Concluding Etrip and Today’s market outlook

It’s time to officially conclude the work on Etrip, explain what we tried to do and try and analyze where is the online travel market heading without us.
We started Etrip 3 years ago as an online travel agency, believing that through serving customer needs we would be able to identify unanswered needs and address innovative solutions.

For instance, one of the ideas was: ‘save low cost’, which aimed to build a marketplace for swapping unused low cost flight tickets which are transferable, unlike traditional airlines tickets.  We did not develop the idea further since we thought that raising awareness to the service would require a too heavy investment. We had other similar ideas that had the same ‘no-go’ faith, until Etrip was brought to life.

It started as ‘Fetch!’, whose original elevator pitch was: “a human based service that gives you a chosen quote for your travel from every available source in the world.  To receive the source of this quote you need to pay a small fee (i.e. $20) – and the source is yours to use for the reservation.”

The name Fetch was retired in favor of Etrip and the business model changed: we’d use an engine, comparing every potential travel supplier in the market, but provide the service for free. We started by pulling a live market test, in which we did use human search in order to answer customers flight queries (the infrastructure still lives on Etrip.nl) – the market research proved that our human team was able to find better prices than Kayak.com in 63.4% of the cases, saving on average 52.5 EUR.  Our searchers found those fares simply because they set no-boundaries as to where they would search. Something that Kayak and any other search engine do by choice: they only search providers who’d pay if the visitor clicks their offer.

Once proving that the market gap was there, we were set to develop Etrip as a ‘travel reservations gateway’ which would be a competing model to travel search engines such as Kayak.
Our plan was to bring users the ‘perfect’ travel comparison by reviewing every established supplier in the market, without trying to charge these suppliers for leads. Above this structure we wanted to build a set of complimentary products such as service for booking, travel insurance sale or pre-sale of airport services. The slideshow embedded below is one that we showed potential investors and can help see where we were heading.

View this document on Scribd

Despite long efforts, we never actually managed to get enough venture capital to execute our search engine, which was the core of it all. We received some grants and small seed capital, but since we lacked a dedicated techie in the core team it was hard getting passed the ‘engine obstacle’ without paying for developers, and we were left with plans and slideshows, but could not create any real added value.

The Travel Market Today

The previous post in this blog reviewed online travel trends in Europe, and since its publication last summer not much have changed. Kayak, the worldwide market leader in travel comparison, have opened versions for 9 European countries (still shy of skyscanner’s 16), and that, together with the inclusion of more airlines such as Easyjet (but not yet Ryanair) has helped it gain ground in some markets and its now as popular as skyscanner is in countries such as Spain and Belgium.

However, skyscanner, wegolo.com or the newest joiner qfly.nl are better tools when searching for flights within Europe, and Kayak, Bing Travel, Mobissimo or their newest competitor, fly.com, still needs to be compared with other travel agencies when searching for international flights.

Moreover, the promise of ancillary services is still not introduced to travel search engines, which prefer to remain solely a search channel and rely on ads and click through fees as sole revenue models.

We believe that both promises are still there, but would not have the chance to accomplish it under Etrip.

What’s next for Fly Open Sky?

Fly Open Sky, the company behind Etrip, would launch iBidlow.com in November. iBidlow would make purchases on the opaque travel websites Hotwire.com and Priceline.com more knowledgeable using consumers generated content, helping consumers make better deals on these sites.

We plan to launch similar services in the future for other small ‘gaps’ in the online travel market, hoping that the work done on Etrip would inspire another service in closing the search gap.

What’s going on with European travel mediators?

This is a post we have been hoping to write for a very long time, perhaps since the opening of this blog. Thanks to the launch of Google Trends for websites – we are now able to get verified statistics for European websites too, and even enjoy the ability of creating a country based review on each website.

This change of events allows us to publish a world exclusive review of the real scale of visitors to the travel reservations websites in Europe. We will try and let the graphs do most of the talking.

1. How popular are the leading OTA and TSE across the Atlantic?

In order to create this graph we used the top 3 services in each country. Europe is represented by Germany, France, Spain, Italy, Belgium and The Netherlands.  The online travel agencies used are: Expedia (in every market), Opodo, Ebookers, Travelocity, Orbitz, Cheaptickets, Edreams (in various markets). The travel search engines used: Kayak and Skyscanner in every market, Momondo, Sprice, Billigfliger (according to their leadership position in the market).

