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July 1, 2005

Travel Search at VerticalLeap

Travel Search
At Vertical Leap Vertical Search Event

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moderator: Niki Scevak, Jupiter Research

panelists:

Here are my raw notes. Further processing to come later.

niki: Recently left to start own venture. Took a deep look into vertical
search. Travel and retail form the backbone.
Travel has unique trend in that 30 years ago the listings were trapped
inside mainframes. The internet webified those systems and brought them
online, but kept intact the agency model of listings being centralized, and
people transacting with the listing agency.

Post 9/11, airlines going bankrupt spawned discount airlines with closer
connection to their customer.

Jafri: Travel is 40% of all ecommerce. Building a search company as believe the
next generation of travel companies

Niki: How much is consumer demand in these 3 factors:
1. fragmenting of listings
2. more people buying travel online
3. market spending more money on search engine marketing

Phil: Travel is incredibly fragmented. Messy markets are good when looking
at search as you can aggregate it all for consumers.
Overwhelming rush of people and demand is good as well. This is the right
sector, fusion of search and travel is a good mix. The peanut butter and
chocolate combinations that taste great together.

Beatrice: Growing demand for onlie information search. You can just go
online and search for tickets. In the past booking through travel agent were
expensive systems. Many of those suppliers chose to establish their own
channel. In US had 3 independent suppliers, in Europe over 50.
Mobissimo caters to those independent suppliers, especially international.
In the future, growing globalization of economics means we need search to
locate inventory and prices.

Scott: Travel search represents the way some people shop for travel. A large
and growing segment want to compare prices and availability, but want more
than price comparison, want value comparison. Continue to see it as a blend
going forward.

Jafri: $52B in transactions, going to $76B next year. The other two
industries that come close are illegal…

The challenge for travel search engines is how to collect all this
information. You wouldn’t know you could buy a $2000 ticket wholesale for
$500. Search is also of great value to suppliers, gives them market info they
have historically never received because legacy systems don’t capture it.
They can use the info to dynamically change the price and increase market
share. So we see this as a great opportunity for market to evolve from front
ends to legacy systems, to a whole new infrastructure.

Niki: A lot of people claiming the lowest price, with guarantees. Is that consumer
confusion a good or back thing for consumer search?

Jafri: Never go to sleep at night thinking you’ve got the best deal. How
comprehensive, how many sources, how deep can you drill, how relevant
content can you bring back.
30% of the market is just in the wholesale market, which consumers can’t get
access to. Is there a search engine that can deliver that content? Otherwise
it’s not providing full value. If the supplier says I’m willing to lower my
price, but only if you give me real-time market info — I’ll lower my price
by $10 to get a sale of $1000. Those are the new business methods that
search engines will bring to the market.

Niki: Issues with crawling expedia’s listings, etc, and where that will
play out?

Scott: Our policy is not to crawl anyone without explicit permission. We
spend a lot of time building relationships. You see online travel agencies
moving slowly into travel search as it’s up to us to provide and demonstrate
value for partners. Companies that make it possible for travelers to find
the best trip for them, not just the lowest price, will add the most values.
We’re in early discussions with a lot of partners. There are concerns on
both sides. Within FareChase we want to main unbiased and accurate
results. We don’t charge for free clicks. We believe travelers need to know
that rankings aren’t based on inventory, but what’s most relevant to search.

Jafri: United did a study and found a consumer would switch carriers for a
$5 price difference. Success of low cost carriers is all driven by
price. The medium carriers need to lower their price. For the consumer it’s
important to get best value for their dollar. In our research we look at
price-driven consumers if it’s apples to apples. People are looking for
experience and relevant, richer content and go to sites with more
comprehensive experience.

Beatrice: Bring some suppliers that were reluctant to work with meta search
engines. American Airlines went so far as to sue a meta search
engine. Mobissimo now has America Airlines in our search engine. The market
evolves, and suppliers come to recognize the value to them. The suppliers,
and travel sites are in a review period. In the past, Expedia, Travelocity,
and Orbitz touted themselves as search engines. Now we’re saying we are the
search engines, you’re just representing some of the inventory.

Phil: We see some holdouts, but many more players are turning to travel and
meta search and embracing it. Intercontinental hotels pulled out of expedia
and are working with travel search. Orbitz and Hotels.com are working with
sidestep, but not other players in travel search. Partners are selective,
looking for (1) partners that are partner centric, and (2) big enough
audience to be interesting. I’m confidence the holdouts will come to join
us.

Niki: Who are your direct competitors, the general search engines or
online travel agencies?

Phil: The easy money is shifting transactions away from traditional online
agencies. Hoteliers don’t view travelocity fondly, it’s an expensive way for
them to sell. When we approach them with a different model, driving
transactions direclty totheir website, bulding direct relationships with
their consumers and building their own brand, not just the online agencies’
brand, that’s attractive to them. Hoteliers are having better luck driving
transactions through google and yahoo, but should play with travel search
engines as well.

