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Tag: Farecast

Travel 2.0 Conference – The Producer Speaks

As a followup to my blog coverage of the “Travel 2.0” conference, held a couple of weeks ago in Hollywood, I conducted a brief email interview with the host and primary moderator of the event, Philip Wolf. He’s the president and CEO of PhoCusWright Inc., the producers of this major annual event for executives in the travel industry, now in its thirteen year. PhoCusWright is an independent travel, tourism, and hospitality research firm specializing in consumer, business, and competitive intelligence. It conducts and publishes primary work focused on strategic assessment and segment forecasting, and it offers a range of custom research and strategic consulting services, in addition to producing its annual series of high-profile executive conferences. PhoCusWright has clients on six continents.

TECH~SURF~BLOG: Phil, what was your overall assessment of this year’s executive conference?

WOLF: I’m sure this year’s event was the best ever. We had record attendance and have received overwhelmingly positive feedback. The buzz was definitely palpable in Hollywood. The theme, “Travel 2.0 Confronts the Establishment,” was incredibly important to those in attendance, and the timing was perfect to discuss this subject. This is the most exciting time since the online travel wave hit — it is really the next wave, though not as big. The dialog on stage was very strategic. PhoCusWright’s moderators asked great questions, and didn’t let go without real answers. The caliber of our audience was incredible — senior level executives. Off-stage, the seeds were planted for millions of dollars of deals.

TECH~SURF~BLOG: What was the most surprising development?

WOLF: The conference was a prototype of 2.0 at work — not just about 2.0. It was wonderful to see how successful it was with attendees distributed throughout the conference area. The headsets worked incredibly well, and it was great to see how “tuned in” everyone was with them — whether they were in the café area, the exhibitor area, or outside on the terrace, they were as involved as those sitting in the theater.

TECH~SURF~BLOG: Generally speaking, how is the industry reacting to the whole “Travel 2.0” concept, based on your feedback so far from attendees? Do they get it? Do they buy it?

WOLF: Most people attending The Executive Conference got it; some hate it. I’m pretty sure it’s going to stick.

TECH~SURF~BLOG: What moves can we expect to see from some of the Travel 1.0 players in the next year? How about the Travel 1.5 metasearch players — how will Travel 2.0 affect them? Any predictions based on what you heard or observed at the conference?

WOLF: Prediction: This time next year, those expressions won’t be in play. Most of the five tenets I mentioned in the opening monologue will be “the norm” in the business world. For example, mapping was a special thing a couple of years ago; today, everyone’s got it. [Ed.: The tenets that define Travel 2.0 according to Wolf are these: transparency, collaboration, better basics, speed, and predictability. You can read his opening speech here.]

TECH~SURF~BLOG: What about the subject of content in the whole Web 2.0 travel mix, and the role of professional vs. user-generated content? How important is content, what kind of impact will it have, and which firms do you think best undertand what’s going on here, or how best to handle content on their sites?

WOLF: There’s going to be a blending of different types of content — user-generated, vertical, professional, etc. The blending will be across search, shopping, and sharing, and their aspects will start to blur. Whether content is labeled “user-generated” or “professional” won’t matter over time. What matters is what was most helpful to the customer.

Thanks, Phil. I thought it was a very worthwhile event, and enjoyed blogging it. From the boost I saw in my blog traffic, and the many people I heard from commenting favorably on my coverage, I agree this is a very hot topic. And I look forward to following Travel 2.0 going forward.

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Travel 2.0 Conference Wrapup

Pretty much every exec who matters in the $6 trillion travel industry [the biggest industry in the world, they tell me — bigger than oil even?] was either in Hollywood last week for the PhocusWright Executive Conference or wished they could’ve been. Well, for the latter group, perhaps this little recap of mine will help. And I suspect it will be of interest to anyone at all with a reason to pay attention to this huge caldron of commerce. That would especially include online advertisers that quite understandably lust after this rich consumer demographic.

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Forbes calls the travel business a “global honeypot.” What’s interesting now is that the industry itself is the first to admit it’s experiencing disruption from the phenomenon we call Web 2.0. I love stories like this! Hey, where change of this magnitude is brewing, conferences just get real, real interesting. And you know me: I enjoy getting into the middle of the action at these things and blogging about it. [And this is now my eighth post on this event.]

Let’s face it, all of us as travel consumers have an interest in this topic. What new travel sites, tools, mashups, or other developments will change the way we plan and purchase our travel? My take is, who can not be interested in this topic? So, hopefully this wrapup of my coverage of the event will be of interest to you no matter what your job or profession. Note the comments I’m including here don’t offer the perspective of an industry insider — they’re just the random observations of a tech-savvy, Web 2.0-ish consumer and trend-spotter of sorts, who’s admittedly on the outside looking in here….

Setting the Stage
PhocusWright has been doing this event for 13 years now, and themed it this year with the very provocactive line, “Travel 2.0 Confronts the Establishment.” As in the little guys eating the big guys’ lunch! Or at least shaking things up in this big, big space…. There was a lot of talk about how things have progressed in the past decade: Travel 1.0 (nee 1996) vs. Travel 1.5 (nee 1999) vs. the new era of Travel 2.0, which is now causing much change in the online portion of the travel business. This sector, of course, continues to grow much faster than offline travel (i.e, traditional travel agencies and paper tickets).

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Some Definitions
Travel 1.0 = represented by the OTAs (online travel agencies), a category that generally encompasses what’s called “The Big Three”: Expedia, Travelocity, and Orbitz.
Travel 1.5 = embodied in the “metasearch” engines (think comparison shopping sites) such as Kayak, SideStep, Mobissimo, TravelZoo, SmarterTravel, and others.
Travel 2.0 = which is about a host of new players (several of whom pitched here), as well as new enhancements existing players are scrambling to add to their sites (Google, Yahoo, MSN, and AOL included) — either organically or by acquiring companies that can bring Web 2.0 mojo to their existing online travel businesses.

Why Do We Need Travel 2.0?
One of the most useful presentations I caught was actually in one of the pre-conference workshops, from Chicke Fitzgerald, CEO of the Solutionz Group, who said she’s been in the travel business since 1978. She stepped through the above three modern stages of the business, explaining the gist of each. Travel 1.0 was about “where and when,” and content was largely organized by destination. “Time is the most precious commodity, and online sites are not doing a good job.” So, then came the Travel 1.5 metasearch sites. “It still takes too much time to save a few bucks,” she said. Okay, so what defines Travel 2.0 according to Fitzgerald? “It aggregates content with consumer demand.” It features flexible, time-saving tools (think Ajax), and is about community. “People want recommendations from someone like them — real feedback, not marketing hype. And they want their own feedback heard.”

Fitzgerald also talked about the need for new buying metaphors: “Where and when is not sufficient. It needs to be more like the advice of a trusted travel agent — that is, ‘If you liked this, you’ll love this’.” An additional factor today, she said, is that we don’t just have the designations of ‘business’ and ‘leisure’ travel anymore. “There are varying degrees of these.” Fitzgerald wrapped up her talk by adding, “We need Travel 2.0 because consumers today are just buying the way they’re being sold to. Online booking is commoditized — the metaphors are all the same. There’s enormous growth potential still ahead.”

Another key insight from the same session came later, from Les Ottolenghi, CEO of INTENT MediaWorks: “Companies that want to be successful in Travel 2.0 better intersect with consumers that are now hooked on YouTube-type content experiences.”

