Failure of On-Demand Platforms- Reason & Solution

Forecasting the future of your on demand service platform and importance of having a plan to scale it - Odtap

The glaring success of the on demand era has given birth to a school of thought among the tech community. They have started believing that following the uber business model and entering the on demand industry will be the only move that is keeping them from reaching complete success.

While it has worked for a number of businesses like GrubHub or Airbnb, the number of businesses that have failed are also extremely huge. In fact, if you sit down to make an excel sheet comparing the on demand services fail vs success ratio, you will find that the number of businesses that struggled to survive were more than those which didn’t.

But does this mean that you should give up hope on your on demand platforms’ business success and give up? Of course not. What it implies is that when you plan to succeed in the crowded on demand market, you should also factor in the reasons behind the application’s failure.

The intent of this article is to help with just that.

Table Of Content 

  1. Understanding Uber’s Success in the on demand sector
  2. The List of on demand Brands That Failed Miserably
  3. Reasons Behind on demand Business Failure
  4. How Can on demand Businesses Save Themselves From Shutting Down Prematurely?
  5. Conclusion

Understanding Uber’s Success in the on demand Sector

Uber Loses License to Operate in London - WSJ

When you dissect the on demand economy, you will find that it is mainly built on three building blocks: delivery immediacy, consumption passivity, and a fixed cost. Uber did not just ticked all the three boxes of the on demand business model, but also aced some other factors that helped it build a seamless ride booking user experience.

Here are the two factors which added to the brand’s success, making it one of the most successful on-demand companies:

  • The company operates in populated urban cities where there’s enough liquidity for making the marketplace work.
  • The customer base were already very familiar with trusting a stranger to take them places. Thus, creating a trust in the market was never a problem.

The Uber model doesn’t care about the transaction’s intimacy aspect nor about the disintermediation challenges. Imagine once you on demand home service app users find a person they like for cleaning their house or planning their kids, how would you stop them from contacting those service providers directly, without going through your application? This disintermediation when continued can lead to greater burn, churn, and in some cases extinction of the business.

Since the Uber model didn’t include the need to care about intimacy, they could survive and grow on a much greater speed. But not every Uber-like story has a happy ending. There are a number of once top in the game on-demand platforms that have fallen owing to the on-demand challenges.

The List of on demand Brands That Failed Miserably 

1.  Happy Home Company 

The Happy Home Company | LinkedIn

Happy Home Company was a twist in the otherwise traditional home service market. The idea behind the brand was to offer users home maintenance plans which included recurring things that had to be kept in top working conditions. Inspite of bagging $7 million from investors, Happy Home’s founder wrote a shutdown letter which stated, “Ultimately we weren’t able to make the transition from a scrappy startup to self-sustaining company.”

2.  Pronto

Team Communication Software | Pronto works better

The business was set out for helping people get healthy meals faster. The UK based service had the work with the intent of connecting the users with chefs while enabling food delivery in under 20 minutes. It had every element to make it one of the most flourishing on demand delivery apps. Even though the idea sounded good to investors and adopters, the company couldn’t keep up with the promotion budgets of Uber and Deliveroo – one of the very commonly occurring on demand challenges.

3.  Workers On Call 

Why call centre workers love to use your name – and why it's really annoying

AI has changed the face of work, this is something that has been established over time. The Workers On Call services used AI systems for streamlining matching of employers with freelancers who needed jobs. The application that boasted of freelancers getting matched and started to work in under 30 minutes, although backed by a powerful vision, was a little ahead of its time. The brand even after raising $30K funding, signed off with a tersely message saying, “Bye Bye. Sorry Workers On Call is closed.”

4.  Homejoy 

Homejoy shuts down amid lawsuits over worker misclassification – The Mercury News

One of the textbook examples of failed the businesses is Homejoy. Started with $20,000 seed funding in 2000, the business became a big name in 2013 when it raised $38 Millions – making it one of the most successful on demand startups. But soon the customers started failing to convert past their first booking. In fact, only 15-20% people re-booked in a month. The numbers were simply not enough for the brand to survive. Add to this the legal battles against classification of workers a s independent contractors led to the business’s death in 2015.