Beatrice: Marketing money is still mostly offline. So the first shift is to
move that money online. Travel suppliers can directly track ROI from online
spend.

Niki: What kind of cost difference is there for cost offline, through
search engines, travelocity, etc? How much cheaper, how compelling?

Beatrice: Certain travel keywords on general search engines run from
$2-5. The meta search engines are moving to CPA, so no risk, or when there’s
a referral. CPC levels range from .50 to 1.60. Definitely below the prices
on the general search engines. So there’s a big opportunity there, and for a
more targeted opportunity to get a user who is shopping, not just to
research information.

Scott: For Farechase, we built product with search monetization. We surround
free results with paid/branded results on a more traditional advertising
basis. That’s how Yahoo is positioning different for vertical search. It
does a lot for consumer confidence and trust, hard to come by in the travel
industry. And extremely good value proposition for advertisers. We’ve seen
that with suppliers.

Jafri: Airlines pay $30 per customer acquisition through traditional
channels (sabre, travel agents online or brick and mortar). From search
engines, they’re paying $5 per customer acquisition. So they can cut the
cost by a big amount, enough to restore profitability to the airlines.

Niki: Advertising pricing in search world is typically per click. But in
travel it’s per acquisition / transaction. Is that a sign of an immature
market or a permanent phenomenon?

Beatrice: Depends on suppliers needs. Some are driven by ROI, who will opt
for CPA. Others will be interested by CPC as they also have advertising on
their sites so they can monetize each visit. Others are driven by
brand. It’s difficult to convey a brand message about one hotel on a google
text ad, but an image can do this better. So the media will likely shift.

Phil: We think it’s important to be flexible aboutg models. Who are we, as
emerging companies, to tell them how they must do business. They have
different groups, with different methods for success. So we have to listen
to them and price accordingly.

q: Mike Gibson. You’re doing a lot of crawling. Need for real-time data
sounds important. As airlines might be thinking how to price their seat
inventory, web crawling seems to run contrary to real-time data.

Beatrice: Web crawling is one of the methods to get real-time
availability. We don’t have the luxury of feeds. Airline has limited
inventory per class of bookings, which may disappear each minute. If you
want to find a ticket in the summertime to Europe that can be incredibly
frustrating. Sometimes the partners do cache part of the inventory and you
don’t get the most up to date image of the latest inventory. Don’t see a way
ultimately other than XML feeds crawled in real-time.

Niki: Are those conversations about XML feeds starting to happen?

Jafri: We’re in discussions about getting XML feeds. But we’re dealing with
30 year old store and forward technology. They aren’t where they can provide
real-time XML feeds. Some companies are taking that forward data feed,
converting to XML feeds.

q: Ofer from Raw Sugar. How to discover information within destinations,
rather than just pricing to get there?

Scott: Travel planning is a multi stage multi decision maker process. We
look at it as a funnel: Inspiration, research and comparison, booking, on
trip, and post trip experience. There are products and services to provide
at all those stages. Yahoo Travel is being integrated into the farechase
experience. Like a mapping tool to show you attractions around a particular
hotel. It’s very important for travel search engines to get beyond just
providing info about the product and prices, but helping people to plan and
book travel.

Niki: WIth local search panel, IYP 20% of the quries are related to
travel. So travel is a big factor around local search as well.

q: What incentive do suppliers have to work with one or few of you,
vs. getting to as many channels as possible? E.g. What got American to sign up
with Mobissimo?

Beatrice: We are the most comprehensive travel aggregator. Half of our
queries are coming from international search. We aren’t spending money
buying keywords, so we don’t compete with hotels. We educate users on
benefit of using a search engine. The product has an international
component. And query management system. Travel suppliers are based on very
old structure that doesn’t permit tracking, they have to pay for every query
to those systems. Sending a query that will convert is the issue. As you
aggregate more searches you also need a system to manage the queries.

Jafri: Value to suppliers is critical, they have to buy into it. First
distribution was through online travel sites. They made it clear that that
model is broken, they’re spending too much money on this. They have 3
problems: They spend $10B on distributing their products, they have $30B in
unsold inventory, and these travel sites are owning the customers.
Any travel search engine that addresses these issues will get the support of
the suppliers.

Phil: You not only provide qualified queries, but also volume. If any of you
manage search engine marketing campaigns yourselves, you think about range
of search engines on which you advertise. Are you going to advertise on
Canoodle or to more and deeper with an engine that can provide volume? It’s
the combination of quality and quantity of leads.

q: Growing distribution through affiliate programs?

Jafri: That’s important. There is no real leader in travel search yet. To
get traction in marketplace we must team up with sites that can generate a
lot of traffic.

Posted by barney at July 1, 2005 1:58 pm

This entry was posted in Ecommerce, Search

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