[Small digression: it’s very hard (at least to me) to find the right “voice” for blogging. My natural tendency is to write in details. Unfortunately, I don’t the time to afford it in the blog, and it’s probable readers can’t afford it either. So for the time being, I’ll try to be more concise. Let me know what you think :-) ]

So, what are the strategic moves these actors can make to both monetize their users and win ? First, let’s look at the monetization part:

• Sell “classic” ads: no need to expand. Doomed.
• Sell “non-classic” ads (cf the Esther Dyson piece): they would not only compete head to head with each other but also with the innovative travel search engines, which would propose such features as “friend an airline” themselves (only it would be “please let us know your 3 preferred airlines so that they can propose you personalized deals when you search for a travel plan”). This would make them compete in a broader, much more competitive market. They’re both unlikely to win.
• Adopt the transaction way: propose a search engine aggregator right on their site, and charge a %age off each transaction. Same thing: competition more acute, value for users not clear (if they are slightly less usable or competitive than another site, they will lose). Not only that, but the majority of frequent flyers are corporate users and corporate users book through their accredited travel agents (no choice).
• Charge a fee for premium accounts: classic model, charge users a small monthly fee for access to exclusive features. With 2 players competing for the same market, they would need a huge distinctive value to be able to charge this way. As we see below, they don’t .

As with all other social networking implementations, a key part of success is attracting users to get the spiraling effect rolling. How could D/T try to distinguish themselves to attract such users ?

• Add more features ? It’s unlikely one can come up with a feature so unique it isn’t imitable by the other one.
• Look and feel ? Idem.
• Actually, everything else, idem.

Tripit has for it its email extraction feature; Dopplr their look and feel and their commitment to openness (implemented deeper than Tripit’s). Neither has a killer competitive advantage to attract users, and it’s unlikely it even exists (but the future may prove me wrong). So should they do ?

In my opinion, go for the corporate market. Yes, I know, but please bear with me. The should offer corporations a specific set of features exclusive to their company’s employees. The main ones I have in mind would be to get in touch with other, but unknown, employees, while traveling (or at home when others are traveling). Picture this: you’re a young and recent employee of a global organization, stuck for the week-end somewhere you don’t know anyone. But it’s a big location of your company, so you know there are others also there. A tool that lets you signal you’re there and ready to go for lunch/dinner/skiing/whatever with other employees would bring everyone a lot of value.

Think about social networking in terms of costs/benefits: you use tools that lets you extracts more value out of your contacts in less time. Such a tool would let employees extract value out of very loose relationships (don’t even know each other, just employees of the same group) and out of their travel time. The cost / benefits for individuals is great. It is even more significant for said companies, in terms of knowledge sharing, networking, innovation opportunities, etc… (Hey, the only thing in common is their employer, what do you think will occupy 90% of their conversations ?)

Now let’s take our original monetization/attraction questions with this in mind. First, charge employers for access to such features. It is not trivial in terms of data security, and you can price monthly by active users (ie everyone can use it, but companies pay only for the ones who actually use the tool). Done right, this one is an easy sell.

Attraction ? Well, ones you start to have a significant subset of companies onboard, what do you think the employees will use to keep in touch with their friends and families travel plans ? Another tool so that they have the joys to juggle among 2 different apps for doing the same thing ? Right, by going after the corporate market, they would in effect get the spiraling effect in the consumer market (where they can have the transactions model if they want to).

Anyway, that’s my take on it and I would be very interested by any comments on these dynamics; especially if you think I’m wrong, please comment away…

Very skilled at connecting with thought-leaders and the blogosphere: Dopplr launched with an incredible buzz and this attention is sustained. It receives way more coverage than Tripit. This is due to the skills and connection of the peoples onboard.

Well, a great illustration of this came via Stowe Boyd. Here’s his latest post:

The Dopplr guys have listened to the users, again:

[from More Dopplr Raumzeitgeist detail: Cluster Cities]
[…]

What we are showing are what we call ‘Cluster Cities’ which is the basis of some new functionality you might have already noticed if you’re a Dopplr user that’s been studying their journal feeds/emails closely.

Rewind to Reboot, Copenhagen at the end of May 2007. We’re sitting on the grass in the sunshine with a bunch of early Dopplr users, including Stowe Boyd and Stephanie Booth – when Stephanie is the first to voice something we’ve heard a lot from Dopplr users since: “make my trips more ‘fuzzy’”.

By which, she and others meant that they would like to see coincidences in the surrounding area of ‘social spacetime’ to their trip – i.e. “show me if there are going to be people I know nearby the stated destination of my trip when I’m going to be there, as I’d probably like to change my plans a little to see them.”

This is a cornerstone of our goal to help optimise travel for Dopplr users – surfacing information about such near coincidences to let them judge whether to alter their plans to make their trip more worthwhile. We’re going to be releasing a lot of functionality to exploit fuzzy, social spacetime through the early part of 2008, but the first part of it has leaked out into the journal.

More coincidensity!

Of course, this is only interesting in light of this post extract, almost 3 weeks before, on the TripIt blog this time:

We’ll keep track of all the various places you’ll be on a trip without you having to manually enter anything. Then we use that data to look for overlaps with your friends. If you’ll be within 20 miles of a friend at any particular point on our trip, we let you know.

