Group MCAGJP Report on TripAdvisor.Com

E-BizTripAdvisor.Com Mini-Research

Leader: Michelle Cheung J.

Assistant Leader: Annabel Goy Xiao Yue

Secretary: Joey Peh Jinwei

Class Code: F3

TripAdvisor.com

Ghosh (1998) suggested 8 key elements that must be addressed to develop a successful business model (in any kind of brick or click businesses).

They are:

1. Value Proposition (why should customer buy from you?)

2. Revenue Model (how would the money be earned?)

3. Market Opportunity (which target market/s and its size?)

4. Competitive Environment (who are your competitors?)

5. Competitive Advantage (what are your special qualities?)

6. Market Strategy (how are you going to attract target customer?)

7. Organisational Development (How would the business be structured?)

8. Management Team (What are the important qualities and experiences of the leaders?)

Our group has chosen to analyse the business model of TripAdvisor.com using Ghosh’s suggested 8 key elements.

Report Flow

The report will proceed as such:

History & Background of TripAdvisor.com
Ghosh’s 8 Key-Elements

· Value Proposition

· Revenue Model

· Market Opportunity

· Competitive Environment

· Competitive Advantage

· Market Strategy

· Organisational Development

· Management Team

Opinions & Comparisons of TripAdvisor.com
Conclusion
Bibliography

History & Background

- TripAdvisor was founded in February 2000 by Stephen Kaufer

- Main source of revenue from users’ clicking to book/buy tickets hotel/attraction/restaurant/flights/vacation rentals

- The company was an early-adopter of “user-generated content”, which means most information provided on their website is based on user’s contribution.

- TripAdvisor was bought over by InterActive Corporation in 2004 and has since progressed into a major e-business firm that has acquired many other smaller travel websites such as “Holiday Watchdog” and “VirtualTourist”.

- Search engine that comes up with links (opposite approach as google: not the most authoritative, but the most back-end reviews etc)

- Currently operates sites in 30 countries and in 21 languages including sites in the U.S.

- According to TripAdvisor’s statistic claims, 60 million people utilise their travel social network every month. Also, they have 32 million members from all over the world and over 75 million reviews of hotels, etc.

TripAdvisor.com is pre-dominantly a “Broker” business model that caters to the B2C (Business to Consumer) markets. In addition, the website is also supported by an advertising business model.

TripAdvisor.com is also a “Pure-Play” business model.

Information Broker – provides information on site about Hotels and flights and provides direct booking links to travellers to do transactions.

Pure-Play – No physical building or office, only on the internet.

The 8-Key Elements

1. VP (Value Proposition):

“Helps people to decide: Where to Go… Where to Stay… How to Get There… & What to Do When They Arrive.” Trip Advisor is a "Pure Play" travel website that assists travellers in gathering real travel information, advice and opinions from real travellers.

OVP (Online Value Proposition): “Your Computer Is Now The Travel Agency.”

Provides travellers with extensive choices of travel destinations in one website, hence allows quick, easy and convenient way of accessing information on what the travellers may wish to visit for a holiday or other purpose for the trip.

Planning features with booking tools also brings convenience to the travellers and allows accurate and timely information to be provided at any time and place they wish to have access to the website as long as they are able to access the internet.

Having reviews from the TripAdvisor community of real travellers, as well as social network connection such as Twitter and Facebook which facilitates sharing of reviews from mutual friends with similar interests allows relevant, accurate and trusted reviews. Forums and photos of the travel destinations also increase interactivity between travellers and hence, provide immediate clarifications on any uncertainty issues.

With the website content solely about travel information; even the graphic advertisements that are put up, it provides customization for its specific target market, which are the travellers. Proper advertisements and information will show that the site is comprehensive and clear about what it is providing, and hence will be able to retain and attract the existing and new visitors.

2. Revenue Model:

Advertising Revenue Model – TripAdvisor earns its revenue and profits by offering travel suppliers marketing platforms such as graphical advertising and cost-per-click advertising. Restrictions on travel information-related advertising will narrow down TripAdvisor’s revenue from other interested parties who wish to provide non-travel information advertisement. However, with its customization, it will be able to retain its customer base that will have a higher probability of clicking on the related advertisement, will attract more travel suppliers to wish to advertise on their website and hence, generates revenue.

Although TripAdvisor has no physical presence to attract customers, it only requires little advertising and marketing efforts to attract them, as it is just an information broker. A simple advertising effort would be the cost-per-click advertising through being listed on the suggested sites by Google search engine. Hence, it does not have a high Customer Acquisition Cost (CAC).

3. Market Opportunity:

Travellers around the world; especially the 30 countries which they operate at provides worldwide presence and access of travel information on their website. Through partnership and also operating 19 other travel media brands, TripAdvisor is able to maximise its customer base and/or visitors to a total of 74 million monthly visitors.

