Posts from — November 2008

Whenever Natty or I talk to anyone about online travel, we inevitably talk about or reference TripAdvisor somewhere in the conversation.  This is because TripAdvisor (and its partner websites including virtualtourist.com, independenttraveler.com, etc.) has, by far, the most extensive database of user generated reviews and the most active base of users of any travel information site.  TripAdvisor completely dominates the market despite a horrible design, deceptive sponsored links, multiple pop-up ads and disorganized site layout.

TripAdvisor has built themselves to be at the center of the online travel information universe.  We strongly believe that network effects have, at this point in time, firmly ensconced TripAdvisor’s position.  This is because they are the only site that has the depth and breadth of reviews to drive users to their site, and conversly, they are the only ones who have the vast number of users to entice reviewers to review purely based on the impact of their reviews.

There are no less than twenty different sites attempting to unseat TripAdvisor.  However, none are having a large impact and this is directly derived from a classic chicken-and-the-egg problem: they are struggling to attract users to review, and with no reviews, they are struggling to attract users.  Some sites, such as WAYN.com among others, have resorted to enticing users through point systems (sometimes redeemable for real-world services) to write reviews.  Others have resorted to large scale traffic generation schemes to drive users to their site.  Regardless, it doesn’t appear that it’s working.  A post on compete.com’s blog shows that, if anything, TripAdvisor’s reach is expanding after a 2008 site redesign.

Another takeaway from the Compete post is that over 1% of TripAdvisor users contribute reviews.  Given their huge inital base, the expansion of their database is expanding far more rapidly than newer entrants.  Competitors to TripAdvisor will have to drive the percentage of users contributing reviews much higher than TripAdvisors (already impressive) 1%, making the barriers to entry for online travel information sites almost-impossibly high.

They have a huge user base and that drives fantastic results.  According to Expedia’s 3Q08 press release, the TripAdvisor Media Network had revenues of $236m ($314mm annual rate) — nothing astounding, compared to the billions that GOOG generates, the billion that myspace generates or the estimated $300m that Facebook generates.  However, due to the fact that travel advertising is extremely valuable online (something that the Everlater team has not overlooked), TripAdvisor CRUSHED the margins of all of these other online media companies — their reported operating income (actually OIBA per EXPE reporting) margin is 53% (compared to GOOG’s roughly 25% margin, and Fox Interactive Margins of 0-10%), meaning they are on pace to earn operating income of $165m — margins and profit that are almost unheard of in the digital media space.

We (at Everlater) have several takeaways from TripAdvisor’s dominance:

1. Travel advertising is a great place to be. While no one knows exactly where the economy is going to go, and whether online advertising will be worse or better than the whole, we do know that we are positioning ourselves to take a slice of the tastiest part of the online advertising pie.
2. Content is king. We are building a media site, and our content is the most important part.  Because we are not targeting the travel information space, we are targeting an active contributor user percentage much higher than 1%.
3. Paying users doesn’t work. This takeaway is courtesy of TripAdvisor’s competitors.  If we ever have to entice users to contribute content to our site, then our business model is broken, rather than our marketing plan.

In thinking about traveler dynamics, we are very conscious of travel being both a communal and individual experience. A unique and valuable perspective we believe most online travel sites overlook.

When people travel alone they, by definition, experience travel individually.  Experiences are interpreted individually within the context of a participants unique perspective.  However, most individual (solo) travel experiences include interactions with other people, whether in the context of a location (city) or event, where outside participants affect the experience by providing perspective and content, whether desired or not, that help shape the experience.

When people travel with companions or within groups they, by definition, experience travel communally.  Within the group context, experiences are shaped and interpreted by the communal perspective of multiple individuals and desires during the experience.  However, travelers within groups also interpret these experiences individually due to the inherent uniqueness of an individuals perspective.

Therefore travel, whether experienced alone or with a companion or group, is both an individual and communal experience.  It is our opinion that this is an important perspective to take when designing the functionality of our site and by acknowledging this dichotomy we add additional value to our competitive advantage.  Our users will want to share their experience and interact socially with other travelers communally and/or individually - while this is not revolutionary, we have not seen this functionality built into current travel sites.

For those of you who don’t know (and shame on you), Couchsurfing rocks!   Couchsurfing is a community seeking to internationally network people and places, create educational exchanges, raise collective consciousness, spread tolerance and facilitate cultural understanding.  It is a huge inspiration to Everlater.

More 411 on CS’ing (know the lingo). People from all over the world have created profiles on Couchsurfing, opening up their couches to fellow travelers for nothing more than stimulating conversation and cross cultural exchanges.  Yes, you can Couchsurf from Angola to Afghanistan, and Antarctica to Aruba.  There are no fees or rules, just a commitment from all members to honor the values set forth by Couchsurfing, a communal desire to unite the world and expand cultural awareness and the kindness of anonymous people knowing that a home is better than a hotel and a friend is better than a tour guide.

Nate and I have Couchsurfed all over the world, from Stockholm to Delhi, Buenos Aires to Bogota and even New York to San Diego.  We have met amazing and inspiring people, and more than anything, been overwhelmed at the incredible openness with which people have embraced us, complete strangers, into their homes and told us their stories.  Couchsurfing communities around the world gave us personalized tours and experiences never found in guide books, helped us travel on a budget by reducing accommodation expenses, connected us with local traditions, enabled us to build a global friend network and broke down cultural barriers and stereotypes helping us repair a negative American image around the world.

Couchsurfing is an amazing movement exhibiting the beauty of humanity.  Barriers are nothing but human creations to separate, Couchsurfing ignores barriers and builds bridges.  We are inspired by Couchsurfing and amazed by the community.  Couchsurfing is a non-profit, check them out and if you believe, think about supporting this incredible movement.

1. Heartbeats - The Knife
2. Challengers - The New Pornographers
3. Star Witness - Neko Case
4. Riot Going On - The Teddybears
5. Lights Out - Santogold
6. Son’s Gonna Rise - Citizen Cope
7. The Night Starts Here - Stars
8. Bruises - Chairlift
9. Take Me To The Riot - Stars
10. Don’t You Evah - Spoon
11. Baby When the Lights v Tainted Love - Jameson Hill
12. Chase the Sun - Planet Funk
13. Lover’s Day - TV on the Radio
14. Hit the Heartbrakes - Black Kids
15. Of Moons, Birds, & Monsters - MGMT