The Gorillas Get Grilled
The online travel business isn’t just about the travel-only sites. The big-mamma search and portal sites like this space a lot, too. A session late on the first day — unfortunately right before everyone was ready to bolt for a cocktail — was a panel of travel execs from Google, Yahoo, and AOL. And it ended up being much too short in my mind. And don’t ask me why MSN wasn’t represented, which is more and more seeming to be a worthy competitor, in my opinion. A few observations I logged from this session:

Jasper Malcolmson, Director, Yahoo! Travel: “We put our user-generated videos through a layer of processing to make them semi-professional.”

Jane Butler, Managing Director-Travel, Google, in answer to the question “What does the Long Tail mean to you?”: “It’s incredibly important….we subsidize their passion though AdSense, for example. But we also focus on the ‘head’ and the ‘trunk’.”

Jeff DeKorte. VP/GM-Travel, AOL: “We’re rebuilding our underlying platform…We’re doing a lot in music, which we can bring over to travel.” What about metasearch? “We invested in Kayak. That’s serving a segment of our audience, but still small.”

Jasper Malcolmson, Director, Yahoo! Travel: “Our COO came to this event two years ago…We still don’t think this metasearch thing is going to happen.”

Jeff DeKorte. VP/GM-Travel, AOL: “It won’t overturn the rest of the industry.”

In answer to an audience question, “I’ve heard Travelocity is cutting back on paid search, true?”

Google: “We’ve not experienced that.”
Yahoo: “Neither have we.”
[Editorial comment: Then it must be true… 🙂]

Interesting follow-on comment by Yahoo: “It’s about a 50-50 split now in travel search between the OTAs and the algorithmic search engines….Our ‘Trip Planner’ is a social networking site, like RealTravel.”

Moderator question: “What about click fraud?”
Google: “We have a huge team working on that.” [Ed.: I’ve heard this for years now. ] “We’re doing things to help site owners defend against this.”

Audience question: “Where are you with the next stage of personalization?”
Google: “Look for ‘Google Co-Op’ — individuals and organizations can index their sites.”

The Big Corporate/Offline Players Speak
A key session on the first morning featured a senior executive each from American Express and Carlson Wagonlit Travel, the two biggest players in the corporate travel sector.

What does Travel 2.0 mean to American Express? Priyan Fernando, EVP and COO of Global Business Travel, said it was this: technology, convenience, and peace of mind. “It must have scale, be global, and based in common platforms…a 24 by 7 environment…personalized service wherever you are.” He also said that, as work becomes more virtual and the web becomes the workplace, “the convenience of Web 2.0 is now becoming the expectation in the corporate space as well.” And it enables employee social networking, too, within companies. “We’re all moving to Web 2.0 whether we like it or not. It’s a more simple way to do business,” he added.

Carlson Wagonlit Travel is another big worldwide travel player, which saw first half sales in 2006 exceed $1 billion, driven by global economic expansion. “But procuring travel remains very complex,” said Hubert Joly, CEO. “The trend continues to outsource corporate travel.” The company is especially focused now on online travel. Why? “Because it’s now 50% of our transactions,” said Joly. “And this part of our business is growing rapidly outside the U.S.” The final thought Joly left with us was this: “Travel 2.0 is more a journey than a big bang.”

Nine Startups Get Five Minutes of Fame Each
Sprinkled throughout the conference, one a time, were five-minute talks by selected Travel 2.0 startups in various stages of operation — some very new, some further along. I must say these pitches were hardly of Demo Conference quality, but a few made a good impression, and all seemed worthy of a look — it’s just that Powerpoints alone rarely do any business pitch justice. They all should have read Guy Kawasaki’s Rules for Powerpoint first. [And a note to PhocusWright: live Web demos beat Powerpoint hands down — though, granted, they can backfire.]

I’ve already blogged about RealTravel, which was the first one up. Another one, Gusto, offers “travel and lifestyle” reviews of hotels, restaurants, attractions, nightlife, and shopping, and even lets you book reservations, too. Plum Ventures, a “social travel planning platform,” is the latest startup from Hans Peter Brondmo, and at least the third time I’ve heard him pitch at conferences since the Web 1.0 days (he debuted Plum at Demo in February). Home & Abroad plans your trip for you, for free, and has four ways to dive in: Just Browsing, Trip Themes, Virtual Concierge, and Dream Trips. Tripmates is an interactive travel community where you can blog about your travel, share reviews and “trip flicks,” and even find a travel buddy. SearchForecast is an SEO intelligence service, for travel and other industries, that provides monthly competitor reports, to help you control those “rising pay-per-click costs.” [By the way, this is another one of these startups with offices in “Sydney/SF/London.” Hey, those Aussies are everywhere!] The other three startup presentations I missed (sorry).

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The Coming Shakeout in Booking Systems
One of the most interesting presentations, for those of us from the tech world, anyway, was that of ITA Software….a Cambridge, MA-based company that recently raised, oh, just a small amount: $100 million. Okay, so maybe the name doesn’t ring a bell with you — but, hey, whoever said techies knew how to brand? In this case, trust me, it doesn’t matter. These guys (now 175 strong, with 125 more soon to be hired) are a big, coming disruptor in a business where decades-old, mainframe-based “GDS” booking systems like Sabre, Galileo, Worldspan, and Amadeus have owned the market — but have become much too costly for newly cost-efficient airlines. Thus, the VCs are betting, with companies like ITA (and another called G2 Switchworks in Chicago), that the power of the Internet to take costs out will win.

“Complexity has been building since the ’20s — big airline complexity,” said Jeremy Wertheimer, CEO of ITA Software and one of three cofounders, who holds a Ph.D. in Artificial Intelligence from MIT. “Legacy systems layered on top of each other duplicate customer data and degrade customer service … Transaction-oriented systems do not support customer-centric views.” He talked about the new reservations systems of the future. “They will be about new business models, new a la carte options, simplified user interfaces, more self-service, and lower cost.”

A Few Notes (Very Few) from the VC Panel
This had to be at least the 651st such panel I’ve covered, and they all start to sound the same — so don’t expect anything earth-shattering. It featured Joel Cutler of General Catalyst Partners (by phone hookup), who’s invested in Kayak among others….Jim Kolleger of Genesys Partners in NY, who had one company, Portaga, exhibiting at the event….Allan Thygesen of The Carlyle Group, Washington DC, who’s invested in Viator and others….and Matt McIlwain of Madrona Venture Group in Seattle, a firm that’s into travel a lot, with investments including TripHub, VacationSpot, and Farecast. Matt had an interesting comment in response to a moderator question about what’s coming in the next 3 to 5 years. “Travel is an early adopter,” he said. “Did you see the recent NY Times article about ‘Web 3.0’? The Semantic Web will fuel innovations in coming years.” In response to another question (a good one), about what does the startup do that’s just looking for $500k, when VCs want to invest at least $5 million in their deals, and what if they’re not located in the VCs’ backyards, we got the classic opposite response. Allan Thygesen said, “We work with a lot of people that coach startups. There’s talent everywhere. You need to support your companies globally.” The more common (truthful?) answer seemed to come from Matt McIlwain: “We have all we need in Seattle.” Note to everyone else: don’t waste your time.

