For many Long Islanders, app economy allows them to take on side jobs, boost their income

The "app economy" is gaining a foothold on Long Island as companies such as Uber Technologies Inc. and Airbnb Inc. offer on-demand services to clients and fresh income and flexible hours to workers.

Economists are struggling to quantify the impact of the new business models, which use apps to directly connect consumers with individuals selling their services -- what is also known as the "gig economy."

"We're still in our diapers to understand the complexity," said Hugo Benitez-Silva, associate professor at Stony Brook University's economics department.

"It's definitely having an impact," said Shital Patel, analyst at the New York State Department of Labor's Hicksville office. "We just don't know how much yet."

Still, the scale is suggested by Uber's accounting for more than half the business travel receipts for U.S. ground transport, excluding rental cars, in the second quarter, according to data tracker Certify.

A major reason that these upstart companies have gained so many users is that their apps remove friction from transactions by seamlessly matching buyers and sellers, cutting out middlemen and bypassing regulators, Stanford University economics professor Liran Einav said in a presentation before the Federal Trade Commission.

"The gig economy has opened up income potential for people," said Samer Hamadeh, an entrepreneur in Manhattan's Silicon Alley who co-founded Zeel, an on-demand in-home massage company. "On the consumer side it lets you address an issue you might not have addressed before. It creates opportunity on both sides of the equation."

The emergence of the app or gig economy has triggered regulatory scuffles and lawsuits that question whether workers hired through some apps truly are independent contractors. The $50 billion and $25 billion valuations attached to ride-sharing and home-sharing companies Uber and Airbnb also have prompted a flood of startups with a similar formula, from car sharing (RelayRides) to on-demand house cleaning and home repairs (handy).

Need a massage?

If you want a massage, there's an app for that. Need your dog walked or boarded? There are apps for Fido, too.

One of the apps for this new world of work comes from Long Island.

SEE PHOTOSApps you must download immediately

A 5-year-old Huntington startup, Work Market, has built an app and back end software that allow client companies to manage and pay freelance workers. Backed by East Coast venture capital heavyweights Union Square Ventures and Spark Capital, the company has built a marketplace with more than 100,000 contractors in businesses from technology to security to legal services.

Among Work Market's clients: Yahoo, which uses the software to assign stories to bloggers.

By all estimates, the number of "contingent" workers, defined by the U.S. Bureau of Labor Statistics as those without "an explicit or implicit contract for long-term employment," is growing.

A survey by Emergent Research and software maker Intuit Inc. conducted in July and August found that 3.2 million Americans work in the "on-demand" economy. That study forecast that the number of on-demand workers will more than double by 2020 to 7.6 million.

For Long Islanders, who live in one of the country's highest cost regions, the app economy allows them to boost their income by doing jobs on the side -- rather than transforming them into full-fledged independent business people.

Louise Ryall of Westbury works as a one-on-one monitor at Bowling Green Elementary School in Westbury during the school year, but during the summer those checks stop.

For the past three summers, Ryall has bridged the income gap through DogVacay, an app that serves as an Airbnb for dogs and cats. The app matches homeowners willing to take in pets with owners seeking to drop off Lassie or Whiskers for a few days.

DogVacay says that its average nightly boarding rate on Long Island is $40.95 -- 85 percent of which goes to the sitter -- and that its bookings have climbed 120 percent in the past 12 months.

"It used to be rough during the summer," Ryall said. "Living on Long Island ain't easy."

More evidence of the new economy can be seen in the volume of listings on Airbnb. The Long Island Hospitality and Leisure Association puts the inventory of Airbnb rooms -- which varies according to when the hosts want to list -- at about 1,000 versus more than 17,000 for traditional hotels and motels.

Worldwide, "they have more rooms than Hilton [or] Marriott," said the association's president, Mike Johnston.

Airbnb prices can range from $53 per night for a spare room in Stony Brook to $399 per night for a guest cottage in Remsenburg.

One Airbnb host, Marianne Stefanowicz, spends most of her time in a rental apartment in Manhattan's Chelsea neighborhood, but "fell in love" with Greenport. In January the London native bought a three-bedroom house in the North Fork village with the idea of renting it out on some weekends.

Speaking from an Uber cab during a business trip in London, Stefanowicz said the weekend retreat "helps me maintain balance in my life" after long days at a Manhattan advertising agency. The Airbnb rentals, meanwhile, provide a financial buffer when mortgage payments come due. "It takes away a little of the pressure," she said.

Whether Washington gets a taxable piece of that income depends on how often a homeowner finds renters.

