A bold question, but certainly one worth asking as mobile becomes part of the establishment rather than the revolutionary upstart.
The recent article Why mobile itinerary planning and sharing is starting to get very interesting was focused primarily on the key players in this space and how social networking was creeping into mobile itinerary planning apps.
In this follow-up piece I intend to address the key question of who, in the medium term, is well placed to make money from mobile, and how. I'll also suggest a few new revenue ideas to consider putting in a mobile business case that should help turn around what may look negative today.
My primary focus is almost always on airlines, but in most cases where I mention airline strategies below, they could just as easily apply to any travel company that has sufficient scale and has access to customer data ahead of the date of travel. Therefore this could mean travel management companies, other large travel agencies, OTA's or maybe in certain cases even some large hotel chains or rental car companies.
But the real advantage the airline has is that they get multiple bites of the same cherry. Even when a person does not buy from airline.com, if they are a frequent flyer the airline has a way to communicate prior to travel; once each passenger reaches the airport the airline has a captive consumer all the way until they depart the plane.
Whilst the Bow Tie Model of ancillary revenue shows the difficulty in any one provider owning a significant share of the travel spend committed by the passenger as more time elapses after the booking, controlling that passengers preferred travel related mobile app has the potential to radically shift the balance of power over who gets what percentage of this part of the ancillary revenue pie.
Nobody is better placed to seize this opportunity than the airlines themselves - Lufthansa and Southwest are the airline early starters in this race to "own" the handset, but we have a very long way still to run.
In my earlier piece I mentioned Worldmate, Tripit, Tripcase, Mobiata, Farelogix, Traxo, Kayak and Cornerstone, all of whom are or could be doing interesting things in mobile.
Of course, there are many more companies I could have listed like MTT who have done work with Russian Airline S7 and Qantas offshoot Jetstar, Quickmobile who built the app for the PhoCusWright conference and have worked with Flight Centre, match2blue and their work for Lufthansa, or Reardon Commerce who compete largely with Cornerstone in the corporate market and have released their own iPhone app.
I could keep going on and on, but the focus now is not so much on what individual companies are doing (with a few obvious exceptions) and more on which sources of data and types of content have the best chance to make mobile apps and a mobile strategy in general extremely profitable.
There are three key questions:
How to get the app installed on the travellers phone as early as possible?
How to generate currently unseen sources of revenue and thirdly?
How to maintain customer engagement with the app once the traveller returns home?
All the time never forgetting how to make the business case stack up?
You won't use all the ideas below in your business case, but there are more than enough positives to make standing on the sidelines a very lonely place.
The early bird catches the worm - getting the app installed
The point at which the traveller commits to a destination is usually the point at which the plane ticket is purchased. Prior to this they are looking for inspiration, after this they are looking for accommodation.
At this point in time, getting a revenue generating mobile app onto the phone is probably only of slightly lesser importance than making sure you also have the passengers hotel and car booking secured. Maybe in future even that order of priority could be flipped.
Sure everyone doesn't have a smart phone yet, but adoption is growing rapidly. Even more importantly, looking at the total market is much less relevant than looking at percentage of plane trips taken where one of the party is carrying a smart phone.
This is a point I have not seen being made before: when there are multiple people on the same PNR, this really is the statistic you should be looking at - if only you could get your hands on it!
In the first four and a half minutes of Google CEO Eric Schmidt's speech at Mobile World Congress in Barcelona in February he rattled off a series of numbers that should see the mobile doubters using their own outdated stats like a drunk uses a lamp post - for support, but not for illumination.
Some of Schmidt's numbers: Smart phones growing at over 30% a year, in under 3 years smart phone sales will pass global PC sales, mobile web adoption proceeding 8 times faster than the equivalent point 10 years ago for the desk top, and in selected developing countries Google are already seeing more search traffic coming from mobiles than from the desktop.
I still occasionally hear people talk down airline websites as a valid sales channel - yes, these people do exist, but nobody takes them too seriously any more. Maybe the mobile doubters are next in line.
Before the doubters cite roaming charges, let me say I agree. An app aimed at anything other than domestic travel will fail if it does not address this issue. Apple's patent applications hint at this, and since v3.0 the iPhone has had push capabilities - most others have had it for much longer.
Aside from the high roaming costs of polling, the battery life is vastly improved from apps using push. Some mobile platforms allow you to intercept the SMS before the user sees it, thereby enabling a mode of communication that will work even if data transfer is turned off and the handset is in phone only mode; expensive in most cases, but maybe cheaper when the traveller is up for high internet data roaming costs.