Metasearch Players Spar (again)
With the plethora of so-called metasearch sites (comparison shopping engines) in the travel biz — remember Travel 1.5 from above? — I guess it’s not uncommon for them to be vying for attention and even sparring somewhat on stage. [I just read an online account of one such encounter that occured last year.] It appears to be a dog-eat-dog world out there, and these firms may be under some pressure — at least one had a major change at the top in recent times. On stage for this event, we had three interesting studies: two macho CEOs from SideStep and Kayak (the NexTag guy didn’t show), and one very meek, softspoken young lady (French?), the CEO of Mobissimo.

The moderator kicked things off by asking the panel to talk about how a metasearch site is different from an online travel agency. “An OTA is an ecommerce site, which charges a fee [$5 is common],” said Rob Solomon, CEO of SideStep, “whereas what we are is a free search site.” Kayak’s CEO and cofounder, Steve Hafner, responded: “Consumers don’t care. They just want an easy-to-use interface.” Solomon chimed in that they just acquired hotel-reviews site TravelPost, and that “our goal is to be one of the world’s largest travel sites.” Meaning more money can be made from advertising, said the moderator, than distribution (commissions from bookings)? “No!” chimed in Kayak’s Hafner, “It’s just an add-on.” To which SideStep’s Solomon countered, “Three years from now, we’ll have 50 million visitors per month!”

At that point, some guy throws in a great question from the audience: “Forrester says ‘Metasearch 1.0’ is dead on arrival — the economics don’t work. What about that?” To which Kayak says “Bunk!” And SideStep, who hasn’t even seen the report, says “We’re a great platform for travel players.”

The sparring continues. Sidstep: “Our bookability is better than the other two, because our data is right from the airlines. And we have user-generated content.” [Especially now with TravelPost.] Kayak: “We’re a personalized site. We log what you’re doing.” [Ed.: And you like dealing with the privacy nuts, then, I hope?] And finally the CEO of Mobissimo, Beatrice Tarka, gets a chance to weigh in….and she has a doozer to deliver: “We’ve been profitable for one year.” Take that, you wannabes!

One last blast from the macho guys wraps up the session. SideStep: “We’re a great place to build a brand.” Kayak: “We aren’t. We’re a qualified-lead transaction engine for you.”

Got all that now?

Two of the ‘Big 3’ Vie Onstage
An executive roundtable panel called “The Giants,” held near the end of the event, was moderated by Phil Wolf himself, CEO of PhocusWright [who does an excellent job, I might add]. It featured Jeff Clarke, the CEO of Travelport (formerly Cendant Travel), which owns Orbitz, and Dara Khosrowshahi, CEO of Expedia — another one of the “Big 3” online travel agencies. [Don’t ask me where the remaining member of the triumverate was, Travelocity — that was never explained. Should we be reading anything into that?]

Clarke crowed about his firm’s advantage in owning a GDS (Galileo), while Expedia’s CEO said their big edge was that they’re vertically integrated with their travel-planning site, TripAdvisor — which, by the way, had luggage tags all over the seats for us in this session. [Great little branding giveaway.]

In what became another “mine’s bigger than yours” kind of sparring match, Travelport said “We’re the only ones with operations in all the significant global geographies.” To which Expedia later responded that they’re all over the world, too, from a branding standpoint: “All three of our brands [that would include Hotels.com and TripAdvisor] will be global. We built a great site in Australia, and we have the best hotel site in Japan.” He admitted that Hotels.com is continuously “fighting it out” with Travelport’s Gullivers in the group-travel space.

The moderator asked how each company was affected by recently being spun out of a larger entity — Travelport from Cendant and Expedia from InterActive Corp. Expedia’s take: “It was a huge distraction initially,” but a good thing because “it’s hard to have a sense of mission when you’re part of a conglomerate.” Travelport’s CEO said, “It wasn’t bad, and not forced.” [The firm is now owned by private equity firm The Blackstone Group.]

Expedia’s CEO said his biggest challenge now is attracting good people: “We need those who want to change the world and don’t just want a company job.” He noted that he’s now focused on “small entrepreneurial teams.” Travelport’s biggest challenge? It’s a gargantuan task, according to the buzz I picked up at the event, but one Clarke almost played down: “We’re a collection of 20 companies, so we’re now tying together those operations.” But he, of course, couldn’t end without rubbing the nose of his competitors in the fast that Orbitz had had “three consecutive quarters of outstanding growth,” better than any other online travel agency. Wheras Expedia’s CEO, with only 2% growth in the recent quarter, admitted “we must improve our air product” and that his firm continues to “invest heavily in technology.”

Content: Dead-Trees and Online Players Blur
A great session right at the end was kicked off by another Aussie (!), Judy Slatyer, CEO of Lonely Planet Publications, which publishes great trvael guides and has moved to become an online resource, too. “Travel advice has basically stayed the same since the days of cave drawings. The only motive is helping others who will make the same trip.” What has changed, though, she points out, is “the huge volumes of information,” which are increasingly online — “encouraging people to try new things, making them more daring.” This, she says, causes more spontaneity. “Short breaks is the fastest growing segment in travel today.” And when it comes to “planners versus wanderers,” she said that “Web 2.0 is making the planners ecstatic!” After her talk, Slatyer was joined by a panel of other online and offline travel-information publishers, which brought out some interesting tidbits:

Daniel Saul, CEO of Smarter Living Inc. (SmarterTravel.com): “The key question is how professional content works with user-generated content.”

Tim Jarrell, VP/Publisher of Fodor’s: “Consumers want multiple sources and sites. Our forums will use editorial judgement.”

Lonely Planet: “We expect to spend more on professional content. We’re looking for more ‘human’ content versus pure reviews.”

TripAdvisor CEO Stephen Kaufer: “We’ve had links to professional reviews since the beginning, giving them equal weighting.”

And, in an interesting online/offline twist, J.R. Johnson, CEO of VirtualTourist.,com, noted “our online content is going offline soon, too” — meaning print. And TripAdvisor chimed in that they also have a magazine! So, friends, it seems both bits and atoms will continue to have a place in this burgeoning world of travel planning…

Other Random Speaker Comments That Stood Out
Jeff Clarke, CEO of Travelport, in answer to the question, Why should consumers pay $5 to book a reservation?: “Time. Speed is worth something.”

Stephen Kaufer, CEO, TripAdvisor: “How can a random crowd be more accurate than a group of experts? We see it in our community every single day! … We now have one million visitors a day, and 6.5 million ‘opinions’ online — 182 reviews of this very hotel!”

Kaufer (again): “Trust is online gold dust — twice as many leisure travelers read consumer reviews than professional ones (68% to 38%).” … “Wikipedia’s numbers have shot up from 80 million per month a year ago to 140 million per month now.” … “People will give back without a kickback — no money, no fame, no power, just the satisfaction of contributing back to a site they got something from.”

Priyan Fernando, EVP and COO of Global Business Travel, American Express: “The convergence of work and personal life is affecting travel.”

John F. Davis III, CEO, Pegasus: “When we started, we had four looks for every book, but that’s going way up. It’s a cost of doing business that we’re not able to pass on to our customers.”

Lawrence W. Hall, CEO, Hotel Booking Solutions: “No one questions apps in the cloud anymore.”

A slide that appeared on screen between sessions: “The online leisure market will grow 19% from 2006 to 2007.”

Robert Metcalf, Founder of Flyspy, speaking of his innovation: “It’s one search, one chart, with a Google-like interface.”

Phil Wolf, CEO of PhocusWright: “Web 2.0 will bring complete transparency in data and pricing — which is code for ‘truth’.”

