand grocery delivery services heats up the battle for drivers and new models of work.

Freelancer Marketplace Upwork’s IPO is Another Thumbs-up for On-Demand Economy

Upwork’s initial market capitalization was nearly $1.6 billion.

Food Delivery Services Continue to Expand, Raise Funds

The growth of delivery services will mean more opportunities for small and local food stores and restaurants.

IRS Advice for Gig Economy Small Businesses | 2020

IRS provided advice for participants in the gig economy.

On-Demand (Gig) Economy Tips & Advice From the IRS (2020)

Gig economy income is taxable no matter what the source. This is true if the work is full-time, part-time or if an individual is paid in cash.