And then the maps themselves can either be cached beforehand, or even better, a vector based mapping system like Ovi Maps from Nokia can be installed on phone making international gouging by telcos much less of an issue. Roaming charges are a legitimate concern for travellers, but they are definitely not a showstopper to mass adoption if the application is designed in the right way and assuming the low cost of use is properly understood by travellers.
Just over a year ago I had a colleague trawl through data covering millions of PNRs booked in a two year period on over 50 Amadeus e-Retail hosted airline websites. She found that the average booking was made 46 days prior to the date of departure. It became even more interesting when looking at the different lead times for different types of PNRs.
The following numbers are just for one representative airline, but domestic travel booked via internet was purchased on average 35 days ahead, international was 76 and redemption was even higher; in fact 29% of redemption bookings online were made more than 90 days in advance.
I'm pretty sure the international number would have come down since that analysis was done, but how are these numbers relevant for mobile? In short, get in early and get commitment - there is a lot of time from buy to fly, and the longer the booking window then all the more time for that passenger to install a competing mobile itinerary planning and sharing application.
Much harder to dislodge something when the user has already invested time in customizing the existing app and entering in key trip related data. Itinerary planning and sharing only becomes relevant once you have an actual itinerary, so whover knows this fact first has a distinct advantage.
This is maybe the biggest challenge most of the innovative new entrants will face if they don't partner with companies that can directly access the traveller earlier in the process. Waiting until the traveller arrives at the destination airport will be too late for DMO's adopting a wait-until-arrival strategy.
The market for chargeable digital downloads of destination guides is already proven. Lonely Planet state that one in five sales of their city guides now come via the iTunes store - their digital business is growing at 40-50% a year. If the traveller hasn't purchased a digital guidebook prior to ticket purchase, then sell one at this point.
Own the mobile app, bundle the guidebook, make it readable (or at least searchable) via your app, offer a free or discounted updated guidebook if one comes out prior to departure to overcome long lead time resistance, and lock the customer into your app every time he opens the digital guidebook. Or wait for him to buy it from iTunes, get no commission, and give him one less reason to install your app at this early stage.
Guidebooks are just one example, but a little creative thinking should see you easily expanding on this. Add it into the business case for mobile by estimating what you will sell and the commission you will earn from the guidebook content owner, as well as the cost of licensing/modifying an app from a mobile phone technology specialist.
The app should definintely be pushed first to all, and the itinerary planning and sharing features are a natural, but guidebook integration may open up a new market of traveller that today isn't convinced they need an app just for itinerary planning. Owning the preferred app on the handset means being able to benefit financially from the ideas that follow below.
The focus of this article is on revenue generation, but from what I've seen given my experience working with airlines, the quickest way to get a mobile strategy approved is to also factor cost savings into the business case.
The savings just from automating things like inventory schedule change notification, SSR confirmations, disruption notification etc can be huge, and anything you can do to move work out of the call centre and into a self service environment will almost certainly outweigh the revenue generation possibilities from mobile in the short term.
Using these savings to set up a mobile strategy that will eventually deliver more in revenue than in cost savings is much smarter than only looking at the cost side of the equation. Besides, the more integrated the mobile strategy is, the much better chance you will have of getting that one "must have" travel app installed on the passenger's smart phone.
Interestingly on the point of moving non revenue generating queries out of the call centre, I saw Lufthansa referring to their recently launched MemberScout mobile app as a member-helps-member service.
There are of course other strategies for getting an app onto a persons phone at an early stage. Deals can be cut with telco's to have it pre-loaded, or corporates can automatically download it to employees BlackBerries.
I've never heard of this latter one being used in negotiation, but both the travel provider (be that TMC or airline) and the corporation have something the other needs, so it wouldn't surprise me to hear of this happening in the future.
Opening up new sources of destination revenue
Ancillary revenue has grown tremendously in recent years, but in some ways the mobile may end up cannibalizing a small part of this. Of course the new revenue opportunities will replace the lost ones many times over, but before looking at the positives, here is one small potential negative.
Sojern have a nice business selling ads on boarding passes to a number of US carriers and recently announced a new partnership with US Airways. Sojern shares the revenue with the airline. US Airways do not disclose the potential annual revenue from the ads, but have said it's 30% to 40% more than they receive from their tray-table advertising.
My guess is that the business model of ads on home printed boarding passes may end up stuck somewhere between a Viator, Isango or Unaira and an AdMob or Quattro once they are replaced with a bar code on the phone. At that point, the challenge becomes the more general one of how to ensure these destination related offers are delivered to passengers in a timely manner over the entire trip, not just at boarding pass creation time.
Travel Buddy recently announced a partnership with GuestLogix to provide its travel information services to airline customers and their mobile phones. To quote GuestLogix chief executive Tom Douramakos from the press release:
"Now OnTouch Concierge Everywhere extends that onboard store experience beyond the flight during the entire trip and afterwards as well."
