NB: This is a guest article by Jonathan Alford from Seattle-based consulting firm Lenati.
Last week I flew on Delta from New York's JFK back to Seattle, and for the first time experienced the new deal between Delta, Amazon, and Gogo.
Tnooz reported it here, but the real significance, scope of impact on multiple industries, and how this has unfolded makes an interesting story not only in the travel industry, but by showing that airlines (and possibly hotels) are now recognized as a potentially large customer acquisition battleground in the cutthroat digital media and entertainment industry fight for "living room share" and in multi-channel retail.
We’re not just talking old-school in-flight entertainment as a cost center anymore.
To start, while airlines have been a consumer punching bag on many fronts, it’s good to acknowledge Delta and Gogo – in the face of negative perception of ancillary fees and Gogo’s historic core competency in communications technology rather than consumer experience – for adapting to deliver a more compelling passenger experience.
Not to ignore IFE trailblazers like JetBlue and Virgin America and what other airlines are doing, but a marriage of one of the world’s largest airlines and the world’s largest online retailer and disruptive force in the book and entertainment industries is noteworthy.
Also noteworthy? Delivering a better passenger experience and driving ancillary revenue are not mutually exclusive.
What’s so special?
To begin with, note Amazon’s presence on Delta’s web homepage – positioned as "Your Pre-Flight Destination…for…books, music, and travel essentials".
Next, the free Amazon access dominant on the Delta-Gogo home screenshot, taken by my seat-neighbor - ironically flying to visit Amazon to discuss big data initiatives - and Groupon’s placement to target deals based on the destination.
Think they won’t be tracking purchases to target travelers better? A friend of mine, Jeff Holden, helped build Amazon and now runs Groupon's product development – the DNA is there…
What is being recognized is that airlines offer – at least for a snapshot in time – the holy grail of merchandising.
They know exactly when travelers are flying and thinking about what they’re going to do on the flight, where they’re going, and what they have always been high impulse-buy consumers of – books, movies, music, and more.
What is not yet seen is a channel for Amazon’s video business, but I’d wager it’s part of the deal as in-flight streaming technology improves, perhaps locking Netflix and Apple out. For now, Gogo provides video downloads.
Back in late-2009
This is interesting in that even before the iPad launched, one could see a developing convergence of digital media, mobile, and airline wifi trends, and when juxtaposing forecasts for airline wifi installations, explosive digital entertainment growth, and install bases of iPad, Kindle, Netflix, etc, airlines looked to be a significant potential customer acquisition channel for digital media firms.
I shared the info below with Amazon’s video business and some airlines at the time (late-2009 forecasts from several sources).
It was interesting; however, Amazon was unconvinced of the real airline user base and Aircell’s (Gogo) technology, airlines were focused on baggage fees, Aircell did not have a consumer internet core competency, and the concept remained just that – a concept.
However, those iPad, Kindle, Xbox Live, and other market forecasts have proven to be drastic underestimates, creating even greater competition in digital media and entertainment - and prompting a big boy like Amazon to look again.
Early-2011
With wifi installs having accelerated dramatically, what continued to be lacking was focus on the passenger experience in the face of airline baggage fees and a regrettable "flying mall" approach promoted by short-sighted retail technology vendors trying to sell into the airline on-board space.
The final straw for me was the worst commercial I’ve ever seen – SkyMall blaring on the monitors of a United flight at 1am that woke half the cabin screeching, "Shopping while you fly, it’s the fun way to buy!"
Go ahead, sing it out loud three times…
This prompted some analysis:
Today
Now we’re seeing wifi tailored to airlines’ brands, complemented by Gogo’s rebranding, and improving with strong consumer brands. So what could continue to develop? Perhaps a few things:
1. Most importantly for revenue generation, think outside the flight. Passively hoping travelers wait until they get on board or up to 10,000 feet caps the market.
Amazon’s placement on Delta’s homepage – not just the in-flight screen – indicates this is occurring. Mobile marketing in the roundtrip pre-flight and in-flight "60-hour cycle" below is a great opportunity.
2. Further disruption of the old IFE value chain, as streaming capacity improves and airlines take costs out of the system, even as they invest in further upgrading premium cabin IFE systems.
3. Though airlines do not set WiFi pricing, hopefully Gogo’s economic model will continue to evolve such that its pricing can trend lower without sacrificing margin.
To close, in this era of high fuel costs, higher fares from airline consolidation, baggage and window-seat fees, and general challenges of the airline economic model:
"If airlines and the wifi providers can leverage the larger opportunities outside the flight and…create a more compelling offering to passengers, then ultimately…it can drive wifi conversion, revenue, and a positive consumer experience – a win-win-win-win for airlines, passengers, wifi providers, and digital media partners."
Keep your passenger experience fingers crossed and enjoy the fascinating multi-industry and technology dynamics.
NB: This is a guest article by Jonathan Alford from Seattle-based consulting firm Lenati.
NB2:Shopping basket keyboard image via Shutterstock.