[Further Read: Why Did HomeJoy Failed]

The truth of the hour that still remains is that even after these on demand platforms failure instances, the fact how the internet has trained consumers to get services in real-time is not stopping budding entrepreneurs from entering the on demand economy. But how can businesses ensure that they are not destined to become yet another name in the list?

While one way to get some satisfaction would be to partner with an on demand software development company that has worked with the inception of popular on demand businesses, it would also help to know the on demand services failure reasons that can lead to their failure.

Reasons Behind on demand Business Failure

1.  High Competition

Is competition in the workplace good or bad?

The upsurge of hyperlocal service demand has led to a rise in demand of on demand services attending to the complete needs of their customers. One way entrepreneurs are competing in the market is by lowering their service costs. This, in addition to the high operational costs of transportation, infrastructure, and labour has been keeping on demand startups from flourishing.

2.  Reluctance among Venture Capitalists 

Building Radar: Silicon Valley investor funds Bavarian technology start-up - Invest in Bavaria

With on demand failure stories shooting off the roof, investors have started becoming wary of where to put in their money. As it is, getting funded on your application has been a difficult process and when you add in the unsureties that the sector now comes with, the probability of raising money lowers even further.

VCs are now becoming all the more cynical about the startup’s longevity. Businesses that are promising a strong long-term vision with a cash flow picture backing it have become the only answer to the types of apps investors will be backing in 2020.

3.  Product Incompetence 

Article: Overcoming the Unconscious Incompetence Hurdle at Work — People Matters

If there is one event that follows every successful startup, it would be the fact that competitors are soon to follow. The value that your business once offered starts getting challenged and bettered by the competitors. This, in turn, is leading to the product becoming incompetent in the market, irrespective of the efforts that went behind on demand app development services.

Brands that are failing to keep up with the changes with timely pivots are soon finding themselves crawling out of the on demand space.

4.  Inefficient Resource Set 

Human Resource Insights #2: 4 Signs of Inefficient HR Departments | Credait

The lack of an experienced set of people can most often than not result in the failure of on demand companies. The same applies for the on demand industry. Irrespective of which on demand domain you pick, you will find that the ones that survived were known for their skilled workforce. A lacking on this front can lead to on demand business losing their worth in the industry and thus get closer to their demise.

5.  Not Being Able to Solve Real Problems 

6 Ways to Enhance Your Problem Solving Skills Effectively

A number of on demand companies that fail deal with band-aid type of problems in place of emergency room type problems that make the solution extremely non attractive to the end users. Example: For example, imagine an on demand car wash service. Just how frequently would users demand the service? But the expenses a business will have to make to keep it afloat would be huge. In short, the business neither ends up being cost-efficient nor effective.

6.  Under or Over Valuing Demand and Supply 

Demand And Supply Balance On The Scale. Business Concept Royalty Free Cliparts, Vectors, And Stock Illustration. Image 87121470.

The last in our list of reasons that tend to lead directly to business failure is under or over valuation of demand and supply that your on demand business would garner. Businesses, more often than not undervalue the demand that they would attract and thus plan low on supply. Likewise, they at times think too much of demand and end up with an underutilized supply of resources.

Now that we have enlisted the most common reasons behind an the app business failure, let us dive into the way outs – how can on demand businesses prevent this fate.

How Can On demand Businesses Save Themselves From Shutting Down Prematurely?

Market Expansion

A Complete Guide to Market Expansion Strategy – Welp Magazine

One of the biggest issues with today’s top-on-demand businesses is that they don’t expand from their existing markets. The entrepreneurs who are very new to the industry end up being limited to a pool of loyal customers and don’t think of expansion opportunities. The problem with this is that the moment a new competitor with deep pockets enters the market, the probability of them getting out of business increases.

Here’s a look into the expansion roadmap that we generally share with our clients when we assist them with on demand app development.

Make Your Customer Needs Your Bible 

Build Your Business on Faith: 55 Bible Verses About Business

In the fight between what you can offer and what your users need, your offerings should always prevail. Although it can be a sweet attraction to invest in tomorrow’s big need, it can be extremely unwise to let go of your customers’ present day needs.