Using mobile to sell during the entire trip really is the holy grail.
Ancillary revenue can roughly be split into two key areas. First is the a la carte fees from unbundling the ticket price. My experience has been more in the second type of ancillary revenue which is helping airlines get a cut of any spend the traveller would have probably made anyway, but which the airline traditionally has not seen a cent of. For example, hotel, car, destination content and the like.
The original strategy was to draw the purchase of these items closer to the purchase of the air segment to lock in a commission before the passenger had time to look elsewhere. Now with mobile, whoever controls the travel app can also compete with the hotel concierge and the various other local parties trying to influence where the remaining uncommited cash will be spent whilst on location.
The problem with destination content to date has in part been not fully understanding the role of satisficing behaviour - more is not necessarily better, and timing is key. There are some great companies in this space, but the product has never been embraced by consumers to the extent it deserved. This is one reason why I think DMO's on their own face an uphill battle in mobile, despite having the most local content and a few already making a valiant effort in mobile.
Viator's mobile app has masses of content, and at least it is not single destination, but destination content is about selling something good enough at exactly the right time; this becomes even more relevant once the mobile user interface and international roaming charges are taken into account.
How newer entrants like either Goby or Siri attempt to proactively sell via their iPhone apps will be interesting to watch, as well as how they intend to get a large enough installed user base. My view is that people buy flights, people buy hotel rooms, but those same people need to be sold destination content.
If the hotel concierge doesn't make the sale, if the local taxi driver doesn't make the sale, and if that aggressive guy standing in front of the closest shopping strip to your vacation hotel doesn't make the sale, then the mobile app can and should. In fact, a good mobile app should get the sale before those others even get a chance to ply their wares.
I'm hardly the first to make the link between mobile and destination content - Stephen Joyce was making this point back in September 2009, but I am convinced there is money being left on the table here at present.
In the last few weeks I've seen an alarming number of people talk about both social networking and/or mobile claiming that return on investment should be binned in favour of other more subjective measures like return on engagement, return on inspiration or worse. Others are welcome to this space, but for any new technology to get widespread acceptance in business it is never a wise move starting out by being defensive and apologetic.
Mobile can show a very positive ROI, and integrating social aspects and destination content into the platform can definitely make the financial rewards even greater. If there is only one point you take away from this article, please let it be that mobile is a genuine money making opportunity and the right time to chase it is now.
Back to destination content and satisficing behaviour. The best way to make your app top of mind first thing every morning during a trip is to push a weather forecast, and below it show to one idea for an activity suited to those weather conditions and the demographic of the traveller. On a cold and rainy day don't promote kayaking (unless maybe it is distressed inventory at a discounted price, and only to the most budget conscious traveller).
On that rainy day during the vacation, any suitable activity is better than being stuck in the hotel room, and by being first in front of the consumer with the applicable offer, the sale is most likely to go to the well designed mobile app - especially if it also has the right design to facilitate easy purchase.
This is just one reasonably simple idea, but with a bit of creative thinking and correct use of timing, this offer combined with what you already know about the passenger from data within the face of the PNR should see commission revenue on destination content as a reasonable line in your business case.
The future of mobile advertising opens up a lot of possibilities, and one industry example I came across was STA Travel who engaged in a mobile ad campaign with apparent success.
For a company selling (in part) tours and expeditions with a strong focus on younger cost conscious travellers (eg backpackers and gap year) imagine how much more powerful such a campaign could have been if it targeted those people directly. Most backpackers buy a local SIM card, so how will the ad network be able to segment the ads to this demographic?
The airline who flew the backpacker should have the local mobile number on record for notifications, an email address, and knowledge of dates of travel and number and types of travellers in the party taken from the PNR. Ask yourself just how valuable this information would be to a mobile ad network?
The phone tells you who, the GPS (if it is turned on) gives you the where, but neither gives you the why; the context of why a person is in a given location is extremely valuable to advertisers. It is much better promoting a five star restaurant with limosine pickup to someone in a city on a short trip flying business class than to the person with a discount economy ticket returning home in 12 months.
All of the talk I am hearing on targeted mobile advertising is around GPS. With Apple taking a negative stance on this, and the probability that people may turn it off if they feel stalked (especially if the ad offers them a dollar off a Big Mac everytime they walk past a McDonalds), I think GPS as a basis for serving location based ads is in many cases actually less valuable than the data contained within a PNR.
Who else knows if I am travelling with children, or travelling alone? And in an away from home destination, I am much less likely to rely on my own local knowledge and more likely to respond to marketing messages, making me very attractive to advertisers who know the context of my trip.
