In Beijing, Barry Diller addressed the topic of technology's impact on travel to delegates of the Global Travel & Tourism Summit organized by the prestigious World Travel & Tourism Council.
After sharing some entertaining stories of his prescient moves into online travel with Expedia, he moved on to some forward-looking thoughts on search, social media and mobile.
He also provided some thoughts on why foreign firms fail in China, that I found interesting in the context of Expedia's investment in China's #2 OTA, eLong.
1. Google not likely to succeed in travel, and search to be more than just "blue links"
According to Diller, search will "evolve" and "blue links will be superseded by a better way." He took the opportunity to promote Ask.com's "semantic" search which is "the best place to ask a question." According to comScore (via SearchEngineLand.com), Ask.com was down to 1.7% share in December 2009, compared to 9.9% for Bing/MSN/Live, and 67.3% for Google's "blue links."
Unfortunately, it appears that Diller's own investments in the search space have had vision but not marketplace success. Either that, or Google is actually more than just the "blue links" Diller refers to.
When asked about Google's prospects in the travel space, Diller replied that Google lacked the focus on travel to be successful in the vertical. "Life is about focus. Those companies that really focus on travel just run rings around Google and their nascent travel efforts and Bing's [travel efforts]," said Diller.
"It's very difficult for broadband search engines to play a very big role in various areas of e-commerce." Rumors of an acquisition of ITA Software and Google's recent acquisition of Ruba may represent Google's attempts to bring more focus to its efforts. But Diller's characterization of Google's lack of focus fails to consider the fact that travel is one of the largest categories of traffic in general search engines like Google and a significant portion of TripAdvisor's own traffic still comes from Google and other general search engines.
2. TripAdvisor to benefit from the opening of social networks and Facebook
Diller, the chairman of TripAdvisor parent Expedia Inc., implied that TripAdvisor would be a beneficiary of the trend toward more access to the social graph, the data which describes the set of relationships and mutual interests people have with other people online.
TripAdvisor starts with the base of a proposition based on word-of-mouth, and 34 mm reviews covering 70,000 destinations worldwide. "What's going to happen is that these reviews are going to be filtered so that their word-of-mouth power is not about strangers, but refined to the point where you will get such dead-on accurate…recommendations about what to do," said Diller. "I actually think it's going to be the powerful way to access [travel]...how to make decisions."
TripAdvisor recently launched support for the "Like" button which allows you to connect any page on TripAdvisor to your Facebook profile, and gives TripAdvisor privileges to message you inside Facebook.
3. Mobile: Jump in with both feet
Diller advised that all companies should aggressively attack the mobile opportunity. "Anyone who doesn't plunge into mobile applications…with both feet…will have an end sooner than you would like. [At IAC] we're throwing money at applications before [customer demand] comes."
Specifically, Diller emphasized that companies in the distribution business must consider distribution of content on "wireless small form factor devices." He highlighted Urbanspoon, a iPhone application for restaurant recommendations that was acquired and integrated into the Citysearch business.
4. Diller on why foreign firms fail in China
When asked about why foreign firms fail in China, Diller offered some simple advice, but without any reference to his company's own investments in China. Diller quoted his friend Jack Ma, founder of Alibaba. According to Ma, Western firms fail because "they think someone [in China] is good because they speak English" when in fact what is important is "speaking Chinese to Chinese."
While the comment may seem superficial, Ma's point is much more profound and not limited to language fluency. Executives at foreign-controlled companies must spend considerable effort maintaining confidence and alignment with their parent companies--in other words "speaking English"--instead of focusing on local problems, local partners, and local solutions--in other words "speaking Chinese to Chinese."
Expedia's acquisition of eLong may be a case in point.
In 2004, Expedia (prior to it's Aug 2005 spinout from IAC) invested $72.4 mm in eLong (NASDAQ: LONG) for an outright 30% interest and warrants to own a controlling 51% of the company.
In 2010, under CEO Guangfu Cui, eLong has achieved profitability in Q1 and is now valued at approximately $270 mm.
While Diller may consider elong to be a successful investment, most watchers consider eLong to have failed to compete effectively with market leader Ctrip. According to market research firm iResearch Inc., Ctrip now commands 55.6% of online travel sales compared to eLong's 9.8%
Q1 2010 online travel market share
(Ctrip in green, at 55.6%. eLong in dark blue, at 9.8%. Source: iresearch.com.cn)
Notwithstanding the advice of Jack Ma to Diller and his apparent awareness of how to hire executives and manage Chinese subsidiaries, eLong has had a succession of CEOs and Chairmen during the period since Expedia's acquisition.
Guangfu Cui, appointed in Oct 2007, is the 3th leader of the company, succeeding Tom Soo Hoo (resigned April 2007), and the joint team of Barney Harford (resigned as Chairman July 2006) and Justin Tang (resigned 2006). In contrast, Ctrip co-founder Fan Min still runs his company, which is now valued at $10 billion, more than Diller's Expedia itself.
Ctrip's recent investment in China Lodging Group highlights Ctrip's much broader role in the travel ecosystem than their international perception as a winning online travel agency. Ctrip's ability to secure capital through secondary offerings also means that it can continue to make strategic acquisitions to increase it's lead.
Meanwhile, eLong, valued at less than 1/35 of Ctrip, is struggling to assemble enough volume (such as its opportunistic investments in sunnychina.com and Sinohotel) to be relevant to suppliers so they can provide some healthy competition on the online distribution landscape.
In summary, Diller's advice was articulate and clearly stated, and provides good context about the potential direction of travel technology. His advice on mobile is most-likely dead accurate for most travel distribution and technology players, and his vision for TripAdvisor's increasing role in travel planning and research is likely to be true as well.
However, in the arena of search and in-China travel, the track record of his companies does not match the confident picture projected by Diller to conference attendees.