NYNY Solutions

Dohop.com  - the flight search engine that not only displays search results from multiple vendors, but actually combines flights in a gadzillion ways to come up with the best and the cheapes option for you - released a major update a couple of days back.

It’s now possible to pick airports from an interactive map, plus results seem to have more fare info, with booking options from both travel agencies and airline websites.

Dohop.com has released a new version of their flight search engine - or flight planner as they call it. Graphic makeovers include an innovative map search and more information about each search result and booking options.

 But the cool thing about www.dohop.com is the search engine will combine results from hundreds of sources and create unique itineraries, specifically tailored for your trip. If you are flying London-Berlin, this won’t mean much, but if you’re intent on going from one less frequently served airport to another, really far away - dohop will potentially amaze you.

Not only do they come up with alternative routes and combine one way tickets from different carriers, they also find and include low-cost carrier flights in the equation. This is where savings on fares can be really interesting.

It’s no big secret that Travel Search Engines like kayak, dohop, sidestep (now also kayak…), mobissimo, skyscanner, farechase, farecast, momondo, et al, all want to get paid from the airlines and OTAs in their search results.

The overall prediction is that the willingness to pay for TSE traffic seen from Online Travel Agencies in later years, will be matched by airlines in the near future, as airlines continue to come to terms with, and start executing on, their own Supplier Direct strategies.

But how will these guys pay?

For now, we’ll set aside the notion of radically new or innovative payment setups, as well as the unsuitable common ones like fixed fees (…although that might actually work) and CPM.

This leaves us with Cost Per Click, or Cost Per Order.

So far, the general stance, more or less, from the TSEs have been to try to be strict about CPC, and OTAs (and airlines) have been trying to get CPO deals.

Both sides can argue their case.

• TSEs claim to be information providers to users, and as such they should present unbiased results, and should have no particular stake in the sales that may or may not occur from the traffic they generate. They can also argue that their compensation shouldn’t hinge on the OTA/airline’s ability to actually make their visitors book and pay.
• OTAs/Airlines claim they can not defend paying the CPC rates TSEs want them to pay, without knowing what results they’ll get. With a CPO setup, the risk of participation is substantially reduced.

Or is it? I believe there are strong arguments supporting the CPC model also from the point of view of an OTA/airline:

• With a CPC deal you need a high conversion rate for the traffic to be profitable. This means your prices shown need to be attractive, and you may have to apply specific yield management for TSE traffic. Trying to be attractive to customers, generally is a good idea.
• With a CPO deal, however, you know you need higher profit margins to cover the commissions you’ll need to pay to the TSE. This goes against the idea of a TSE, where - no matter what anyone tries to tell you - price is king.
• • High margins = unattractive fares = negative branding
  • Low margins = attractive fares = higher conversion rate = branding through sales
• Allowing a TSE to query your site costs you. It generally costs more if you’re an OTA than if you’re an airline, but there are some examples of airlines with ridiculous costs per search. OTAs having too crappy look-to-book rates in a GDS might even get shut down by airlines - which generally is not a good thing…
• If you’re an OTA - and aren’t able to convert the TSE traffic to sales, instead of going to CPO, you might use this as an alarm that your site isn’t up to the task. Perhaps you don’t assist your visitors in completing the transaction, or your site is slow or designed by drunken monkeys. Regardless of which, TSEs are pretty good for benchmarking.
• Finally, with CPC, you don’t need to disclose to the TSE how well you are actually performing.

There’s one thing that unites travel search engine (TSE) companies and Google. I wish it was the turnover. It’s not, but at least it’s the business model, and that’s something.

[pause for effect]

Both companies are selling shovels.

Business through search engine advertising currently shows very attractive ROMI figures, it’s still pretty new and fresh and helps managers perform Management - “We must be on Google”. It’s an easy phrase to remember, and it sounds cool in meetings.

So, it’s the Klondyke gold rush all over again, and the gold-diggers are lining up.

Googles advertisers are gold-diggers. So is a TSE’s. Some prove very successful, some moderately so, and some absolutely not at all.

And yet we’re selling the shovels for the same price to all of them. Or in the case of Google - selling the shovels to whoever pays the most. Regardless of the details, we really don’t care how good each individual buyer is at digging gold. we should, however, care a great deal about how good the buyer collective is at digging gold, because we live in symbiosis.

And that’s the thing of the thing. Although we are depending on our buyers’ success, we still don’t move in and try to be extra nice to a particular client. Why? Becaue we’re shovel peddlers and this is what differentiates us from being consultant gold-diggers, or rent-a-gold-digger’s. This is what we must not sway from, if we want to be successful in the long run.

A gold-digger should be able to make rational assumptions about the market space, and regard our service as neutral and unbiased - any gold-digger’s money is worth as much as the next one’s, and everyone get’s the same kind of shovel and the same kind of warranty. Without this, we are invevitably starting to take sides, and we are no longer selling shovels, but helping to dig.

So how do we figure out if the shovel-peddler & gold-digger setup is going to be a sustainable setup ?

First, there must actually be enough gold around, for enough gold-diggers to live and tell their success stories. As long as the barrier of entry is low, and gold is abundant, gold-diggers with pocket calculators will do their math and figure out up to what point it makes sense to enter the shovel store. We will have more and more gold-diggers lining up to buy shovels.

Second, there must be enough shovels (if you haven’t figured it out yet, a shovel in this analogy is a click or a visit to a website - but, nota bene, not orders. A shovel is not gold, it’s what you dig with to find gold) and the shovels must be effective tools for gold-digging.

For a TSE, the analysis consists of trying to determine conversion rates and profit margins at airlines, online travel agencies, hotel chains, and other types of companies (gold-diggers). A blinding flash of the obvious is we need to have a solid idea of at what price our customers break-even when buying an incremental visit to their sites. We need to estimate the total market size and growth potential, and figure out the quality of our traffic. We can’t do much about the market, but we can focus on improving both quality and volume of traffic.

We need to be skilled gold-diggers but dedicated to staying in the store.