I saw a number of travel industry predictions at the start of this year about how 2010 would see data play a much more important role in travel - the above example is one very tangible example of how that prediction might come true. No doubt your legal department will have a heart attack, but get the fine print from your conditions of sale bullet proof in order to cover this use of data, and then go for it.
Opportunity favours the brave, and even though the market for this data is not yet proven, I am absolutely convinced it is a goldmine for whoever can sell it in a way that does not contravene data protection laws - I'm putting my money on the major airlines for this one. PNR data being used to serve mobile ads in a highly segmented way - this is incredibly valuable.
Moving to the next untapped source of value coming out of a well executed mobile strategy. Imagine getting your hands on how much passengers paid to travel when they flew with a competitor and what share of wallet of their annual travel spend you are receiving.
This is where the Tripit model really stands out. There is a wrong way to get this information, but having passengers on a competing airline voluntarily sending you their itinerary receipts is pure genius.
The value of this information must be factored into the business case, and it should be a significant number - look at what websites pay QL2 or Infare to monitor competitors, or what an airline pays for MIDT data, and then make an estimate of what this information could be worth to your own employer if used intelligently.
Before finishing up on totally new sources of revenue related to mobile, it is important to note that I have barely touched on the social networking capabilities for mobile usage whilst on vacation and how this could be tied to revenue generation for the owner of the app.
Mobile suppliers are starting to tout the social capabilities of their new phones, and despite most social travel initiatives to date (at least the ones from airlines) focusing on the ability to share a taxi, the revenue potential beyond this is real and should not be ignored.
I never intended to write a three part series on mobile for Tnooz, but I've since realized that location based social networking revenue generation warrants an entirely new post to conclude.
Therefore my next article for Tnooz will throw around a lot of ideas for companies really wanting to build a compelling and profitable mobile app, especially one with a strong focus on social and destination.
The intention will be to demonstrate even more revenue lines for that mobile business case - a business case based on genuine innovation and not just catching-up.
From trial to testimonial; or applying the post-trip treacle.
Stickiness equals success over the longer term, so how to ensure the great momentum you have built with the passenger on location does not evaporate when he returns home; especially as cost per customer acquisition must be a line in the business case.
Southwest has a popular app for the iPhone and they use the lure of their DING special fare alerts to keep users engaged even when not travelling. You wouldn't want to give the app users any preference over your frequent flyer program members, but it makes sense for any new app customer to be automatically enrolled in the frequent flyer program and then this problem is solved.
Even if the special offers are public fares, giving the mobile app users advance warning of promotions, even if by only half an hour, might be enough to make the app a little stickier.
Spanish airline Iberia have occasionally enabled Zap Off for their frequent flyer members where for a limited period and only for that closed user group all fares on the website have a 5% or 10% discount.
This may also be an option to encourage stickiness, but I'd be very wary of making special offers or benefits like additional frequent flier points as a prerequisite for success; doing so could end up making what was supposed to be a profit generating exercise into an expensive indulgence.
I've mentioned above the ability to enter flights from other carriers, assuming it is an airline that owns this app (or at least has licensed a white label from a vendor specializing in mobile technology).
This inclusiveness applies to hotel and rental car bookings as well. In order to really own this market, that functionality is a prerequisite. If airlines don't offer it, then travel agencies or an existing mobile technology company will do so under their own brand.
Even if you have lost the sale of the air segment to a competitor, if you have the passenger itinerary emailed to you there is absolutely no reason why you can't try and cross sell them accommodation and the like.
I'm surprised Tripit does not try this actively, but maybe they feel it will be perceived as a negative by the user of the service - they are probably right at this point in time, but once their product becomes so compelling that it is a must have, then I'll definitely forgive a slightly more aggressive sales pitch.
If you can build something good enough to convince passengers on a competitor airline to forward you their itinerary emails in sufficient numbers, even a little bit of inducement might be justified if you can cross sell to them before and after their flight.
This is a definite ancillary revenue line, plus the data it delivers is a benefit to your own business and must also be quantified as a substantial number in any business case. I'll speak more about the benefits of getting non customers using your app in the next installment covering social.
The percentage of PNRs containing at least one traveller with a smart phone must be significant, and the percentage of these that are already hooked on an enhanced itinerary planning and sharing mobile app would be very small indeed. Cover all the bases, and owning a geographical market with the preferred travel app is a real possibility.
All of what I have written above presupposes that the winning app in any region, or maybe even globally, will contain all the best of breed features currently in the leading products available for sale today.
I haven't laboured this point, as it is much more interesting to look at what hasn't been done yet. Taking the best of what is out there today and combining it with some of the cost saving and revenue generating ideas written here is good.
But add to that the marketing muscle of an airline or similarly large player in the travel sector with the power to get it onto customers handsets in significant numbers, and the ancillary revenue story may have just been given a totally fresh set of legs.