To be fair, when Tripit released this feature, Stowe did a great comparison and analysis of the two services. But if it had been TripIt releasing this single feature, I’m pretty sure they wouldn’t have gotten a single post on Stowe’s blog pretty much just relaying their own announcement. This is where their DNA/skills show off.

Namely, a field with significant barriers to entry, successfully preserved, ensuring inertia in the order flows, and recognized by investors:

Some customers fear that the CME will start to raise trading fees once it has swallowed its rivals. This worry is particularly acute in a business in which barriers to entry are much higher than in cash equities, where nimble electronic trading networks have helped to hammer down commissions. Most attempts to poach futures business have been quickly repelled, except when an online exchange has targeted an inefficient “open outcry” market, as InterContinental Exchange did when nabbing oil futures from NYMEX before the latter went electronic. With the CME already a leader in screen trading, it looks all but unassailable.[…]

Largely because they are so hard to budge, derivatives exchanges tend to trade at much higher multiples than markets that deal mostly in stocks.

Within this environment, one could expect an ossified marketplace, with players competing mainly on scale and leveraging fees within their kingdom (their citizens mostly trapped inside). Coherent with the CME objective to conquer and establish more kingdoms:

“Their strategy seems fairly simple: be in all products in all markets,” says Craig Abruzzo, co-head of listed derivatives at Morgan Stanley.

But exploiting the old, dying, competitive paradigm doesn’t prevent the CME from innovating in the new one.

The crisis may help exchanges in another way, by highlighting the opacity and illiquidity of some OTC instruments. The CME, for instance, is pushing new clearing services for swaps, currencies and even credit derivatives—until recently the exclusive preserve of broker-dealers charging fat fees for a “bespoke” service. Among the advantages of this hybrid model, argues Kim Taylor, the exchange’s head of clearing, are daily marking to market (“so losses can’t accumulate undetected”), ease of selling and less chance of not being paid, since the exchange acts as counterparty to both sides of the trade.

Being able to successfully compete, in parallel, within the old and new paradigms is pretty remarkable for such a corporation.

Source: The Economist – January 31st 08

Ryanair profit warning sends shares tumbling

Ryanair, the leading European low cost airline, warned on Monday there was a “significant chance” its profits would decline next year and could fall by as much as 50 per cent under the impact of rising oil prices and falling fare levels.

The Ryanair share price fell by 12 per cent to €3.18 in early trading. Rival EasyJet fell 27½p or nearly 6 per cent to 439¼p.

The decline in Ryanair profit can be traced back directly to Ryanair’s DNA—to use Umair Haque‘s phrase.

Ryanair is notorious for charging its customers excessive amounts for anything but the fare. Its handling of incidents has also been disastrous, leaving passengers stranded and without assistance at all. Lastly, a glance at pilots and crews bulletin boards (PPrUne for example) confirms the media reports of a rigid and brutal personnel management.

Easyjet for its part started with the same pricing strategy: selecting additional items (such as travel insurance) by default, charging excessive amounts every possible time, etc. Personnel management wasn’t as bad as Ryanair’s one, but clearly the investment wasn’t significant.

In the then less competitive of 2001–2003, Ryanair continued to grew quickly, by slashing prices and reinforcing its grip on costs. Easyjet for its part was promising but fell short of implementation. It competes too closely with Ryanair without succeeding at keeping its costs as low. The 2001–2003 stock prices are graphed below: Easyjet wasn’t successful because of its DNA. To succeed in Ryanair’s business model, your DNA has too be the one of a ruthless company, competing virtually only on costs and routes, but sacrificing its culture and its relationships with customers.

So Easyjet chose, smartly, to compete in an entirely new space: middle-cost, without superfluous service, focused on increasing the value it provides to its customers without additional costs. And then, Easyjet’s DNA was in full motion. Consider now the travel experience with Easyjet:

• When booking online, they don’t try to sell you travel insurance. Ryanair adds a very expensive one.
• They do make sure you buy luggage fees (GBP 3.99 per flight for a 20 kilos bag) online and don’t try to charge you an increased fee for paying at the airport. Ryanair charges GBP 18.50 for a 15 kilos bag and try to charge it at the airport (for GBP 30 of course).
• Ryanair of course charges for a long list of items, including GBP 3 when you check in at the airport. Most people discovers these fees at the airport of course.

So Easyjet compares well to Ryanair in terms of fees ? Not only, they innovate as well by building strong relationships with their customers. Here’s some extracts from their “Why fly Easyjet” section:

• No worries if you miss your flight We understand how frustrating it is to miss a flight. That’s why you can catch the next available flight for a flat charge of just £35 if you turn up at the airport within two hours of your original flight’s scheduled departure time.
• Arrived at the airport early? No problem! Your time is important to you, so if you get to the airport early you can hop onto an earlier flight home free of charge – provided we’ve got a seat available. What’s more: if your outbound flight was from London you can now fly home to any of our London airports (Gatwick, Luton, or Stansted) for extreme flexibility if you travel on public transport!

Amazing how powerful DNA is.