WeWork as the bogeyman
Usually, questions in the Global Coworking Survey aren’t about a specific company, especially since the WeWork concept is mainly aimed at the target group of traditional offices and business centers – and above all the younger ones. Furthermore, competition is part of business. However, with its multi-million-dollar marketing budget, WeWork has been replacing Regus as the #1 punching bag over the last few years.
Other than Regus, WeWork never acted like a foreign body that twists coworking just as a marketing term, but rather also served as a blueprint of many new coworking spaces. That’s why it isn’t the WeWork activities that are problematic within their locations, but rather their external effects.
Just like Regus, WeWork is investing a lot of money in their marketing activities – for instance in Google ads, in order to appear in front of other coworking spaces in search results. Things become especially annoying when they don’t just use “coworking” as their keywords, but also the names of other local coworking spaces and thereby position themselves in front of the actual search result. Likewise, WeWork invests heavily in Facebook ads. In both cases, the prices for keywords for the competitors in the marketing channels have increased appropriately. However, this approach is only limitedly suitable for the coworking market, as word of mouth via trusted persons is more important for gaining new members.
Price dumping is a second problem. The officially-communicated member prices of the WeWork locations are often higher than those of their competitors. Unofficially, WeWork is underselling them. At least in the starting phase, members are recruited with free trial months and free services. According to reports, they are also addressing members of other coworking spaces directly. In order to quickly fill their locations, they often offer a 50% discount on contracts for 6 months or one or two years. After all, empty working spaces would be a rather bad buying argument for other members, especially shortly after their opening.
Neither the marketing efforts nor the discounts for new customers are scandalous on their own. They are also not new, and they can be found in pretty much any market. However, they are done on an enormous scale and they put nearby coworking spaces at a competitive disadvantage. They don’t have anywhere close to the capital of WeWork, who are able to burn millions of dollars in order to buy into markets and gain new members.
The results, sinking prices for members or smaller numbers of members, can affect the profitability of other coworking spaces negatively, unless they adapt their strategy. That’s the reason the question was included in the Global Coworking Survey. In the results, WeWork is harming around 40% of all coworking spaces that are in walking distance to their locations. However, more than a quarter is profiting from the company.
The 2018 Global Coworking Survey ran from November 8, 2017 to January 30, 2018. For this topic, all respondents had been considered who filled in the questionnaire by December 31, 2017. Here you can find more information about the survey.