A bold question, but certainly one worth asking as mobile becomes part of the establishment rather than the revolutionary upstart.
My recent article Why mobile itinerary planning and sharing is starting to get very interesting was focused primarily on the key players in this space and how social networking was creeping into mobile itinerary planning apps.
In this follow-up piece I address the key question of who, in the medium term, is well placed to make money from mobile, and how. I'll also suggest a few new revenue ideas to consider putting in a mobile business case that should help turn around what may look negative today.
My primary focus is almost always on airlines, but in most cases where I mention airline strategies below, they could just as easily apply to any travel company that has sufficient scale and has access to customer data ahead of the date of travel. Therefore this could mean travel management companies, other large travel agencies, OTA's or maybe in certain cases even some large hotel chains or rental car companies.
But the real advantage the airline has is that they get multiple bites of the same cherry. Even when a person does not buy from airline.com, if they are a frequent flyer the airline has a way to communicate prior to travel; once each passenger reaches the airport the airline has a captive consumer all the way until they depart the plane.
Whilst the Bow Tie Model of ancillary revenue shows the difficulty in any one provider owning a significant share of the travel spend committed by the passenger as more time elapses after the booking, controlling that passengers preferred travel related mobile app has the potential to radically shift the balance of power over who gets what percentage of this part of the ancillary revenue pie.
Nobody is better placed to seize this opportunity than the airlines themselves - Lufthansa and Southwest are the airline early starters in this race to "own" the handset, but we have a very long way still to run.
In my earlier piece I mentioned Worldmate, Tripit, Tripcase, Mobiata, Farelogix, Traxo, Kayak and Cornerstone, all of whom are or could be doing interesting things in mobile.
Of course, there are many more companies I could have listed like MTT who have done work with Russian Airline S7 and Qantas offshoot Jetstar, Quickmobile who built the app for the PhoCusWright conference and have worked with Flight Centre, match2blue and their work for Lufthansa, or Reardon Commerce who compete largely with Cornerstone in the corporate market and have released their own iPhone app.
I could keep going on and on, but the focus now is not so much on what individual companies are doing (with a few obvious exceptions) and more on which sources of data and types of content have the best chance to make mobile apps and a mobile strategy in general extremely profitable.
There are three key questions:
- How to get the app installed on the travellers phone as early as possible?
- How to generate currently unseen sources of revenue and thirdly?
- How to maintain customer engagement with the app once the traveller returns home?
...but, obviously, never forgetting how to make the business case stack up?
You won't use all the ideas below in your business case, but there are more than enough positives to make standing on the sidelines a very lonely place.
The early bird catches the worm - getting the app installed
The point at which the traveller commits to a destination is usually the point at which the plane ticket is purchased. Prior to this they are looking for inspiration, after this they are looking for accommodation.
At this point in time, getting a revenue generating mobile app onto the phone is probably only of slightly lesser importance than making sure you also have the passengers hotel and car booking secured. Maybe in future even that order of priority could be flipped.
Sure everyone doesn't have a smart phone yet, but adoption is growing rapidly. Even more importantly, looking at the total market is much less relevant than looking at percentage of plane trips taken where one of the party is carrying a smart phone.
This is a point I have not seen being made before: when there are multiple people on the same PNR, this really is the statistic you should be looking at - if only you could get your hands on it!
In the
first four and a half minutes of Google CEO Eric Schmidt's speech at Mobile World Congress in Barcelona in February he rattled off a series of numbers that should see the mobile doubters using their own outdated stats like a drunk uses a lamp post - for support, but not for illumination.
httpv://www.youtube.com/watch?v=ClkQA2Lb_iE
Some of Schmidt's numbers: Smart phones growing at over 30% a year, in under 3 years smart phone sales will pass global PC sales, mobile web adoption proceeding 8 times faster than the equivalent point 10 years ago for the desk top, and in selected developing countries Google are already seeing more search traffic coming from mobiles than from the desktop.
I still occasionally hear people talk down airline websites as a valid sales channel - yes, these people do exist, but nobody takes them too seriously any more. Maybe the mobile doubters are next in line.
Before the doubters cite roaming charges, let me say I agree. An app aimed at anything other than domestic travel will fail if it does not address this issue.
Apple's patent applications hint at this, and since
v3.0 the iPhone has had push capabilities - most others have had it for much longer.
Aside from the high roaming costs of polling, the
battery life is vastly improved from apps using push. Some mobile platforms allow you to
intercept the SMS before the user sees it, thereby enabling a mode of communication that will work even if data transfer is turned off and the handset is in phone only mode; expensive in most cases, but maybe cheaper when the traveller is up for high internet data roaming costs.