4. Competitive Environment:

Under the competitive environment of the business model, one has to know the environment of the ebusiness. That is, a business has to know their direct and indirect competitors, know their consumers and suppliers etc. A tool that would be useful for analysis would be Porter’s five forces model.

a)        Threat Of Substitute Products

In Porter's model, substitute products refer to products in other industries. To the economist, a threat of substitutes exists when a product's demand is affected by the price change of a substitute product. A product's price elasticity is affected by substitute products - as more substitutes become available, the demand becomes more elastic since customers have more alternatives. A close substitute product constrains the ability of firms in an industry to raise prices.

The competition engendered by a Threat of Substitute comes from products outside the industry. For example, the price of aluminum beverage cans is constrained by the price of glass bottles, steel cans, and plastic containers. These containers are substitutes, yet they are not rivals in the aluminum can industry.

TripAdvisor.com is unique in that they are a business that exploits the fact that they are a meeting point for different users. Most of the content on the website is user-generated and web services are free for users to use.

The main ‘product’ of TripAdvisor would thus be the information that can be found there - Information regarding hotels, restaurants, attractions etc, in the form of user reviews and forums, and information that can be found using their search engine.

Some of the substitute ‘products’ could be more popular travel blogs, or other channels of information, like Discovery Channel’s Travel and Living.

However, the threat of these substitute products could be considered low, as TripAdvisor.com offers much more information compared to these channels of information – A much larger variety (from hotels to restaurants to flights), from across the globe (America, Africa, Middle East etc).

TripAdvisor also offers search engine filtering and ranking of search results, which makes it really convenient for users, as users would be able to find information, in order of relevancy, and they are also able to refine their searches, for example according to their budget or place of visit.

b)        Threat Of New Entrants

The maintenance and improvements of large user-based content websites like TripAdvisor requires specialist knowledge software, programming, web design, marketing and a lot more. That is, a competent team is required for the production and maintenance of such a site. Thus this would function as a barrier to entry.

Also, because TripAdvisor is a trusted and comprehensive travelling website, with lots of traffic, and with an established clientele, it would be the first stop travel planners would go to. Thus, threat of new entrants would be low, as there would be few potential customers.

TripAdvisor has also set up a media group that buys over other travelling websites similar to TripAdvisor, so even if there were a few more successful websites similar to TripAdvisor, they would be able to buy it over and hence lessen competition and rivalry in the industry.

c)        Bargaining Power Of Customers

It has been established that most of the revenue for TripAdvisor comes from pay-per-click advertising, and commission from travelers who book rooms or buy tickets etc.

Thus their two main customers would be various hotels, airlines, attractions etc, and the users of the website.

The bargaining power of various hotels etc is low, as they are fragmented. That is, there are numerous businesses, and many different types of businesses who would advertise with TripAdvisor. Additionally, because TripAdvisor is the leading site for wanna-be-travelers, businesses to do with travelling would be compelled to advertise with TripAdvisor rather than any other website.

It might be noted that although TripAdvisor has been criticized for allowing unsubstantiated anonymous reviews to be posted about any hotel, inn or restaurant, it has since reviewed it’s criteria for reviewing. There is a verification process which considers the IP address and email address of the reviewer, and tries to detect any suspicious patterns or obscene or abusive language. The website also allows the community of users to report suspicious content, which is then assessed by a team of quality assurance specialists. TripAdvisor also alerts the owner or manager of a TripAdvisor listed establishment whenever a negative review is posted about them on their listing, and the establishment is able to register with TripAdvisor and reply to the negative review.

The bargaining power of the community of users can be said to be moderate, as TripAdvisor.com’s business hinges on the traffic it receives, and also the community of users who post reviews and other additional information. However, TripAdvisor has implemented systems to keep traffic high. For example, TripAdvisor accepts comments from users on how to improve the website, and also, it should be noted that TripAdvisor has almost established a brand for itself, as a trustworthy and comprehensive website for travellers, thus there is already a relationship between users and TripAdvisor, and thus users would be compelled to keep frequenting TripAdvisor, should they want to organize trips.

d)        Bargaining Power Of Suppliers

Not very applicable to TripAdvisor, as they do not outsource or have any other suppliers or vendors. Their staff does most of the work.

5. Competitive Advantage:

The first competitive advantage would be the trust between TripAdvisor and its users. 72% of travellers beginning their search for a hotel or for travel advice on its website, with more than 60 million unique monthly visitors, and over 75 million reviews and opinions.

Another competitive advantage would be the global reach of TripAdvisor. It claims to be the world’s largest travel site, with the largest travel community in the world. It also operates in 30 countries worldwide (including China under daodao.com), and in 21 different languages.

