Finding the Expedia Solution

Expedia and Hotels.com, two of the great innovators and success stories in the online travel agency business, have recently been spun off by their parent, Barry Diller's IAC, into a new company called Expedia. The spin-off is intended to boost IAC's sagging stock price. Apparently, Diller believes there is more upside potential in IAC's remaining properties, which include Ticketmaster and the Ask Jeeves search engine, than in its online travel properties.

On August 8, the New York Times wrote a piece that nicely summarized the many challenges facing the newly independent Expedia. In essence, Expedia profited handsomely during the economic downturn by buying blocks of hotel rooms on the cheap from the major hotel chains then reselling them at a markup. Hotels got badly needed money, but they ended up paying a high price in business disruption, not the least of which was enabling a third party to sell their hotel rooms less expensively than they could.

But now with an improving economy, the hotels are fighting back, aggressively pushing travelers to their own, much improved Web sites, which now always offer the best available room prices. Some chains have gone even further, and are now squeezing Expedia on standard booking commissions. Further, Expedia's many competitors have begun copying much of the Expedia business model. End result: much more competition and a less compelling product are both kicking in at the same time. Expedia is hardly out of the game, but it's going to be a tough battle going forward. And how does Expedia plan to distinguish itself and hold onto market share in this hotly competitive market? A new focus on content to help travelers make more informed travel purchases, an effort that will likely be fueled by another company that IAC included in the Expedia spin-off, TripAdvisor (a 2004 InfoCommerce Model of Excellence winner).

A second article in the New York Times on August 16 described the rapid growth and success of the managed corporate travel business. Managed corporate travel essentially involves a corporation pushing all its travel bookings through a single online travel agency in exchange for efficiencies and savings. One of the biggest players in this field, the article noted, is Expedia Corporate Travel.

Is there a contradiction here? Not at all. What it underscored are the essential differences between consumer and business markets, and the power of infocommerce.

Because consumer markets for almost anything tend to be huge, they attract lots of players. These players compete aggressively for market share, because consumer markets tend to depend on volume to make real money. To attract fickle consumers, the general pattern is for the competitors to start an arms race to offer the most content, the most features and the most functionality. It's an endless, expensive spiral, and many companies cripple themselves in the process of trying to cripple the competition. Worst of all, it's harder than ever to build loyalty among consumers, and more expensive than ever to try to remain front-of-mind with them.

In contrast, business information markets tend to be smaller but afford greater stability. Further, businesses still tend to consider other factors in the buying decision beyond price, such as dependability and functionality. Expedia Corporate Travel is doing so well in the corporate travel market because it's doing a lot more than booking cheap fares. In addition, it provides management tools, enforces corporate travel policies, provides sophisticated reporting and saves client companies money as well. By taking information (hotel and airline rates and schedules) and making it actionable (by taking reservations), Expedia adds value by improving productivity while controlling costs. By acting as a central corporate travel agency and providing management control and reporting, it embeds itself into corporate workflow so deeply it is almost impossible to dislodge.

Not all data providers can or want to take their customers all the way to a purchase, but what we should be striving towards is adding functionality to data so that it helps customers improve their efficiency and productivity. And that is the essence of infocommerce - to become part of internal customer workflow, where you can deliver the highest value while creating long-term customer dependency and significant switching costs. As the tale of the two Expedias illustrates, the future of data publishing is less linked to finding lots of new customers than pushing more deeply into the businesses of our existing ones.

HEAR FROM THE MOST IMPORTANT NAMES IN DATA PUBLISHING BUSINESS ...
TODAY'S AND TOMORROW'S InfoCommerce 2005 is proud to announce that Dale T. Denham, Senior Vice President, Advertising Specialty Institute, has been confirmed as a speaker.

Truth and Consequences

A few weeks ago, CNET published an article about Google. To create some interest, the article kicked off with some information obtained via Google about Eric Schmidt, Google's CEO. The specific information published about Schmidt was by today's standards pretty banal: town of residence, money made selling Google stock, political contributions and a tidbit or two about his outside interests. None of it was all that revealing.

Google's reaction to the story has to merit an award for tone-deaf public relations: it banned everyone at Google from talking to anyone at CNET for one year. Yes, CNET is being punished for using Google to write an article about Google. Irony and hypocrisy abound. But beyond the quick yucks, there is a much bigger issue: to varying degrees, we've all been throwing data together so quickly and on such a grand scale that we haven't really stopped to consider the consequences of our work. Putting all the information in the world under one index is indeed an activity rife with implications, and even less ambitious attempts to gather and disseminate data have issues associated with them. And these issues actually grow as you become more successful at what you do.

Many of us now have data products based in whole or in part on data mining, assembling data gathered on an automated basis from all over the Web. Getting data assembled properly is no small feat, and there can be consequences if it is not correct. This isn't just an issue for consumer information, as the U.S. Supreme Court made clear in its famous Greenmoss decision. Nor is it just an issue for financial information. It's only a matter of time before some company is passed over for a contract, or some individual is passed over for a job based on an incorrectly aggregated data profile, and then watch the legal fireworks. Blazing new ground can be risky.

Similarly, we all need to remain focused and clear on why we collect and report certain information. We've all seen the spate of recent headlines about identity theft. The real question for many of these data providers, one not publicly addressed, is "what were you doing with all that information in the first place?" Which of your customers had legitimate uses for it and why? To hear some of these data providers talk, you'd come away convinced that private investigators were the largest and most lucrative market out there. Hardly. Talk to these data providers privately, and they will quickly admit that the main reason they aggregated all this personal information was because they could, and because when it comes to information, more is always perceived to be better. In many cases, those data aggregators most loudly proclaiming that "more is better" are the ones that know the least about their customers and how their data is being used.

I've been very bullish about rating systems and user recommendations as a way to add value to databases, and still am. Yet I will acknowledge there is a dark underbelly here as well. We spend a lot of time worrying about attempts to game these systems to achieve undeservedly high scores. But there are also cases of consumers using rating and referral services to punish businesses they take a dislike to, sometimes for the pettiest reasons. Some businesses are saying that negative comments hurt them financially, and that the data publishers behind these systems are disinclined to get involved in the messy business of arbitrating disputes, so they are left with no avenue of appeal.

Our vision of infocommerce is that data, properly formed and properly delivered, becomes more valuable to customers, who rely on it more. That's a great business model, but with increased reliance ON our data, there comes increased responsibility FOR our data, and what we are seeing now is just a sampling of some of the heightened level of scrutiny to come. We must be ready with a thoughtful policy that protects interests that extend far beyond our own businesses.