And then the maps themselves can either be cached beforehand, or even better, a vector based mapping system like Ovi Maps from Nokia can be installed on phone making international gouging by telcos much less of an issue. Roaming charges are a legitimate concern for travellers, but they are definitely not a showstopper to mass adoption if the application is designed in the right way and assuming the low cost of use is properly understood by travellers.
Just over a year ago I had a colleague trawl through data covering millions of PNRs booked in a two year period on over 50 Amadeus e-Retail hosted airline websites. She found that the average booking was made 46 days prior to the date of departure. It became even more interesting when looking at the different lead times for different types of PNRs.
The following numbers are just for one representative airline, but domestic travel booked via internet was purchased on average 35 days ahead, international was 76 and redemption was even higher; in fact 29% of redemption bookings online were made more than 90 days in advance.
I'm pretty sure the international number would have come down since that analysis was done, but how are these numbers relevant for mobile? In short, get in early and get commitment - there is a lot of time from buy to fly, and the longer the booking window then all the more time for that passenger to install a competing mobile itinerary planning and sharing application.
Much harder to dislodge something when the user has already invested time in customizing the existing app and entering in key trip related data. Itinerary planning and sharing only becomes relevant once you have an actual itinerary, so whover knows this fact first has a distinct advantage.
This is maybe the biggest challenge most of the innovative new entrants will face if they don't partner with companies that can directly access the traveller earlier in the process. Waiting until the traveller arrives at the destination airport will be too late for DMO's adopting a wait-until-arrival strategy.
The market for chargeable digital downloads of destination guides is already proven.
Lonely Planet state that one in five sales of their city guides now come via the iTunes store - their digital business is growing at 40-50% a year. If the traveller hasn't purchased a digital guidebook prior to ticket purchase, then sell one at this point.
Own the mobile app, bundle the guidebook, make it readable (or at least searchable) via your app, offer a free or discounted updated guidebook if one comes out prior to departure to overcome long lead time resistance, and lock the customer into your app every time he opens the digital guidebook. Or wait for him to buy it from iTunes, get no commission, and give him one less reason to install your app at this early stage.
Guidebooks are just one example, but a little creative thinking should see you easily expanding on this. Add it into the business case for mobile by estimating what you will sell and the commission you will earn from the guidebook content owner, as well as the cost of licensing/modifying an app from a mobile phone technology specialist.
The app should definintely be pushed first to all, and the itinerary planning and sharing features are a natural, but guidebook integration may open up a new market of traveller that today isn't convinced they need an app just for itinerary planning. Owning the preferred app on the handset means being able to benefit financially from the ideas that follow below.
The focus of this article is on revenue generation, but from what I've seen given my experience working with airlines, the quickest way to get a mobile strategy approved is to also factor cost savings into the business case.
The savings just from automating things like inventory schedule change notification, SSR confirmations, disruption notification etc can be huge, and anything you can do to move work out of the call centre and into a self service environment will almost certainly outweigh the revenue generation possibilities from mobile in the short term.
Using these savings to set up a mobile strategy that will eventually deliver more in revenue than in cost savings is much smarter than only looking at the cost side of the equation. Besides, the more integrated the mobile strategy is, the much better chance you will have of getting that one "must have" travel app installed on the passenger's smart phone.
Interestingly on the point of moving non revenue generating queries out of the call centre, I saw Lufthansa referring to their recently launched
MemberScout mobile app as a member-helps-member service.
There are of course other strategies for getting an app onto a persons phone at an early stage. Deals can be cut with telco's to have it pre-loaded, or corporates can automatically download it to employees BlackBerries.
I've never heard of this latter one being used in negotiation, but both the travel provider (be that TMC or airline) and the corporation have something the other needs, so it wouldn't surprise me to hear of this happening in the future.
Opening up new sources of destination revenue
Ancillary revenue has grown tremendously in recent years, but in some ways the mobile may end up cannibalizing a small part of this. Of course the new revenue opportunities will replace the lost ones many times over, but before looking at the positives, here is one small potential negative.
Sojern have a nice business selling ads on boarding passes to a number of US carriers and recently announced a
new partnership with US Airways. Sojern shares the revenue with the airline. US Airways do not disclose the potential annual revenue from the ads, but have said it's
30% to 40% more than they receive from their tray-table advertising.
My guess is that the business model of ads on home printed boarding passes may end up stuck somewhere between a
Viator,
Isango or
Unaira and an
AdMob or
Quattro once they are replaced with a bar code on the phone. At that point, the challenge becomes the more general one of how to ensure these destination related offers are delivered to passengers in a timely manner over the entire trip, not just at boarding pass creation time.