The truth is that you will get a multitude of opportunities and time to pivot your startup. But what you won’t get is the current time and your users present day needs. Getting insights into this information is what a sound on demand mobile app development company can help you with.

Think of Being Monetarily Prepared First 

The matter of the modern day fact is that it is very difficult to get funding on an application. No matter how well propositioned your application is or how green your cash flow statement looks, there is zero guarantee of you getting funded.

The solution on this front can only be to look into alternate financing options and not remain limited to VCs.


The growing cases of on demand industry failures have led to the sector getting the image of being a house of card. The only way for entrepreneurs to enter and succeed in the domain would be to do extensive user research. One way we suggest to achieve this effortlessly can be through the mode of product design and development sprint – one of the key practices that on demand app developers follow.

On-Demand App Development Guide: Startups to Rule

The Fundamentals of On-demand App Development - Algosoft apps technologies

The on-demand business sector has established itself to be a successful business model ever since it started mushrooming post-Uber launch. The concept with which Uber was launched – to give users the ease of booking a ride in real-time at a cost point that is lesser than the booking cost of traditional commutation models – took very little time to get adopted by other service industry sectors. While the on-demand economy was earlier restricted primarily to on-demand ride-hailing businesses, today it has become a part of a number of sectors: food delivery, at-home services, legal and healthcare consultation, amongst others. The result of this expansion is that the on-demand economy has today become a revenue and funding magnet. It is safe to say that the on-demand economy is reshaping the whole world around us.

While the expansion is good for the economy, it comes tagged with a prominent challenge for businesses – high competition.

This article cum mini-guide is for every entrepreneur who is brave enough to start their business in a crowded market. A guide on how to start an on-demand business.

Let us start by looking into the reasons that are driving entrepreneurs to enter the on-demand business domain.

Reasons Why On-Demand Service App Development Is Witnessing A High Demand

While the constant innovations made by the on-demand startups have played a pivotal role in the rise of on-demand industry demand, the inscribed advantages like accuracy, timely delivery, and cost advantages etc. have made them a prominent category in the overcrowded mobile app industry. Here is a bulleted view of the reasons that have brought a rise in on demand app for startups and subsequently in on demand app development company.


Convenience is key in the digital age - Raconteur

People are generally more inclined towards services that they can conveniently book and avail for real-time usage.

Nearby Service Availability 

Increase availability stock illustration. Illustration of serviceability - 31012635

Users find it attractive when the service they are seeking is being delivered on their doorstep or vicinity. This is the number one reason why on-demand remained the most profitable business model at the time of global COVID-19 lockdown.

Cost efficiency 

Cost Efficiency for Post COVID-19 Business Optimization

The services offered by the on-demand companies are more often than not a lot more cost-effective than traditional services.

Easy Payment 

Easy Payment Icon Stock Video Footage - 4K and HD Video Clips | Shutterstock

Another factor that attracts users towards on-demand services is the fact that they offer a very easy mode of payment happening mostly over the app screen within a few clicks.

Even though these four reasons are the main ones acting as the driving force of the on-demand economy’s demand, the one that has given the industry a major push is a changed consumer behavior that acts on ease and convenience.

These reasons altogether have created an economy that is flourishing to great heights at a very lightning speed. A statement that can be validated by the fact that even after the fifties of on-demand companies on mobile, the industry is seeing no stoppage in terms of new app launches.

On this note, let us look at the on-demand market before we move on to the factors that the on demand app builders swear on to help you succeed in the industry.

The State of On demand App Solutions Market

While there are a number of statistics that prove the on-demand economy is flourishing, let us nevertheless look at the sector in terms of the potential of growth it shows, even when the industry is already crowded by a number of players.

Disclaimer: *The insights mentioned here are the excerpts of the researched-backed writeup we did on the state of the on-demand market (linked above). 

Let us delve into the on-demand market from two fronts – A. On-demand Players and B. End Users.

The benefit that the on-demand market has to offer to the players who are active in the industry can be estimated on two fronts – A. In terms of Revenue and B. In terms of Investors’ Interest. 