A Note About Event Logistics
I’ve covered a lot of great conferences in my day, but I must say I’ve never been to one where the back of the ballroom was open to the exhibit showfloor…which also incorporated what was called “cafe seating.” [See accompanying diagram.] It was a wrinkle that was totally new to me. It was bothersome at first, because noise was obviously coming in from that direction. But one seemed to eventually get used to it. Confroomdiagram_2 And, in its defense, it was part of a pretty ingenious logistics setup. The producers also provided headsets so you could listen to all the action while you were either sitting in the cafe seating, roaming around the exhibit flooor, or even out front in the terrace area. That area also featured a “satellite theater” with a large-screen TV to watch all the action. It included table seating, so I noticed a lot of people there were using their laptops (blogging perhaps?). I, however, much prefer my action live, and down in front, so I was forced to balance my Powerbook on my lap in the main conference room. The wi-fi throughout the entire conference area, by the way, was superb. [But a note to the expensive hotel: it wouldn’t kill you to offer it for free in your damn fancy-shmancy lobby! I had to pay for the roaming version of T-Mobile wi-fi there, which seems stupid.]

Now for some other bitches about the conference logistics:
• Table seating should have been available in the ballroom, too! At least in the front third or so. [I don’t think I’ve ever been to a conference that didn’t have that.]
• And the moderators talking from the aisles was very weird, necessitating bright lights on them all the time — which was really, really bothersome to those of us in the audience in the first 6 or 8 rows, especially close the aisles, whether we were trying to just take notes or blog live.
• The name tags, while two-sided (great idea!), had type that was too small.
• And the signage when you first got to the event was pretty bad — I’ve never had so much trouble figuring out where to go at an event (though that may been as much the hotel’s signage as anything else….very weird layout at this place).
• The reception on the first evening was way too many people (900!) in one space! (A restaurant on the second floor.) We could barely move! I wondered in retropspect why it wasn’t held in the great pool terrace area, where we had lunch each of the following two days, which was great! Under beautiful, sunny Southern California skies….

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Regarding the conference sessions themselves: the opening speech from PhocusWright was waaay too long. I could just hear people collectively thinking: “Okay, let’s get this party started!” And the choice of a panel of Wall Street analysts to open the event was a real yawner.

But this is just my attempt at providing constructive feedback (I saw no comment sheets to do this). Overall, I thought it was a very well run and very valuable conference — and it ran on-time like no event I can remember! I would recommend it to anyone involved in any way in the travel industry … which will undoubtedly continue be an exciting place to be for quite some time to come.

Some of the Great People I Met at the Conference
One of the frustrating things about blogging live at conferences is that it just doesn’t leave as much time as I’d like to meet people. That, plus the fact that one’s success in finding specific people in any crowd goes down drastically as the size of that crowd increases (and in this case, it was a very big number as most conferences go). Nonetheless, I did meet an interesting cross-section of attendees. Most of these were new to me, though a few were previous acquaintances I enjoyed hooking up with again. They’re listed here alphabetically by last name:

– Par Arvidsson, CEO, Wcities Inc., San Francisco
– Christina Brzica, Director of Marketing, RealTravel, Los Altos, CA
– Michael Cayley, VP Operations, PlanetEye, Toronto
– Carolyn Cora, VP Professional Services, Vistrio, Sausalito, CA
– Rod Cuthbert, CEO, Viator, San Francisco and Sydney
– Nelson Granados, Assoc Professor, Pepperdine University, Malibu and Irvine
– Richard Keehaver, VP eCommerce & Travel, Intent MediaWorks, Reno, NV
– Jim Kolleger, Managing Partner, Genesys Partners, New York City
– Eric Kung, CEO, ShowHotel, El Monte, CA
– Kais Makhlouf, VP Client Relations, Nurun, Montreal
– Matt McIlwain, Partner, Madrona Venture Group, Seattle
– Scott Moorhead, Wotif.com, Brisbane, Australia
– Robert Metcalf, Founder, Flyspy.com
– Andy Packard, Director Business Development, LocalMatters, Denver, CO
– Drew Patterson, VP Marketing, Kayak.com, Norwalk, CT
– Josh Steinitz, Founder/CEO, The Nile Project, San Francisco
– Russell Winter, VP Business Development, SideStep, Santa Clara, CA

Great to see all of you, and do stay in touch! Travel 2.0 is definitely going to remain on my industry focus list….

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Flyspy: ‘Consumers Take Charge’

That’s how conference producer and host Phil Wolf, CEO of PhocusWright, described this next session at the the Travel 2.0 conference. He said it was one of the sessions he was most looking forward to, and also said it could be called “reverse yield management,” which I found fascinating. No doubt about it, Web 2.0 and Travel 2.0 fans, airfare search has entered a whole new phase.

One of the main reasons I trekked to Hollywood this week to cover the conference was to hear Minneapolis-based Flyspy do its first sneak-peak pitch — a limited coming-out, as it were, within its chosen vertical. Whatisflyspyslide Robert Metcalf, the founder and visionary behind chart-based Flyspy, was invited a few weeks ago by the event’s producers to introduce his service at this high-profile annual gathering of online and traditional travel execs. He told me he had to think about it for a while, but ultimately decided, even though it’s still early (the site isn’t quite in full beta release yet), that it was just too tempting an opportunity to miss — to get the kind of reaction he could get here.

Robert Metcalf is a very experienced software architect and developer of complex web sites. [He’s shown on the right in the onstage photo.] He describes Flyspy, which he’s been planning and developing very quietly for almost three years now, as the hardest problem he’s ever tackled. “The way airfare data works, it’s just a very, very complex system. When I got into it, I couldn’t believe it.” But now he feels all the hard work is paying off. He describes Flyspy as an “intelligent, at-a-glance airfare search engine.” [See sample Flyspy chart, which illustrates the frequent peaks and valleys of airline pricing, and just how volatile certain routes can be.] He said his main benefit is a “dramatic reduction in fare search time” because of his unique charting approach. The site provides actual, real-time flight data, not historical or predictive data as two other well-funded startups do (and to whom he says he’s often erroneously compared). That would be FareCompare and Farecast, respectively — firms that were also invited to speak in this session (though mysteriously the latter didn’t show). Another key difference I learned with these two sites compared to Flyspy: you can’t actually book a ticket at either.

Though in limited alpha mode, Flyspy has already been discovered and reported on this year by TechCrunch, Wired.com, and Fast Company, and others, and I’ve written about it here previously myself. “It just seems to resonate with people,” says Robert. You can find links to previous coverage at Flypsy’s “About” page.

Flyspyslide1

Robert says that Flyspy’s approach provides “market clarity and market transparency,” resulting in “high customer confidence.” What he’s learned from a significant amount of feedback he’s already received from his site’s users is that searching and booking on Flyspy eliminates buyer’s remorse. “We allow the consumer to really understand the market for trips they’re planning and their various options. And that results in a positive transaction instead of a negative one.” In other words, it takes away that nagging, uncertain feeling we’ve all had: “If only I’d had more time to search, I know I could’ve found a better fare.” Time is the valuable commodity today, and Flyspy addresses that consumer need head-on, he says.