Travel Buddy recently announced a partnership with
GuestLogix to provide its travel information services to airline customers and their mobile phones. To quote GuestLogix chief executive Tom Douramakos from the press release:
"Now OnTouch Concierge Everywhere extends that onboard store experience beyond the flight during the entire trip and afterwards as well."
Using mobile to sell during the entire trip really is the holy grail.
Ancillary revenue can roughly be split into two key areas. First is the a la carte fees from unbundling the ticket price. My experience has been more in the second type of ancillary revenue which is helping airlines get a cut of any spend the traveller would have probably made anyway, but which the airline traditionally has not seen a cent of. For example, hotel, car, destination content and the like.
The problem with destination content to date has in part been not fully understanding the role of satisficing behaviour - more is not necessarily better, and timing is key. There are some great companies in this space, but the product has never been embraced by consumers to the extent it deserved. This is one reason why I think DMO's on their own face an uphill battle in mobile, despite having the most local content and a few already making a valiant effort in mobile.
Viator's mobile app has masses of content, and at least it is not single destination, but destination content is about selling something good enough at exactly the right time; this becomes even more relevant once the mobile user interface and international roaming charges are taken into account.
How newer entrants like either Goby or Siri attempt to proactively sell via their iPhone apps will be interesting to watch, as well as how they intend to get a large enough installed user base. My view is that people buy flights, people buy hotel rooms, but those same people need to be sold destination content.
If the hotel concierge doesn't make the sale, if the local taxi driver doesn't make the sale, and if that aggressive guy standing in front of the closest shopping strip to your vacation hotel doesn't make the sale, then the mobile app can and should. In fact, a good mobile app should get the sale before those others even get a chance to ply their wares.
I'm hardly the first to make the link between mobile and destination content - Stephen Joyce was making this point back in September 2009 - but I am convinced there is money being left on the table here at present.
In the last few weeks I've seen an alarming number of people talk about both social networking and/or mobile claiming that return on investment should be binned in favour of other more subjective measures like return on engagement, return on inspiration or worse.
Others are welcome to this space, but for any new technology to get widespread acceptance in business it is never a wise move starting out by being defensive and apologetic.
Mobile can show a very positive ROI, and integrating social aspects and destination content into the platform can definitely make the financial rewards even greater. If there is only one point you take away from this article, please let it be that mobile is a genuine money making opportunity and the right time to chase it is now.
Back to destination content and satisficing behaviour. The best way to make your app top of mind first thing every morning during a trip is to push a weather forecast, and below it show to one idea for an activity suited to those weather conditions and the demographic of the traveller. On a cold and rainy day don't promote kayaking (unless maybe it is distressed inventory at a discounted price, and only to the most budget conscious traveller).
On that rainy day during the vacation, any suitable activity is better than being stuck in the hotel room, and by being first in front of the consumer with the applicable offer, the sale is most likely to go to the well designed mobile app - especially if it also has the right design to facilitate easy purchase.
This is just one reasonably simple idea, but with a bit of creative thinking and correct use of timing, this offer combined with what you already know about the passenger from data within the face of the PNR should see commission revenue on destination content as a reasonable line in your business case.
The future of mobile advertising opens up a lot of possibilities, and one industry example I came across was STA Travel who engaged in a mobile ad campaign with apparent success.
For a company selling (in part) tours and expeditions with a strong focus on younger cost conscious travellers (eg backpackers and gap year) imagine how much more powerful such a campaign could have been if it targeted those people directly. Most backpackers buy a local SIM card, so how will the ad network be able to segment the ads to this demographic?
The airline who flew the backpacker should have the local mobile number on record for notifications, an email address, and knowledge of dates of travel and number and types of travellers in the party taken from the PNR. Ask yourself just how valuable this information would be to a mobile ad network?
The phone tells you who, the GPS (if it is turned on) gives you the where, but neither gives you the why; the context of why a person is in a given location is extremely valuable to advertisers. It is much better promoting a five star restaurant with limosine pickup to someone in a city on a short trip flying business class than to the person with a discount economy ticket returning home in 12 months.
All of the talk I am hearing on targeted mobile advertising is around GPS. With Apple taking a negative stance on this, and the probability that people may turn it off if they feel stalked (especially if the ad offers them a dollar off a Big Mac everytime they walk past a McDonalds), I think GPS as a basis for serving location based ads is in many cases actually less valuable than the data contained within a PNR.
Who else knows if I am travelling with children, or travelling alone? And in an away from home destination, I am much less likely to rely on my own local knowledge and more likely to respond to marketing messages, making me very attractive to advertisers who know the context of my trip.
I saw a number of travel industry predictions for 2010 about how this year would see data play a much more important role in travel - the above example is one very tangible example of how that prediction might come true. No doubt your legal department will have a heart attack, but get the fine print from your conditions of sale bullet proof in order to cover this use of data, and then go for it.
