Back in the late 1990s, online travel agencies were the coonskin-capped pioneers of e-commerce. While Amazon was an early scout, proving that folks would spent $20 online, the OTAs quickly proved that people would spend $2,000 online. Expedia, Travelocity, Orbitz and Priceline were determined to replace the travel agent and showcase the Internet's ability to collapse geographic boundaries by bringing the world to everyone's desktop and selling travel to them at bargain prices.
These days, however, the old explorers are getting a little long in the tooth. No longer able to compete on price and surrounded by travel providers who want to disintermediate them, the OTAs have stumbled on the old elixir for troubled business models: online advertising. They've started taking ads from other Web sites, tourism boards and even the travel providers whose products they sell.
Advertisers and the industry alike are asking the hard questions: Are the OTAs dipping their toes in the media model, or are they taking the full plunge? Will advertisers get a sneak peak into these audiences? Or the full monty?
If you're competing for online ad dollars, you pretty much have to go all the way. Remember, we're the industry that brought you pop-ups, spam and dozens of dirty tricks for which you still haven't forgiven us. Online advertising isn't "polite." In a competitive media landscape, someone will always go one step farther to distract you into noticing a product or service. You need only read the ads in restaurant bathrooms to get this point.
Can the OTAs compete in this environment? Do they really want to? How far will they go? Will it be good for them? Will it be good for travelers?
The travel planning process is a sacred thing to me: people planning the best two weeks of their year. In Web 1.0, travel sites were little more than cash registers. To get value out of them, you had to know the product you wanted.
Then came Web 2.0, the user-generated content revolution. Time magazine named "You" (as in YouTube) the Person of the Year. And "You" started doing more than booking travel online. "You" started researching, reading, dreaming and digging deep into reviews, videos, blogs and a whole host of inspirational elements of travel planning. The cash register was just where you went to "kick the tires and light the fires." The dreaming, the decision making and the buying are now happening online as much as offline.
For this reason, more and more travel advertising budgets are moving online. They want to be part of the travel-planning process. But travel advertisers aren't the only ones. Travel represents 35% of all e-commerce, and it is the most expensive thing people buy online. Travelers are richer, more educated and older than the average online user. It's a dream demographic and psychographic for the right nontravel advertiser. But do these advertisers want to be a part of the checkout line? Or in the aisles? How interruptive will they want to be to the travel-buying process?
There's more to online advertising than implementing blinking boxes and integrated text links. It's a whole different business model -- fast moving, lightweight and B2B. The OTA model is slow moving, heavyweight and B2C. This is not a transition to be entered into lightly.
On the one side, there's the traditional OTA business model of paying a GDS, hiring telephone support, issuing tickets and holding travelers' hands in an attempt to make a living at $5 per segment. It's a heavyweight business model.
And then there are lightweight media models like Kayak/Sidestep, which bring in an audience and hand off the referral to either the lowest price or the highest bidder. When it costs more to have someone answer the phone than you make selling them a ticket, it's not easy to see which model's going to win here. It's not the one with the most employees. If the OTAs want to compete in a media model, they'll have to be more lightweight, more B2B and much faster moving.
To succeed in the advertising game the OTAs will have to look at their audiences as an asset. They'll have to differentiate based on whom they attract. It's not about heads in beds and cheeks in seats in this game. All of a sudden its about who's coming into your store, not just how many. That's not information OTAs have been gathering and exploiting like other ad sales organizations have.
In media, there's always more room at the top. The one with the best customers wins, not necessarily the one with the most customers. And the sheer scale of the OTA audience and the sameness of their offerings draws a much more "vanilla" crowd than other travel Web sites. In a world of limited travel inventory (hotels are under-built; there are barely more airline seats than post 9/11) the travel advertiser wants the best customer, not the most customers.
There's another element that shouldn't be missed here: Advertising and ad sales are a high-touch B2B industry with demanding customer service expectations. OTAs live in a B2C world where customer service is, well, not the point.
Finally there's a little thing called competition. If the OTAs think they have stiff competition with each other, they should try competing for ad budgets with Microsoft, Yahoo, Google and AOL.
Don't get me wrong. I think the OTAs are smart to explore online advertising as a business model. What a perfect way to monetize the 98%-plus of visitors who "look but don't book."
But the questions are these: Can they compete with lightweight business models? Can they build B2B relationships and service levels on top of B2C organizations? Can they be nimble enough to compete with online companies for ad dollars? And will they be willing to give sponsors and advertisers the "full monty" view of their audiences?
My guess is that the old coonskin-capped trailblazers aren't going to be the first ones advertisers will seek out.
Cree Lawson is the founder and CEO of Travelad Network, which delivers Internet advertising campaigns across more than 50 travel Web sites.
To read more on this subject, see "Online travel agencies pump more resources into advertising."