Flyspyslide2

Flyspy’s Value Proposition
In his presentation, Metcalf said decision-making time is much faster and search much simpler with Flyspy than with all the other sites — whether you’re comparing to the old-line “Travel 1.0” sites (often called The Big Three), the airline sites themselves, or the newer so-called Travel 1.5 “meta search” sites. I guess that makes Flyspy a genuine Travel 2.0-era search site. Metcalf said Flyspy requires only one search, not many, to get the full picture — which is a major time differential. The number of data points on one of his charts would require 240 searches elsewhere. And Flyspy has the “most Google-like interface” of all the airfare search sites, he says. It’s really dead simple for the consumer.

Flyspyslide3

Partners Lining Up Before Launch
Toward the end of his talk, Metcalf took the opportunity to announce that Flyspy has several partnerships in place, even before the company officially launches. Well, he didn’t actually name who they are — just hinted broadly. These strategic relationships include:

1) A leading business magazine, where Flyspy will be a regular feature in the travel section of their web site
2) A frequent flyer web site with 15 million page views/month
3) A leading blog platform with 50,000 blogs and 18 million visitors/month
4) A leading online CRM solution with 500,000 users, where Flyspy will be the sole travel partner
5) A major daily newspaper (circulation 600,000) wherein Flyspy charts will be featured weekly
6) An industry publication with a monthly circulation of 80,000

After this session, I grabbed a shot of airline pricing transparency expert Nelson Granados (left) with Robert Metcalf. Nelson is an associate professor at Pepperdine University, where Flyspy is a case study this semester in two of his MBA classes. He previously held a similar position at the Carlson School of Management at the University of Minnesota, and has also worked for Northwest Airlines.

Nelsonrob_1

In my interview with Robert Metcalf at lunch following the session, I learned he was approached at the conference by several firms that are interested in licensing Flyspy’s data, and also by at least one major, brand-name site that would like to feature Flyspy as its exclusive airfare search partner. “I’m very glad I came to the event,” he said. “I met a lot of great contacts and intend to follow up.”

Watch for another post soon recapping this high-energy conference. As I learned here, travel is the world’s largest industry. But the latest iteration of the Internet seems to be breathing new fire into it…

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Part 2: Flyspy Goes to School

Continuing from my post of yesterday….

Tech~Surf~Blog: Tell us about how you participated in the Carlson School MBA class. I assume you did a complete presentation about Flyspy for the students early-on to establish a starting point?

Robertmetcalf Metcalf: I presented the class with a very detailed look at Flyspy, from high–level concepts to detailed aspects of the business model and technology costs. Remember, the class was going to produce a business plan with an emphasis on IT management. The major points that I hit on were:
• What is Flyspy, what is the problem, and what is the solution.
• Market size and business (revenue) model.
• Understanding the airline industry using a supply-chain metaphor.
• Flyspy’s value to the consumer and value to the airline.
• Future product plans.
• Technology overview and the cost of managing technology.

Tech~Surf~Blog: What was your opinion of the quality of the papers produced by the 10 teams, as well as their PowerPoint presentations in the final class session? Were you impressed by their engagement in the whole process?

Metcalf: Each presentation (business plan) had to be delivered by midnight prior to the final class. I frankly didn’t know what to expect, so I was pleasantly surprised when I received 10 business plans via email. Each business plan was roughly 25 pages in length, had a clear executive summary, a detailed course of action, various recommendations, a summary, and references.

After reading the first business plan I thought, “This one is a clear winner.” After reading each business plan, I had the same thought. Every plan was outstanding because each one addressed a different market segment. Half the class had a B2B solution and the other half addressed the B2C segment.

The class presentations were limited to 12 minutes each. Each team came prepared with a PowerPoint presentation making their case as to why their solution was the best one. And all of the teams used an information and technology strategy to frame the problems and solutions. They clearly knew how to start with a strategic vision and drill down into tactical, operational, and financials details.

Was I impressed? Yes! I was overwhelmed by the thoroughness of their business plans and the clarity of their presentations. I would add any one of the students to my team in a heartbeat.

Tech~Surf~Blog: What ideas presented by the teams really jumped out at you? Are you likely to adopt some of them?

Metcalf: Truthfully, most of the ideas they presented had never occurred to me. Very few of the students had an IT background, so their ideas came from areas they were familiar with. A few ideas were truly novel – combining what Flyspy does with another product or service to yield a solution that’s more powerful than either one….i.e., 1 + 1 = 3.

There are three ideas that we’ll adopt right away. The first idea is a UI (user interface) improvement that increases repeat traffic. The second idea addresses “buyer’s remorse.” It’s a solution that provides a different visualization of the flight and fare data that gives the end-user a comfort level that they have seen all of their options. The third idea involves frequent flyer information.

Tech~Surf~Blog: Tell us about the Flyspy partnership deals you announced at the final class session.

Metcalf: I announced a partnership with a data provider and a few advertising firms. Locking in a data provider is extremely important. If you look at a single Flyspy chart, you’ll see 30 data points for each of the 7 trip lengths. It takes 210 data points to make a complete Flyspy chart. Each data point represents a unique departure and return date combination. If you were to collect this data manually, using Expedia, Orbitz, or Travelocity, you would have to do 210 searches. You can see that it takes a lot of data to support the Flyspy user interface. Our data provider thinks that Flyspy is the future of searching for flights and fares.

Tech~Surf~Blog: What was the decision process you and the instructor used in selecting the winning team in this competition?

Metcalf: Nelson Granados and I selected a team whose idea was relevant, well researched, and fit into the existing Flyspy IT framework without a lot of additional software development. We picked three finalists that we felt met our criteria. In the end, we picked a team that presented a solid business case in a paper that was extremely well researched and filled with details. They didn’t miss a beat. It was one of the finest industry-related papers I’ve seen. I can’t say enough about the team, how well they must have worked together, and the quality of the final product.

As mentioned previously, Nelson is now teaching at Pepperdine University in Malibu, California. This fall, I will be presenting Flyspy as a case study to another round of MBA students. Hopefully, they will have a different perspective on the industry and some more innovative ideas will emerge.

Tech~Surf~Blog: Once you receive your greatly anticipated seed-stage funding, what are some of the first things you’ll do? How will the funds be used?

Metcalf: There are two big areas that we’ll address: 1) turning the site from a “proof of concept” into a world-class search engine, and 2) hiring business development people. We need to get the base technology completed as soon as we can. And we also need to build relationships that will bring revenue in the door as well.

Tech~Surf~Blog: Anything else you want to leave with us regarding Flyspy, Robert – your plans, your vision, any thoughts about the process of getting funded and launched, hopefully here in Minnesota?

Metcalf: I never in a hundred years would have thought that changing an industry – if you can call it that – would be this difficult. My initial question of “why is this so difficult?” has, in one sense, changed my life. I know that I’ve made the airfare search process immeasurably easier for tens-of-thousands of travelers already, and that gives me a great deal of satisfaction.

The short-term plans are to launch the site, build a public relations campaign, and see millions of consumers use the site. The long-term will take care of itself if we pay attention to the customer and the details of running the business. My vision is balancing the process of keeping the site easy-to-use while we add more features.

Thanks for the questions, Graeme. I’ve truly enjoyed answering them.

——

Well, that’s it, folks. I’ll be continuing to follow this developing story closely. In fact, I know more news will be coming very soon. So, stay tuned to your handy-dandy Tech~Surf~Blog channel for all the updates…. (Or, if you haven’t yet, you can subscribe via the RSS or email feed icons near the upper right.)

cheers,
gt

Flyspy Goes to School

This is a story about how a Minnesota startup utilized one of our great local institutions of higher learning to enhance its business plan and leverage its future. But, what started out as a post limited to that has turned into…well, kinda the whole life story of this startup, going back a few years, and the background of its fascinating founder, Robert Metcalf. [No, not that one, as TechCrunch likes to say.] It’s maybe my longest post ever, but I think you’ll like it.