Opportunity favours the brave, and even though the market for this data is not yet proven, I am absolutely convinced it is a goldmine for whoever can sell it in a way that does not contravene data protection laws - I'm putting my money on the major airlines for this one. PNR data being used to serve mobile ads in a highly segmented way - this is incredibly valuable.
Moving to the next untapped source of value coming out of a well executed mobile strategy. Imagine getting your hands on how much passengers paid to travel when they flew with a competitor and what share of wallet of their annual travel spend you are receiving.
This is where the Tripit model really stands out. There is a wrong way to get this information, but having passengers on a competing airline voluntarily sending you their itinerary receipts is pure genius.
The value of this information must be factored into the business case, and it should be a significant number - look at what websites pay QL2 or Infare to monitor competitors, or what an airline pays for MIDT data, and then make an estimate of what this information could be worth to your own employer if used intelligently.
Before finishing up on totally new sources of revenue related to mobile, it is important to note that I have barely touched on the social networking capabilities for mobile usage whilst on vacation and how this could be tied to revenue generation for the owner of the app.
Mobile suppliers are starting to tout the social capabilities of their new phones, and despite most social travel initiatives to date (at least the ones from airlines) focusing on the ability to share a taxi, the revenue potential beyond this is real and should not be ignored.
I never intended to write a three part series on mobile for Tnooz, but I've since realized that location based social networking revenue generation warrants an entirely new post to conclude.
Therefore my next article for Tnooz will throw around a lot of ideas for companies really wanting to build a compelling and profitable mobile app, especially one with a strong focus on social and destination.
The intention will be to demonstrate even more revenue lines for that mobile business case - a business case based on genuine innovation and not just catching-up.
From trial to testimonial; or applying the post-trip treacle
Stickiness equals success over the longer term, so how to ensure the great momentum you have built with the passenger on location does not evaporate when he returns home; especially as cost per customer acquisition must be a line in the business case.
Southwest has a popular app for the iPhone and they use the lure of their DING special fare alerts to keep users engaged even when not travelling. You wouldn't want to give the app users any preference over your frequent flyer program members, but it makes sense for any new app customer to be automatically enrolled in the frequent flyer program and then this problem is solved.
Even if the special offers are public fares, giving the mobile app users advance warning of promotions, even if by only half an hour, might be enough to make the app a little stickier.
Spanish airline Iberia have occasionally enabled Zap Off for their frequent flyer members where for a limited period and only for that closed user group all fares on the website have a 5% or 10% discount.
This may also be an option to encourage stickiness, but I'd be very wary of making special offers or benefits like additional frequent flier points as a prerequisite for success; doing so could end up making what was supposed to be a profit generating exercise into an expensive indulgence.
I've mentioned above the ability to enter flights from other carriers, assuming it is an airline that owns this app (or at least has licensed a white label from a vendor specializing in mobile technology).
This inclusiveness applies to hotel and rental car bookings as well. In order to really own this market, that functionality is a prerequisite. If airlines don't offer it, then travel agencies or an existing mobile technology company will do so under their own brand.
Even if you have lost the sale of the air segment to a competitor, if you have the passenger itinerary emailed to you there is absolutely no reason why you can't try and cross sell them accommodation and the like.
I'm surprised Tripit does not try this actively, but maybe they feel it will be perceived as a negative by the user of the service - they are probably right at this point in time, but once their product becomes so compelling that it is a must have, then I'll definitely forgive a slightly more aggressive sales pitch.
If you can build something good enough to convince passengers on a competitor airline to forward you their itinerary emails in sufficient numbers, even a little bit of inducement might be justified if you can cross sell to them before and after their flight.
This is a definite ancillary revenue line, plus the data it delivers is a benefit to your own business and must also be quantified as a substantial number in any business case. I'll speak more about the benefits of getting non customers using your app in the next installment covering social.
The percentage of PNRs containing at least one traveller with a smart phone must be significant, and the percentage of these that are already hooked on an enhanced itinerary planning and sharing mobile app would be very small indeed. Cover all the bases, and owning a geographical market with the preferred travel app is a real possibility.
All of what I have written above presupposes that the winning app in any region, or maybe even globally, will contain all the best of breed features currently in the leading products available for sale today.
I haven't laboured this point, as it is much more interesting to look at what hasn't been done yet. Taking the best of what is out there today and combining it with some of the cost saving and revenue generating ideas written here is good.
But add to that the marketing muscle of an airline or similarly large player in the travel sector with the power to get it onto customers handsets in significant numbers, and the ancillary revenue story may have just been given a totally fresh set of legs.