This review reveals the missed potential of both travel agencies and travel search engines in Continental Europe. The large European OTA are nowhere near the dominance Expedia, Orbitz and Travelocity posses in the United States. The case for travel search engines is even worse with the potential squeezed at less than 1/5 of its comparative size in the U.S. This might come as a surprise given Europe’s far larger diversion in suppliers which should create a need for travel comparison services. Our explanation is simple: none of the existing services is able to give enough value in a market dominated by suppliers websites. TSE search results are closely tied to OTA, and when the latter don’t add enough value – the case for TSE is similar. Examples of European search engines that compare only travel agencies sites (such as Sprice.com) show that this notion is not yet understood. See Sprice’s jumping (during ad campaign) and dropping (during holiday reservations season) visitors graph for indication.

2. Can Kayak succeed in Europe the way it did in the U.S?

In order to retrieve this info we compared the leading travel search engines in the following markets: UK, Germany, France, Italy, Spain, Belgium and The Netherlands – and added the data together. The review was made using Google Trends based on May 2008 data. The data for Kayak includes its international domain (Kayak.com) or local domains in every market. The ‘others’ column includes data taken from Sprice.com, Billigflieger.de, Momondo.com and Mobissimo.com.

This data for Kayak is quite straightforward and it shows that despite launching dedicated websites in the UK, Germany, France, Spain and Italy in the past two years, Kayak has not managed to capture a significant European audience and is trailing in every European market behind either Skyscanner.net or a local operator.

3. What does the European leading travel search website looks like?

This screen shot is taken from Skyscanner report on Google Trends, and it reveals the site’s quiet success. As far as Google’s data goes, Skyscanner is more popular than Kayak in every European market, and its quite widely spread across the continent, in a way no other travel brand besides Expedia has managed to do, and with perhaps a percent of the financial investment.

Hence, Skyscanner is the role model for those who wish to enter the European travel search scene.  We believe it is successful for simply doing three things:

1. It offers a service that connects consumers directly with the airlines websites.
2. Presenting fast response and simple user interface.
3. Absolutely not relying on online travel agencies in the search results.

So, if Skyscanner is the rolemodel, why do everyone try to copy Kayak.com?
Beats us. And the users too.

News review of the US travel scene

We are back blogging and will try to give our 5 cents on what’s changed in the U.S. travel scene in the last months, as things are certainly picking up and U.S. travel 2.0 winners are getting a clearer shape.

Biggest deal – Kayak buys Sidestep for $196M

The deal that closed 2007 gave Kayak the VC crown of travel search engines in the American market.
The funds behind Kayak and Sidestep joined arms and merged the two firms under the Kayak management and later on under the Kayak brand.
This table (taken from Techcrunch.com) is an analysis of the U.S. travel search engine market: it clearly shows how Kayak and Sidestep dominate this market, with the two combined serving 9.75M visitors in November 2007 and claim to generate $3.5 Billion of travel reservations combined in 2007.

This deal is an indication that until a better travel search design takes the market, the main battle is over. The combined Kayak is said to be thinking an IPO when the stock market tumble ends, with valuations ranging $1 Billion.
Yet, not everyone in the industry are sure that Kayak is a worthy leader. Michael Arrington at Techcrunch recently claimed that Mobissimo, a relatively small player, is doing more than Kayak to answer customers needs. In Europe so far, Kayak or its ‘me too’ followers are failing to gain ground – we will write more about that phenomenon shortly.

Inflated price deal – Microsoft buys Farecast.com for $115M

On April 2008 Microsoft purchased Farecast, the third largest travel search engine in the U.S. and on May added it under its Live Search family. As Farecast was not profitable and had about 1/4 of the traffic Sidestep had with an estimated 1.1M visitors in the month before the deal (according to Compete.com) this price seems rather high. However, Farecast had a superior technology compared with any other search engine in the market – technology that allowed it to predict prices for flight tickets and hotel rooms. This technology was a weak differentiator in the travel search market but it might be more useful in other markets that Microsoft opt.
The most interesting thing about Farecast is a service it stopped offering – the firm was using its prediction ability to offer customers ‘price insurance’ against possible price rises or price drops. The service was not a commercial success for several reasons, including the price of the insurance ($10), the service complexity and Farecast accuracy level which ranged between 50%-70%, in the ranges of an educated guess and apparently not enough for consumers.
Their hotel price indicator (on the right) is a very useful feature that indicates a path travel search engines should follow by giving users clear indication on how valuable their price is.