6. Market Strategy:

The first marketing strategy that TripAdvisor used is search engine optimization (SEO). The first step would be to build a community of contributors that created high-quality content, the next step would be to become the definitive place to link to for the topics relating to travel, and lastly TripAdvisor aimed to rank highly in organic search results. This led to a virtuous cycle where TripAdvisor drew in more users, leading to more contributors and more inbound links, leading to more SEO, and so on. This builds TripAdvisor into a hub for information regarding travelling, for users and other businesses alike.

The second marketing strategy, after gaining a community of users, TripAdvisor sought to expand globally. This was done by creating TripAdvisor sites in different countries, and this was soon followed by language expansion. From a monolingual website which supported only English, TripAdvisor soon became a multilingual website which supports 21 different languages.

The third marketing strategy would be one targeted at other similar websites. TripAdvisor has created a media group which buys over other similar and popular travelling websites. This way, they lessen competition, and also expand their reach worldwide as well, killing two birds with one stone.

The last marketing strategy would be reaching out to other travel-related businesses, like hotels, airlines etc. Businesses are encouraged to register with TripAdvisor, and to use TripAdvisor as a platform for their own marketing.

7. Organisational Development:

This key element refers to the analysis of how the business would be structured to implement new strategy and ability to handle future growth. By having a properly planned organisational development, companies will be able to better adapt to abrupt market changes and technological impacts, and ultimately benefit shareholders and the environment in the long run. TripAdvisor uses the method of “user-generated contented” as the core of their organisational structure. This creates a culture of users all over the world sharing their experience and reviews, which creates convenience for other prospect or existing users.

Another one of the important factors of organisational development is the support staff of the company. By employing people with a certain specific set of qualities, this helps TripAdvisor to maintain an image of being user-friendly, trusted and reliable. For example, employees need to have a sense of humour to maintain good relations with prospect customers as travelling is suppose to be a fun-loving concept. Another example would be employees need to have extensive knowledge of travelling so as to fit the company’s image as the world’s most popular travel website.

An example of a required TripAdvisor employee’s job scope and criteria:

As a social and interactive community network, TripAdvisor also encourages its users to contribute and communicate with other users. This establishes constant database updates and provides reliable information on certain destinations that customers might want to travel to. For example, Korea is very much different from how it was 8 years ago, and having an un-updated information database/reviews will lead to discrepancies amongst users. Thus, by implementing an intensive interaction community as part of the company’s organisational development, it ensures future adaptability to market and environmental changes.

8. Management Team:

· Stephen Kaufer, CEO & Co-Founder

· Christine Petersen, President for TripAdvisor Business

· Julie M.B. Bradley, Chief Financial Officer

· Seth Kalvert, Senior Vice President, General Counsel and Secretary

· Bill Bailey, Vice President, Corporate and Business Development

· Barbara Messing, Chief Marketing Officer

Headquarters: US, Newton Massachusette

Comparisons & Opinions

In this section, TripAdvisor will be compared with one of its direct competitors, and other organizations in the Internet information providers industry.

One of the main direct competitors of TripAdvisor would be HomeAway, Inc. HomeAway is an online vacation rental marketplace, which connects homeowners and property managers who advertise (or list) their properties available for rent with travellers who choose these alternative accommodations instead of hotels. While both organizations are similar in that they help facilitate travelling plans of travellers, and their revenue models are similar, in that both organizations act as brokers (between property owners/hotels and travellers), and also obtain profits from advertising. However, there is a crucial difference in that TripAdvisor places more importance in information generated by it users (in the form of reviews) and also has an expanded range of facilities (flight bookings etc), while HomeAway does not place utmost importance to user-generated content (in the form of reviews), but on the other hand, concentrates on bridging the gap, and building trust between property managers/homeowners, and the travellers, while little emphasis is given to other travelling concerns (like insurance etc). This is not to say that HomeAway does not include user-generated content. HomeAway does have a community of its own, however, it is not as integrated into other content compared to TripAdvisor.

Conclusion

All in all, TripAdvisor has a more dynamic and interactive approach in reaching out to web-users, in that it provides real-time and relevant information that is fully integrated into the web page, compared to other direct competitors. It is definitely one of the leading internet information providers with regards to travel. While, in the foreseeable future, it will be one of the leading online travelling guides, one cannot be sure that it would remain so. As technology improves, and society changes along with it, TripAdvisor may be left behind, very much like how smartphones and notebooks have provided viable substitutes to personal computers. Thus, in our opinion, it is imperative that TripAdvisor remains a fluid and dynamic organization in order to be able to face the challenges that the 21^st century holds.