In terms of Revenue:

What is a revenue team? (definition + video) | IMPACT

What was just an introductory trend has now become mainstream with increased revenue count. It is not just the domain that is witnessing great numbers in terms of revenue and profit, the growing revenue chart is making a regular appearance in the individual on-demand player’s Profit and Loss statement as well. This growth in revenue can be attributed to a number of factors like the ease that users get at the back of every on-demand app experience or the fact that the on-demand industry has emerged as the ideal work economy for millennials. This growing revenue number that has now become prevalent in the on-demand mobile app startup industry is only going to strengthen further – a statement that has been validated by PwC. According to a PwC report, the on-demand economy revenue which was $14 Billion in 2014 will reach $335 Billion by the time we reach 2025.

In terms of Investors’ Attention:

List of top, most active 30 angel investors in Delhi-NCR | The Indian Wire | IndiaMART

Business models of on-demand startups such as Uber, Airbnb, and Bird e-Scooters, which form the on-demand economy, are famous for the fundings that they receive from angel investors to get them the resources they need to grow further. The market that the on-demand industry has captured is the same which investors strive to take a share of. A match that has brought a rise in the funding to on-demand startups. There is a good percentage of investors who couldn’t be a part of the trend when the uber economy was getting incepted but are now prepared to book their share. The investment rounds focused on funding to on-demand startups that started in 2014 with $74 Billion and reached $10,293 Billion in the last quarter of 2017. And if you look into the details of the funding rounds in the on-demand economy statistics, you will find that the major portion of the funding has been coming in from the seed or angel investors.

While these two were the driving force behind the growing attention of business people towards on demand mobile app development, what cannot be ignored is the unwavering demand from end users. 

According to the data collected by the National Technology Readiness Survey in the U.S., it was estimated that the total spending on on-demand mobile app services would increase from $48 Billion in 2016 to $75.7 billion in 2017 – an increase amounting to 58%. The segments of the on-demand startup market, which have witnessed the maximum growth consist of – housing items –  from $5 billion in ‘16 to $10.6 billion in ‘17, transportation, which moved from $6.8 billion in ‘16 to $14.2 billion in ‘17, and lastly food delivery category, which shifted to $8.2 Billion in 2017 from $3.9 billion in 2016. Seeing this growing spending number, Rockbridge estimated that the number of on-demand mobile app startup consumers would reach 56 Million by the end of 2018 and 93 Million by the time we hit 2022.

From what you just read and what the industry is showing, it is clear that the on-demand industry is booming and has proved beneficial for everyone who is invested in the domain. It is now time for the sections where we take your intention to enter the booming on-demand industry and handhold you to become a success.

While we have talked about the whole mobile app development process in detail in our extensive mobile application development guide, the whole process for on-demand is a little different. The ideation stage is a lot more extensive in case of on demand business app development compared to other forms of app types.

Here are the different on demand app development services that are proven to provide success to entrepreneurs.

Which On-demand Service Should You Offer for Having a Better Shot at Success?

6 Reasons Why On-Demand Business is a successful Model for Startups

We have already touched bases on which on-demand models have proven to be the most profitable year after year in this article here – 10+ Industries Backing the Staggering Growth of On-demand Economy

Now, irrespective of which service you pick what helps in starting an on-demand business is identifying services that masses use on an everyday basis and then bring them to the on-demand space. Look at the pain points of the masses, points that are not easily addressed through the mode of the internet.

For example, you can look at the babysitting space where parents usually don’t trust people coming in through the advertisements or craigslist to take care of their child. You can think of a business model which provides babysitting services at the back of proper verification checks.

The idea of finding a service that needs to come on the on-demand market is not to brainstorm around ideas that are yet to make an appearance in the industry but instead look at the existing services that could use some instantaneousness.

Once you have settled on an idea and have the potential that it comes with, the next stage is to ensure that the zeal with which you ideated the on-demand app transmits to the end-users as well. And the one way to ensure that – one which is present in almost every on demand app development guide for startups – is knowing what pitfalls to avoid.

Talking of pitfalls, what would be better than knowing what didn’t work for other businesses in the on-demand space, so that you don’t repeat the same mistakes.

Let us look at some of the on-demand companies that failed and the reasons behind their failure so that you don’t follow the same ones, something that your partner who is offering startup business services should give you a heads-up of.

Why Do On Demand Mobile Applications For Startups Fail?