The killer app deal- Tripit gets $5M series B investment

We wrote about Tripit in the past and noted to the usefulness of the service but also noticed its relative vulnerability. The fact that the ‘after sales’ market is an highly attractive but not yet crowded was enough for Sabre Hodlings, O’Reilly AlphaTech Ventures and European Founders Fund to support the Tripit team with $5.1M investment. Tripit is surely a great product that could also be monetized, but nothing is stopping other players in the ‘open market’ from copying its idea and offer similar service. Both the travel search engines and the user generated content travel sites should be working on such offering already, unless they prefer to cooperate with Tripit and make it a content partner. So far Tripit is performing rather modestly in the visitor charts and Compete.com ranks it with 60,832 U.S. visitors in May 2008 and a declined growth pace. The future will tell if Tripit can drive enough value to attract visitors or would end up to be sold to one of the players in the market, perhaps even Sabre itself.

A wake-up call for the travel industry

The NY Times publishes this week an article that tries to understand why are some indicators for online travel purchase in the United States dropping, for the first time in the short e-commerce history.

This article is definitely worth reading for anyone who works in the online travel segment, but what we liked most about it is the variety of problems it is able to flood to the surface, in an industry many insiders believe to be heading straight up.

First, are the figures: while number of total online travel spending has increased in 41% in the last 3 years, the number of online travel purchasers has dropped 9% in 2006.
Forrester research was made with 60.000 US respondents but it may give a good representation for the future of European and Asian markets as well, which are considered to be trailing behind the U.S. in ~3 years.

Second, the time of search factor: “This is a wake-up call for the industry,” said Henry Harteveldt, Forrester’s online travel analyst. “Customers are tired of spending two or three hours trying to find the airline or hotel or vacation package that meets their needs.” We can identify at least 3 reasons for this phenomena:
A. Customers don’t always know what is it exactly that they are looking for.
B. Customers do not appreciate the hassle of search through multiple sources. A problem that travel search engines are not solving, as we identified earlier this year.
C. Customers prefer to use specialists to help them make difficult travel choices.

Third, some more figures: PhoCusWright found that among travelers with access to the Internet, the percentage who usually book travel online dropped to 62 percent at the end of last year from 68 percent in 2005, while those who say they usually arrange travel offline increased to 31 percent from 25 percent during the same period.
This trend is not good for the industry, and it emphasizes the problem: travel information is available, but purchasing travel online is now becoming less worthwhile.

Among the solutions the article claims that there is a need to change the way travelers search for travel products. While today customers can only look for a specific product (on a specific period of time), Mr. Harteveldt asks for a different type of solution: “Nowhere can you say, ‘I have this amount of money to spend on a trip. These are my interests. This is where I live. Show me my options”.

The problem for stealth on innovation is marked in the fact that travel reservation systems are still laying on the fundamentals they were built upon in the 1960s. We can add to that notion and say that most of the travel suppliers still work based on the same fundamentals, which explains the problem grounding once again.

The article sees the solution with independent technology companies that are entering the market with their own products. LeisureLogix’s RoadTrip wizard is one solution. It helps road travelers find accommodation and venue tickets that match their road plans. We recognized Tripit, a travel booking organizer as another one. Our own solution, Etrip: Travel Reservations Gateway- would first try and solve the hassle of searching for online travel products, and then combine specialized assistance for it, when solutions such as Tripit and RoadTrip are likely to be added to the entire offering in a cooperation method.

What’s on travelers minds?

Tripadvisor’s annual travel trends survey, TravelCast was published this week with few interesting findings, and few findings that reflect opinion diversities between travelers from different destinations.

The picture on the right is of a place called ‘Ksar Soltane’ in Jerba, Tunisia. This town is, according to an analysis of the search activity of TripAdviosrs users, the next hot tourist spot for 2008. Only 3 low cost airlines in Europe are ready for the challenge, with direct flights of JetairFly from Liege starting at €149 for a return trip in November, according to Skyscanner’s database search results.

Green and Terror on top of the concerns. Its interesting to see how two subjects that are so different can be easily brought up into a discussion about travel choices. Terrorism surpasses natural disasters and cost drivers as the most important external factor to choose a travel destination, which is perhaps its strongest victory in the battle on public’s opinion.

The environmental concerns are the most eye-catching evidence in this survey. Only 26% of the respondents said they “Will be more environmentally conscious in their travel decisions in the coming year”, but this figure drops even lower to 19% when British participants were asked about the same statement. Not very much aligned with the stands of the UK ‘green air taxes’ that were imposed earlier in 2007, but perhaps reflect better the debate on the need to impose such taxes at all.