I first met our homegrown Robert Metcalf, founder of Flyspy, back in May of this year. His company is a new breed of airfare search site that changes the game. (See the sample chart.) Flyspylogo_1 I’d read the original TechCrunch blog post about Robert and his firm, and a followup they did a few months later, and I couldn’t believe Robert and I were located so close by and hadn’t yet met. Within a few days, we did meet, and I was immediately impressed, both with him and the fledgling company. As pure Internet startups go, this looked like one of the most exciting I’d seen in these parts in a long, long time. Certainly since the early ‘Net days of 1995, when I first met J.J. and Jeremy Allaire of Allaire Corp. fame. This harked me back to those days. Pure, unadultered Internet moxie and adrenaline. Samplechart And on top of that, with Flyspy, I was able to immediately identify with what it could do for me personally as well. How many startups have an immediate bond with consumers like that?

So, what I decided to do was interview Robert about his experience with Flyspy being a case study for a recent MBA class at the University of Minnesota’s Carlson School of Management. This was after he’d let me sit in on the final class session to hear the presentations of the ten teams. But I wanted the interview to provide background information, too, so I asked him a broad set of questions. Ready for the definitive lowdown on this exciting, new, Minnesota-grown startup? It’s fitting to launch this post on the same day that Robert will be demoing Flyspy at MinneDemo. Here we go….

Tech~Surf~Blog: Robert, first please tell us about your previous experience in the technology community here in Minnesota, prior to your founding of Flyspy.com.

Metcalf: My technology experience goes back to the 1970s. During high school, in Northfield, Minnesota, I regularly took math and computer courses at Carleton College. That’s when I got hooked. I’ve always been intellectually curious, especially around the rigor of software development – defining a problem, working on it, understanding the nuances of “systems,” working on tough problems that a lot of people might give up before solving, and finally producing a tangible piece of work that others can use and enjoy.

For the first part of the 1990s, I did Fortune-50 consulting work. My clients were in California, Iowa, New York City, and Texas, and I was on the road 50 weeks a year. In November 1993, I met with Ed McCracken (CEO of Silicon Graphics) and we talked about the emerging Internet and the impact of a networked society. By the end of the year, I had stopped all consulting work and formed an Internet company, Internet Broadcasting Corporation, here in Minneapolis. [Ed.: Not Internet Broadcasting System, or IBS, based in Mendota Heights, MN.] At first, we developed web sites and then later moved into developing e-commerce sites and Internet applications.

During this time, Silicon Valley held a great allure for me. If you were in the Internet or technology business in the 1990s, then Silicon Valley was, in my opinion, the center of the universe. In 1999, I took a job as a CTO for a startup company in San Francisco. That company was sold to a firm in Los Angeles in 2001. I returned to Minneapolis in 2002 and worked with a group of friends that I’ve always wanted to work with. That company was based in Austin, Texas, but had a St. Paul office. Late in 2002, all development was consolidated in Austin, putting five of us out of work. From 2003 until now I’ve either worked on Flyspy or done consulting work to support Flyspy.

Tech~Surf~Blog: How did Flyspy come about?

Metcalf: In 2003, I went to visit my brother in Williamsport, PA. Williamsport is in the middle of the state and there are 10 or 12 airports you can fly into. No matter which airport you choose, the total travel time is about the same – non-stop and a car trip vs. a one-stop and long layovers. I spent about eight hours researching various date, city, and airline combinations. At some point, my head was swimming from all of the data I encountered. I started to record salient data points in Excel in order to understand the combinatorial explosion problem (multiple departure dates X multiple return dates X multiple web sites X multiple connections, etc.)

That got me to thinking… “Why was this search process so difficult and time-consuming when can I find almost anything with Amazon or Google in a few seconds?”

My intellectual curiosity got the best of me. I decided to spend a weekend researching the problem. After all, how hard could it be to figure out where airfares come from and why the process was so slow? That research turned into nine months of 10-hour days! What I found was an incredibly complex system of players and processes and relationships. It was, and is, easily the most complex industry I’ve encountered.

One day I woke up and understood how the entire system worked. My intellectual curiosity had been satisfied. I had the answer to my question and I knew why the airfare search process was so slow. That day also coincided with getting back to consulting work in order to pay the bills.

Within a few months, my mind went back to working on the problem. I knew what the problem was, and having the skills to devise a solution, I gave up consulting and went back to working on Flyspy for another nine months. At this point I’m almost two years into the process and no one was seen anything. Only a few friends knew what I was up to.

In 2005, I started to show Flyspy to close friends and slowly expanded it out from there. My initial solution was totally wrong, as were the second and third solutions. None was a sustainable business. Iterating through three solutions took about 15 months. The difficult part wasn’t the technology, although that was really, really hard. It was removing a piece of the airline industry puzzle, crafting a solution that no one else had thought about, and replacing the puzzle piece. Everything I touched had to remain the same while the internal workings all changed.

During this time, almost 40 months since I’d started, most friends told me to give Flyspy up and move on to something else. They figured that if the industry hadn’t changed in 30 years, and I hadn’t found a solution in 40 months, then there was no solution. Basically, thousands of others must have thought of this, and worked on it, to no avail.

In February 2006, I was at the end of my wits. I never thought I’d solve the Flyspy puzzle. In order to get my creative juices going again I decided to attend a gathering called “MashUp Camp” in Silicon Valley. My goal was to expose myself, not Flyspy, to a broader audience of people on the cutting edge of technology. I thought that being around them would stir something inside.

MashUp Camp was held on a Monday and Tuesday. On the Sunday evening prior to the event, an informal group of 20-30 participants gathered to drink beer, eat pizza, and show what each other had been working on. Most of the group knew each other, so I felt a bit like an outsider. The group gathered around a big table with a projector. They took turns hooking up their laptops and showing “mash up” applications like WiFi locations overlaid on Google maps, or eBay items alongside Amazon search results for the same product. There was lively discussion around each application.

At the end of the evening, when it appeared that everyone who was going to present had presented, someone asked if there was anything else someone wanted to show. I raised my hand and told them I had developed a new type of airfare search engine, which brought blank stares. I borrowed someone’s laptop and showed Flyspy. I talked for about five minutes and not once did anyone utter even so much as a peep. I felt like no one liked it, because every other showing had prompted a good round of conversation. At the end of showing Flyspy, someone started to clap, and then another joined in, and soon the entire room was in applause.

Someone standing in the back of the room asked if they could include the web site URL in their blog. I told him no if it was going to draw a lot of traffic. Everyone but me snickered. That person was Nik Cubrilovic, who was writing for TechCrunch. I was the only one in the room that had never heard of Nik or TechCrunch. I would later find out that a single mention in TechCrunch would bring 100,000 users to a site in a few hours, resulting in a meltdown. At that point, Flyspy was running a single server that was years old and any type of traffic would have taken the server down.

When I walked into the conference on Monday morning, I was surrounded by people congratulating me. Others wanted their picture taken with me, saying I had created a disruptive power within a billion-dollar industry. I had no idea what they were talking about. It wasn’t until I checked email that I realized that Flyspy was the main article on TechCrunch.