While there are a number of reasons why businesses fail at ruling the market, it is time we look into some real use cases of why some businesses which were on the top of their game in the on-demand space failed.

1. Homejoy – Could not Retain Users

What Really Killed Homejoy? It Couldn't Hold On To Its Customers

The problem Homejoy faced was that people only used the app until the time they were getting discounts and then they were abandoning the app to not return. What could have helped them is if they relied on other channels for customer acquisition as well, ones that were not restricted to giving freebies and offers but focused on creating a valuable image as well. 

2. Exec – Could not Keep up With the Demand

The idea behind Exec was that of an app that would offer service providers a number of different handy-works. So, while to start with, the cost of acquiring skilled employees for all the different services they offered was costly, it then became difficult for them to keep up with the demand that they were getting on weekends and holidays. They should have focused on a niche set of services before expanding into other segments. 

3. Dinnr – Giving Solution to a Problem that does not even Exist

The idea behind Dinnr was that people had to select a recipe on the app, following which the ingredients, in recipe specific quantities, and the instruction was delivered to them at home. Problem was that nobody needed this service, it was assumed that not knowing to cook but having a deep interest in the art, is a mass problem. Had they done proper research by getting in touch with an actual pool of end-users, they wouldn’t have faced this issue and ultimately shut down. 

4. 99Dresses – Co-Founders Backing Out

99dresses Wants To Give Women An Infinite Closet | TechCrunch

An app for trading, selling, and buying less worn clothes in return for fees corresponding to the value of the item was shut down after two out of three co-founders bailed out. It is very important for enthusiastic entrepreneurs to find like-minded people who are equally invested in the project and have a business model that the masses are actually interested in being a part of. 

While the reasons that you just read contributing to the failure of an on-demand business belonged to a number of different zones, there is one concurrent reason behind on-demand businesses shutting down – not thinking of the operation model.

What Are the Key Questions Which Should be Addressed Before On Demand Mobile App Development For Startup Business 

Knowing and selecting the right business model helps in finalizing not just the operational process that you need to follow in your day-to-day business but also carries a huge impact on your profit model and the quotient of on-demand business success.

Let us look at some of the most commonly asked questions of the on demand business models that you should ask from your partnered on demand software development company.

1. Instant Delivery vs Scheduled Delivery Model

6 Reasons Why On-Demand Business is a successful Model for Startups

One of the most crucial decisions that you will have to take in terms of offering a real-time product or service is deciding whether or not to offer it in an instantaneous model.

For example, you can offer ‘Book Cab for now’ or ‘Book Cab for Some other Date’ (The same option can apply irrespective of which kind of on-demand delivery app development service you have invested in).

No matter what you decide to start your on-demand business with, know that you always have the option to expand to the other. For example, if you have an instant on-demand business model you can always add a Schedule feature to it later.

2. Own Delivery Agents or Partners’ 

Amazon Delivery Driver & Delivery Service Partner (DSP) jobs. We're hiring!

The next business model is to make a decision in terms of whether you will be supporting the associated partners with a fleet or will you let them handle it themselves.

An example of this can be seen in the case of the food delivery market. There are two ways to form a food delivery business model – A. Have own riders do pick and drop off food orders from restaurant to end-user or B. Rely on restaurant’s delivery persons to do this.

3. Anonymity vs Choice

Anonymity- Good or Bad? | pavneetdeol13

Let us explain this business model with an example.

There is an app like UrbanClap which allows users to choose a service provider on the basis of ratings and reviews, and on the other hand, there is an app like Uber which while gives the end-users an option to choose a mode of transport and its class, doesn’t give them an option to choose the driver or the car model.

Hope the examples explained what differentiates both the business offering type. While there is no clear answer to which of these two would be better for your business, it is safe to say that it would depend on the service you are planning to offer.

Now that you know what are the different operational models and what separates them from each other, we would suggest you make a choice after aligning them with the feature set you are planning to offer in the market.

With this, you have now seen all – the scope of the market you are going to enter, the way you can choose a service offering, the reasons why on-demand companies fail, and the business model you can choose from to gain maximum benefit.

And now comes the most important part of it all, getting started. Get in touch with our team of on-demand experts to get started with the development process of your app idea.

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