Some airlines seem to be fueling this debate more than others, taking into account that ‘Dirty old aircrafts’ are causing a significant portion of the pollution, which is a chance for more efficient airlines to win a small yet important battle against their older competitors who usually operate an older fleet. Easyjet and Ryanair use the same terminologies in this debate, which so far results in a ₤5-₤10 tax on flight tickets bought in the UK, and a plan of the European Union Emissions committee to add flights into the Emissions Trading Schemes, which will result in significant costs for airlines.

Back to the survey we begun with, other concerns of travelers were cleanness, which somehow made it to the first place in the general concerns of the participants; Apparently 28% of the travelers find airplanes to be polluted, which could eventually result in airlines marketing themselves as: ‘World cleanest airplanes’ or present the ‘Vacuum your row’ programs for dedicated cleaners.

Last winners: Schiphol, Amsterdam’s airport is the favorite airport in the world, While British Airways is the most favorable airline outside of the U.S,. One last note: 34% of the Americans are planning to visit Europe in the coming year, which is quite a staggering figure if we take into account the US Dollar current currency exchange rate, and the fact that 100M Americans might be planning their way to Europe in this very time…

Facebook applications: the insanity is over, long live the interactivity

The $3M sale of ‘Where I’ve been’ application to the Expedia owned Tripadvisor on August attracted plenty of attention to the potential of Facebook applications in general, and travel applications in particular.
The last weeks have seen promises of other social networks such as Myspace and Linkedin that will begin allowing external applications addition to their websites, with Google already planning a 2-way applications infrastructures to be used in its own products.
These developments can assure more hype around social networks and Facebook, but is the reality that promising for application developers?

1. Were there other big apps sales? None as far as we know. Two applications were recently sold on Ebay, The Logbook for $2.550 and the ‘Am I hungry’ application for $20.100, which are both hefty amounts (as comparison, products beta invitations website inviteshare.com was sold to Techcrunch for $25.000 on July) but they make Mashable headline from the ‘Where I’ve been’ sale: ‘Insanity: Facebook app sells to TripAdvisor for $3m’ closer to reality than the going notion in the media at the time of sale.

2. How do you value these apps? While ‘Where I’ve been’ was valued at $1.30 per user (with a fast growing community 2.3M users at the time of purchase), ‘Am I hungry’ had seen a modest valuation of just $0.08 per user, 16 times lower than the ‘Where I’ve been’ user price tag. Since revenues generated by the applications are not yet known, the recent purchase estimations are the best guess around.

Back to the travel focus, when looking at the offering we count 199 travel applications on Facebook travel category, very few are attracting the attention of more than a thousand active daily users. Just 9 applications do that if to be accurate.

3. Successful apps: interactive or useful? Definitely not useful. Kayak, the largest travel search engine, has an application that allows users to see what would a flight to their friend’s location cost, and pursue the reservation link directly from Facebook. Nearly 4.000 users are using this application. On the other hand, the Traveler IQ app, an application that allows friends to compete in trivia questions about worldwide destinations, has nearly 1M users. The case for PetrolHead app with approximately 700k users is similar.

Bottom line(s): 1. Users in Facebook prefer interaction and self expression while the usefulness is left beyond the social network doors. 2. Facebook apps might be easy to create and spread, but they might not be the runway to heaven for most developers, though they can certainly be a great way to attract attention, either to the developer skills or the company behind it.

P.S. Mark Hendrickson at TechCrunch writes a story from the Stanford class for Facebook application developers that adds some new insights. It turns out that companies are chasing application developers, while the Stanford class has already managed to build an application reaching 100,000 users  (kiss me application).  This segment would surely grow larger with Google’s Open Social introduction, stay tuned .

Tripit review

After some period of stealth we are back  with some strategic analysis  posts, the first one being a review of the recently launched – Tripit.

Who’s on Tripit board? Gregg Brockway, Former founder of Hotwire and Scott Hintz, a former junior vice president at the firm are holding the president/vice president positions and form an impressive managerial lineup.
How liquid? – The company raised $1M from AlphaTech Ventures.

What they do? – Tripit is a travel organizing system that works on a simple principle that allows any user to forward its trip itineraries to plans@tripit.com which organizes all the itineraries together in a convenient and sense making method. This information can later on be updated with trip changes and reviewed by family and colleagues.