MashUp Camp was about creating applications from other applications. Even though Flyspy isn’t a mashup per se, it took third place in the voting. All day Monday and Tuesday, I was swamped with demo requests and interviews. When I flew back on Tuesday night, I knew I had been rejuvenated and threw everything I had into bringing Flyspy to market.

Tech~Surf~Blog: Could you summarize the current state of your business – where are you with financing, business model definition, timing for your formal beta launch, etc?

Metcalf: Flyspy has been self-financed to date. Recently, I’ve had two written offers and one verbal offer for funding. One offer was the wrong type of partnership. Another required moving to California. The jury is still out on the verbal offer.

As a result of the recent PR, a number of VCs have contacted me. Many assume that the business is fairly well developed — i.e., a management team in place, prior round of funding, developer’s implementing more airlines, cities, and features, industry expertise on-board, and someone orchestrating a PR campaign. They are a bit dismayed when they find out that Flyspy is the result of one individual with determination. Most (but not all) ask to be contacted when the aforementioned milestones are met.

On the surface, the business model is very straightforward – a combination of advertising and affiliate, or commission, fees. You’ll see this on almost every web site. What you don’t see are the various ways to monetize Flyspy through strategic relationships and various forms of business-to-business offerings.

Early on, when I was researching and developing Flyspy, I had the advantage of being an industry outsider. I then went through a period of time where I realized being an outsider was a disadvantage, because I didn’t know all of the ways to derive revenue from the business model. Only recently have I found out that our business model is fairly unique within the industry, as we’re able to leverage data in ways most people have not thought of. It’s a rich offering and most investors smile when they see all of the ways to bring in revenue. But we could run the business and be profitable if we just stick to advertising and affiliate fees.

As far as launch timing, the first, alpha version of the site has a single airline (Northwest) and routes from Minneapolis fanning out to 50 cities. I consider this “proof of concept,” providing some validation in the marketplace. The next version — I’m not sure if we’ll even call it a beta version — will include at least a dozen airlines and many more origination cities. I would want to see this next version launched by October 1, 2006. It requires a complete overhaul of the base architecture and the serving platform — a lot of work.

The version after that will be a major release. We’ll try to coincide that release with a large PR campaign to create general awareness of Flyspy in the market. The timing of this product release will depend on how fast we can form relationships and monetize all aspects of Flyspy. I would like to roll out a new feature every 6-8 weeks. You can assume from this quick-release schedule that we’ll incrementally update the site instead of waiting for major releases. I view Flyspy as an Internet-based application that’s updated regularly.

In regard to the first, proof-of-concept version of Flyspy, these are typically throw-away systems that you want to learn from, not implement as a production system. The system is being re-written from scratch to deal with scaling issues and data integrity. Going from one airline and one city to multiple airlines and multiple cities is a difficult issue. One false step and a wave of traffic will take the system down.

Tech~Surf~Blog: Where are you with respect to your decision to locate Flyspy in Minnesota or Silicon Valley?

Metcalf: I live in Minneapolis and I’d like to see Flyspy succeed here because it seems that we have so very few successful Internet companies here (relative to Silicon Valley, Austin, and Boston). This area is due for another big “win,” and it’s my hope that Flyspy can be a catalyst that launches another 100 wins from this area. It’s not ego-driven at all. I’d like to see talent stay here instead of migrating to Chicago or either coast. After all, the Twin Cities has historically been very instrumental in the computing business. I’d like to see some of that come back.

I’ve lived in San Francisco, and my mother and sister currently live in Silicon Valley. So the allure of that area is strong personally and professionally. I like the energy, the abundant talent pool, and the startups that emerge from the primordial ooze we call technology. I think we could create a slice of Silicon Valley here in the Twin Cities, but we first have to want it, not just wish for it. It won’t occur without someone or something kick-starting the process. I wish I could be that person, but I’m not charismatic enough to lead that parade. Maybe Flyspy will be successful and be a part of this change.

Tech~Surf~Blog: Please tell us a bit about your market exposure so far – you mentioned your participation in the key conference early this year, but what about the media attention you’ve had to date?

Metcalf: Yes, the first exposure was MashUp Camp, and the TechCrunch piece resulted from that. If you had Googled ‘Flyspy’ prior to MashUp Camp, you’d have found maybe 50 references. Three days after MashUp Camp and that first blog post, there were more than 140,000 links to Flyspy. I took that as market validation that Flyspy could solve a pain-point for many, if not millions, of users.

There are about 300,000,000 people that fly in the U.S. every year – that’s 820,000 people every day, 365 days a year. If you’re like me, you look at flights and fares at least three times before you buy a ticket. Let’s say that two million people look for flights and fares every day. My inexact market research says that people spend about 30 minutes on the process, but it’s only five minutes if you use Flyspy. If you can save even a fraction of those two million people some time, then you’ve solved a really big problem for a lot of people.

The next “major” mention of Flyspy was in the July 2006 issue of Fast Company. I had no idea this blurb was going to run. I was sitting on the sofa reading the issue when I saw an article about new sites for finding airfares. I was stunned when I saw Flyspy named, because they’d never contacted me. Incidentally, after every mention of Flyspy in a popular blog, a magazine, a podcast, or an online article, the number of emails that I receive goes right through the roof.

Wired.com just ran an article about Flyspy and another new site, Farecast, on Friday, August 18. I must have received at least 500 emails that day. There were another 200-300 that came in over the next week. Tom Peters (author of In Search of Excellence) also picked up the article and featured it on his web site.

On Friday, August 25, Information Week ran an article about new methods of finding airfares. And once again the number of emails I received went through the roof.

I’ve also had interview requests from the NY Times, Fortune Magazine, USA Today, the Washington Post, the Dallas Morning News, and Modern Bride. I’ve put these off until a more mature version of Flyspy is ready for a larger audience – that is, more than just Minneapolis to 50 cities on Northwest Airlines.

As far as upcoming events for Flyspy, in September I’ll be teaching an MBA course at Pepperdine University in Los Angeles – Malibu actually – with a colleague from Minnesota who took a faculty position there. Most MBA courses are organized around the “case study” approach. The one for this course will be how to leverage Flyspy and create new ways to monetizing traffic and data. In mid-October, I’ll be presenting Flyspy at The Collaborative’s 20th Annual Venture Finance Conference. Then, in November, I’m speaking at one of the largest annual travel conferences in the country, which is being held in Los Angeles.

All of this publicity is well appreciated, but it seems a bit premature. I can’t fault all the media interest, because Flyspy truly seems to connect with people, and therefore should be in the public eye. I had always hoped for a rush of PR right around a major launch point when I would be able to capitalize on the traffic and keep customers coming back. But with limited airlines and cities at this point, the “come on back” factor is low.

Tech~Surf~Blog: What level of consumer traffic are you expecting when you launch your beta site, based on the continuing publicity you’re likely to get? What is it about Flyspy that really seems to resonate with consumers?

Metcalf: As far as traffic, you can segment travel sites into one of two major categories: “the big three” (Expedia, Orbitz, and Travelocity), and everyone else. Traffic for the big three is huge. They all rank within the top-50 web sites in terms of visitors per month. I realistically don’t think Flyspy will have that type of traffic. I suspect that, within a year of launching, we’ll be in the middle or middle-to-top range of the second tier of travel web sites. Other players (and I tend to stay away from the term competitor) in that tier are Farecast, Kayak, Sidestep, and Yahoo Travel.