Tim McHale, an accountant at Bohemia-based Cerini & Associates LLP, said that anyone who rents all or part of a house for more than 14 days must declare that rental income.

How one app started

Scheduling a morning or evening sports massage used to be a chore for Huntington real estate agent Yvette Loughlin, an avid golfer. The service was hard to book at a local spa, so sometimes she would trek into Manhattan.

Loughlin heard through friends about the Zeel app for finding massage therapists who make house calls. When the Manhattan company expanded service to Long Island, "I was all over it," she said.

Sending massage therapists into client homes raises security concerns on both sides.

Zeel conducts an ID verification on clients by collecting the last four digits of their Social Security number or scanning a passport or driver's license to ensure they are using their real name. The company carries out a more thorough background check on massage therapists to weed out candidates with criminal backgrounds.

"There's a level of comfort when you walk in the door," said Melissa Maltese, a Massapequa massage therapist with her own business, but whose jobs for Zeel account for about a quarter of her income.

Maltese said she travels around Nassau and Suffolk counties on Zeel jobs, which pay more than double the rates of franchise spas. Zeel takes a fee from the customer payment and pays the therapist. Maltese said she nets $110 to $125 per hour.

Hamadeh, Zeel's co-founder, said the company began in 2011 and 2012 booking wellness appointments, including yoga and massage sessions. A closer look at the data, however, brought them to an "aha! moment" that the app should focus on ordering massages on short notice.

"You look at the data and you see the opportunity," he said. "Everybody wants a massage the same day."

At the same time, he said, the roughly 300,000 massage therapists counted by trade associations are working only half the time, providing a ready workforce.

"We think this is a national play," he said of the business model, "and we think our in-home [service] is suited for the suburbs."

The new breed of companies may be popular with some contractors and clients, but some incumbent companies whose business model is under attack question their practices.

Port Washington-based Dan's Dog Walking and Pet Sitting competes against DogVacay and other on-demand pet-sitters like Rover.com. The 6-year-old Port Washington startup provides a similar service in two well-heeled regions, the North Shore of Nassau County and southwest Connecticut.

Unlike DogVacay and Rover, Dan's eschews the on-demand model in favor of 19 full- and part-time workers and three managers.

Founder Dan Reitman, 28, said the on-demand companies misclassify employees as independent contractors.

"That's why they're spending millions of dollars on lobbyists," he said.

Some seek regulations

Critics of Uber, meanwhile, are calling for government to apply the same tax and regulatory rules to the upstart as those applied to conventional taxicab companies.

"If they're going to be in the business, they should fall under the same regulations we have to comply with," Joseph Fierro, general manager of Islandia-based Lindy's Taxi, said of Uber.

A new Suffolk County law that took effect in August, for instance, requires Uber drivers, along with other taxi and limousine drivers, to undergo drug and background tests and pay fees to register with the county Taxi & Limousine Commission.

In New York City, Mayor Bill de Blasio backed away from a proposal to limit ride-sharing drivers after Uber unleashed a public relations blitz.

Companies like Uber in the so-called sharing economy often balk at following the same regulations as established companies, Benitez-Silva said. "Why should we be regulated when I'm a private citizen interacting with another private citizen?"

Applying old-economy regulations, he adds, risks stifling innovation.

Some incumbent businesses are seeking legislative protection.

Johnston, of the Long Island Hospitality and Leisure Association, said that hoteliers have begun talks with lawmakers in Albany about regulating Airbnb.

"The issue is illegal short-term rentals, codes and regulations, sales and occupancy taxes," he said. "Are they following the same rules?"

Another flash point in the gig economy debate involves worker benefits.

Independent contractors in the gig economy do not get health benefits, overtime pay and sick leave, as do full-time employees.

That issue came to the fore on Tuesday, when a federal judge in San Francisco ruled that a class-action lawsuit seeking to give Uber drivers the pay and benefits of employees may go forward.

David Donnelly, senior manager in the Melville office of accounting firm Marcum LLP, said that murky rules surrounding who is an employee and who is an independent contractor contribute to the problem.

"What sounds like a black and white thing is very gray," he said.

Jeffrey Wald, co-founder and president of Work Market, said his company is poised to ride the growth of the on-demand economy -- if the government can avoid trampling on the business model.

In that case, said the former Wall Street banker at JPMorgan, "the sky's the limit."

By Ken Schachter

kenneth.schachter@newsday.comkschach

Ken Schachter covers corporate news, including technology and aerospace, and other business topics for Newsday. He has also worked at The Miami Herald and The Jerusalem Post.