How will they create revenues? As accustomed these days with web 2.0 companies, Tripit shows no direct signs of revenue generation, so we’ll just have to guess: 1. By selling the subscription to corporate customers. 2. By adding location based specific ads/product sales. 3. By storing this information to create data on customers preferences and actual travel links (for instance: a business class traveler to Beijing is likely to stay at the Raffles, while a first class traveler is more likely to book the Presidential Plaza, information that would be interesting for resellers in the segment).

What the future tells? Tripit might not have a great value as a stand alone business, but they could become a great complimentary tool to any travel search engine. If they realize that on time, they could create several partnerships with the leading bunch and source their traffic from these. If not. A travel search engine might end up purchasing them for for an amount in the range of $5M-$10M, or even worse (for Tripit): copy the exact model and add it to its services.
That is the weak point of this (sweet) product. It is not likely to be defensible, and not adding enough value to survive as a stand alone operator. But, Brockway and Hintz have probably thought it over too, future will tell if they managed to answer these weaknesses.

BlogDay tradition – What do we read?

The blog day tradition celebrated 3 years on the last day of August, and according to the day’s habit, each blogger should share their favorite blogs with the readers.
I asked around the staff and gathered the following 5 blogs we regularly read:

1. How to change the world – Sharp readers might have noticed that our own blog subtitle is a tribute to Guy Kawasaki’s blog title. While Guy is a good example for someone who changed a thing or two in all of our lives, we are still working on our first major impact. Until that time, Guy’s blog is a great guide and a useful tool for our daily challenges.

2. TechCrunch – One of the most famous blogs out there is an industry must. I think we know more people who read Techcrunch daily than those who does not. Why do we all come? Because its up to date with most of the daily occurring of new online ventures.

3. Hotel Marketing – Hotel Marketing is all about mashing up news from a large variety of travel related sources. Plenty of times we learn on new online travel developments from their index, a very solid source for almost daily travel content.

4. UK Web Focus is a well written blog focusing of new events, initiatives and strengths of the web. Brian Kelly writes to the point, adds useful examples and links and deals with the hottest issues concerning the “web2.0″ community nowadays.

5. Seth’s blog – Seth Godin is one of the most interesting guys out there. I am saying that with confidence though I have not had the chance to meet him yet. Very few guys can write a meaningful and tutoring blog post in 50 words; Seth does it on a daily base.

Open skies implications

Have you ever heard about the following scenario?
A commercial market was closed for free competition for a long period of time.

After a governmental reform, it was allowed to be open for competition.
The regulator now allows any operator that meets safety and security standards to operate in this market, regardless to its name or history of operations (to some extent).

As a result, the situation of the customers in this commercial market has worsen. Prices are up, availability is lower, conditions have aggravated, reachability to products is now harder than ever. All because more companies are now allowed to deliver a product only few were allowed to deliver beforehand.

I never heard of one, but air transport regulators in Israel are probably afraid of just this scenario. Otherwise, how would you explain their resistance to the offering of European travel officials to expand the European ‘open sky’ agreement to Israel?

Isn’t travel a global language?

 

An article at m-travel, a travel news resource, have recently caught our eye.
Skyscanner, which is a great tool for searching low cost flights, have announced to be adding Chinese to the site languages, bringing its offering to 18 languages.

m-travel actually made the step to list all languages Skyscanner is now available in: Czech, Danish, German, English, Spanish, French, Russian, Italian, Japanese, Dutch, Norwegian, Polish, Portuguese, Romanian, Swedish, Turkish, Chinese and Greek.

There would have been no reason to mention this if that would have been an industry standard. Skyscanner contains at most 500 different words. Translating these would cost you ~€50 per language on Elance and twice as much with a professional translator. Even to Chinese.

Can you imagine a better marketing tool than this? How come this is not an industry standard? How come websites such as Kayak and Sidestep which have raised dozens of Millions have never done such a move?

Maybe they ask, ‘Why would we need Chinese if we don’t work in China’?

Skyscanner proves that its not the funding that matters, its your view.
Skyscanner sees itself as a global tool and makes the obvious moves to prove it. Kayak and Sidestep see themselves as US based tools. And when they do make a translation its part of an ‘expansion move’ into a ‘new market’. Followed with strategy announcement and press releases.

Travel is a global need. Travel search engines would find a flight from anywhere to almost anywhere (don’t try searching for Cuba or Iran…) – Yet, most of them think you should learn English before getting on a plan.

We think that a language should not be a barrier. After all, we are all looking for the same thing, aren’t we?