I don’t like the term “competitor” because each site addresses a different market niche or target audience. The big three try to be everything to everyone: good at most things, but not great at any one of them. Kayak is the best aggregator out there, period. It’s perfect if you want a large number of options and some certainty that you’ve seen every option available. Of course, it’ll take you quite a bit of time to wade through the results and look at various date combinations. Farecast answers the question, “Do I buy now or wait?” If that’s your question, then Farecast is your site. Flyspy just wants to answer the question “What are my options?” – letting you understand the market for airfares in a few minutes. I think we serve a large segment of the flying population, but I’m also realistic enough to realize that, if you don’t like charts, then Flyspy may not be for you – unless you just want results faster than any other web site. Our goal is to get people through the research phase in a few minutes, versus 30 minutes or so with almost every other option.

I also tend to stay away from categorizing Flyspy as a travel site. We’re a search engine that does airfares (cars and hotels later) — better than anyone else. We’re a vertical search engine and we’re the fastest one out there. No one matches us on breadth of data and speed. Think one of the “big three” mated with Google.

I’ve come to realize that Flyspy really does resonate with people. I think there are a number of reasons why people feel so strongly about Flyspy. A marketing consultant from McKinsey told me it was one of the five best brands she’d ever seen. There’s something about the name “Flyspy” and the logo/icon that attracts people. In a way, it reminds me of the Jolly Green Giant – cartoonish, loveable, good name, good brand recall. In an era where most travel sites are big and corporate and serious, Flyspy is light, whimsical, easy-to-use, refreshing, and blazingly fast. It’s a counterpoint to a large, bureaucratic travel agency. And that may be the reason the airlines and larger travel agencies just don’t “get it.” But most people root for the underdog.

The one thing people like about Flyspy that I never saw coming is the benefit I call “no buyer’s remorse.” That is, it eliminates the feeling of “I could have found a better flight/fare if I only had another 20 minutes.” With Flyspy, people are satisfied with their purchase because they knew all the options and made an intelligent decision. Every other site leaves you feeling like you missed something — you just don’t know what you missed. And those feelings, in my opinion, are accentuated with the information overload we have today with the Internet.

Here are some quotes from others that say it better than I can:
• “I’ve been using the Flyspy alpha site to research flights and fares for some time now, and can’t fathom going back to any other site.”
• “It has the mark of a great entrepreneurial idea – something that you don’t know how much you need until you have it, and then you can’t live without it – and it’s such a simple concept.”

One goal that has always been in the back of my mind is to reverse the Pareto Principle (also known as the 80/20 rule) when searching for flights and fares. It appears to me that, when you use Expedia, Orbitz, or Travelocity, you spend 80% of the time searching and 20% of the time making sense of the search results. My goal was to that people would spend 20% of the time searching and apply the remaining 80% to understanding the market and their options. Since searching is time-consuming and analyzing is fairly quick, by dropping search from 80% to 20% you would dramatically speed up the overall process. Hopefully, I’ve come close. I think users feel that their use of time is different with Flyspy, and that resonates with people in a positive way.

Tech~Surf~Blog: Getting back to the main topic of this blog post – how did your participation in this Carlson School MBA class competition come about? What type of class was it, and what kinds of students did it attract?

Metcalf: Well, let me tell the story of how I found an expert in my own backyard. A few years ago, when I was researching Flyspy, I wanted to understand the affects of market transparency. How did it affect pricing? Who benefited and who was hurt? What was the difference between price transparency and product transparency? Specifically, I needed to know if market transparency had a downward-spiraling affect on pricing. If it did, then I was in for a pretty rough ride gaining acceptance from the airlines.

I found an individual, Nelson Granados, who is an expert in market transparency in electronic markets. He happened to live two miles from me and was completing his Ph.D. at the University of Minnesota. Nelson has a Ph.D. in Information and Decision Sciences, a Ph.D. minor in Applied Economics, an M.S. in Applied Economics, and an MBA. And he worked at Northwest Airlines for seven years in the roles of Senior Analyst – Pacific Pricing, Pricing Specialist, Specialist, Pacific Revenue Management, and Manager, Revenue Management. [Ed.: The impressive resume of Nelson Granados is here. Nelson recently accepted a faculty position at Pepperdine University in Malibu, California, and I hope to learn soon that he’s taken up surfing… 🙂 ]

On the topic of price and product transparency, Nelson and I worked together for a few years to understand the affect of transparency in the air travel markets. Bottom line: in a market with only transparent pricing, you’re in a race to the bottom line and there are no winners. If you have transparent prices and transparent product information, then pricing is supported by innovative mechanisms that display product information.

For example, any travel site, Flyspy included, has very transparent pricing for the parameters you specify (departure and return dates). What the others miss is product transparency. You cannot see beyond your selected parameters and, therefore, you cannot see other products the airline has to offer. A product to an airline is a seat on a plane, departing at a specific time, returning at a specific time, and having a specific number of stops. Those attributes make up the ”product.” Other sites have minimal or no product transparency – therefore, all they can compete on is price. Flyspy has the ability to show a wide range of products, via the 30-day chart and, in theory, that negates a downward spiral in pricing.

Flyspy has never been about finding the lowest cost ticket, although you can. It’s about understanding the marketplace for airfares, knowing your options, and, for loyal travelers, finding a product on an airline you’re loyal to and not buying a ticket on another carrier because you ran out of time or had too much frustration.

As far as my relationship with the University of Minnesota’s Carlson School, Nelson was teaching an Information Technology Management (core IS) course. We met one day for lunch and he was talking about his ideas for a case study. He asked me what I would do, and I said I would give the class an assignment that revolved around monetizing Flyspy in the context of Technology Management. He liked the idea because it was relevant to the class, drew on Nelson’s expertise, and worked on a real-world problem in an area that excites a lot of people. We then worked on a course outline and syllabus. I taught a few classes and judged the final presentations. I exposed the students to everything I knew about Flyspy, with a heavy dose of IT management and cost structures. They needed the cost structure in order to defend their decisions as economically feasible or not.

The class consisted of 40 students divided into 10 teams of 4 each. Very few of them had an IT background, which was great for me because it exposed me to business ideas that would never have occurred to me. Most of the participants were in their late 20s to early 30s. Only a few had just graduated from college. Their work experience played heavily on their focus.

Tech~Surf~Blog: How did the “Case Competition” work? What were the rules and guidelines for the teams?

Metcalf: Each team of four had to come up with a way to monetize Flypsy. There were no rules because I didn’t want to limit any ideas. I had a hunch that two or more ideas, when combined together, would yield some pretty good results – so I was looking for some “far out” ideas. There were a few guidelines:
• Loosely stay within the current business sector – i.e., we get data, we display data, we sell stuff.
• Give a slight preference to monetizing historical data. I wanted them to think about ways to generate income from historical data, because a) no one else collects it, b) we’ll have a lot of it, and c) it may be a barrier to entry for a competitor if they have to build up 6-12 months of prior data.

Each team created a 20-30 page business plan laying out their ideas and giving specific examples of how they integrated IT management into their solution. After all, this was an IT management course. In addition, each team also created a PowerPoint presentation for the final class. Each team was given 15 minutes to present their case.

At the end of the class, Nelson and I had the top three finalists come forward as we talked about why we liked their ideas and business plan. We then announced a winner. The winning team will be featured in a Carlson School print publication. The Director of Communications for the Carlson School is writing an article about the integration of business and academia, and is submitting the article to some major IT journals for publication.

[to be continued soon….watch for Part 2]