What makes a successful start-up? linda fox looks at three newcomers on the market, while experts offer their feedback
Travel online has evolved from the travel agency model to social networking and travel and even social networking, meta-search and travel, in a short space of time. There are as many start-ups looking to grab a slice of the action now as there were 10 years ago and, with a predicted slowdown, things are looking just as tough.
Here, we look at three start-ups, their models and their current focus and provide some expert feedback on the services.
Thomas Owadenko, founder of hotel video site Trivop.com, was prompted to form the website a year ago after a bad experience with a hotel.
He had already formed three start-ups and began Trivop by investing some of his own money. The service then received Euro 600,000 of finance in June last year and there are no plans for a second round.
Within six months of developing the site Owadenko realised that getting increasing traffic levels to the site was going to prove difficult unless he participated in viral marketing, competed for key words or worked on search engine optimisation.
He says: “It was sad that some rubbish sites were before us in the rankings, but I realised I would have to wait for video to catch on and offer other services. To produce a site and get traffic is really capital intensive. You need about Euro 20 million.”
Owadenko changed his business model and created a service offering to produce Internet videos for hotels, tourist boards, other travel companies and beyond travel. The company is also offering consultancy in video search engine optimisation.
The B2C service now has about 600 videos, receives between 20,000 and 30,000 unique visitors a month, but is currently taking a backseat
He says: “Google has changed the way it searches and video has come to the top and it’s how to leverage that. Everybody was thinking about videos in terms of improving conversion rates but did not see that it is going to be an important part of the SEO game. It’s about producing fast, cheap, quality video that is search engine friendly.”
Owadenko also believes producing videos could give hotels a competitive advantage over online travel agents in terms of search engine rankings and online conversion rates.
A third revenue stream is licensing the video catalogue to third parties.
Owadenko says the company has orders for the video production side and meanwhile, traffic on Trivop is steadily increasing. He says there is no exit strategy but believes that by creating a good service with strong growth, exit strategies will become apparent.
Adam Healey and Charles Seilheimer founded VibeAgent.com and the site went live in November 2007. After travelling extensively, the pair wanted a way to keep in touch with friends and share travel experiences. In its own words, VibeAgent combines hotel meta-search with user-generated reviews and social networking.
“People trust their friends and don’t want to read reviews from strangers. It is hard to make decisions on where to stay and it is often confusing trying to find the best rate,” says Healey.
The service was self-funded for the first year, then received undisclosed angel funding and will announce an additional round of funding shortly. The finance will go towards recruitment as well as raising awareness of the site. The VibeAgent site has been live for four months and traffic is doubling every month, as is the user base.
“We haven’t paid a dime to solicit traffic. It’s all organic growth and these things don’t happen overnight. We’re happy with the growth but it could always be better.”
VibeAgent makes money using a CPA model. The service gets a commission by driving a qualified lead to transaction partners including online travel agents and hotel websites.
The current focus is on the hotel recommendation engine and ways of making it more intuitive. It already orders hotel results based on users’ online behaviour to give them better informed recommendations. For example, if someone is a scuba diving fan, the results will combine hotel recommendations from other fans.
VibeAgent has also launched its Jetsetter application for Facebook, enabling consumers to share their travel tips and compete with each other on how many miles they have travelled.
He says: “It’s a way of tapping into the 55 million people on Facebook and introduce VibeAgent to them. It’s leveraging the networks that are already out there.”
According to Healey the company is not focused on an exit strategy at the moment.
“If we successfully execute against our strategy, there will be myriad opportunities to create a liquidity event for investors.”
The founding team – Lisa Sounio, Matt Jones, Matt Biddulph and Dan Gillmor – started the site to enable business travellers to share travel plans with each other.
Jones says: “Three of us were travelling a lot at the time, and it was an easy way to tell people where we were going to be at a certain time and we knew there were opportunities to meet up.”
The prototype for the site was built last January and Dopplr went live at the end of the year. The team started off by investing its own money and working part-time on the service without taking a salary.
In September 2007, some investment was provided from a group, which includes Saul Klein, Martin Varsavsky, Reid Hoffman and Joichi Ito, who had already been involved in names such as Linkedin, Netvibes, Typepad and Fon. The investment team also acts as an advisory panel.
Jones says: “We have got a lot of experience in terms of investment, start-up cultures, running a business and running a social network.”
He added that this year the plan is to improve the service further and turn it into a “fully-fledged business”. “The first thing we had to do was build up value for users and that is always going to be of primary importance. Now it’s about making it sustainable. How do we create value for the business itself and the partners?”
A further round of funding is on the cards in the short term, but according to Jones, making the site sustainable is unlikely to involve advertising or a transaction-based model.
When it comes to an exit strategy, Jones says the team isn’t thinking about one. “It’s not even on the horizon. The sustainability thing is going to occupy us for a long time and it’s a niche that has not really been explored yet.”
What three start-up veterans have to say…
James Dunford-Wood: co-Founder of HotelIntelligence.com and founder of Worldreviewer.com
Of the three, only Dopplr appears to cater for a clear market need in an area with little competition. I’m a big fan of the way the site has been rolled out – to certain companies one at a time, thus ensuring users actually had contacts in there.
Trivop relies on the future growth of video – a safe bet, but not something that can stand alone. Owadenko’s assertion that it costs €20 million to get critical mass reflects more on Trivop than reality – though the company seems to have recognised this by refocusing their business model towards B2B.
Great looking with a good user-interface and a neat profiling algorithm, but where is the unique-selling point? TripAdvisor and the others can do all this with their small change. The question is, will they? The opportunity is there to do it better than anyone else, but I fear that competing for reviews and a community of users will be an uphill struggle.
Andy Phillipps: co-founder of Active Hotels
Another example of social networking meets travel; a sort of WAYN for business travellers. I think the company is right to focus on the consumer and build up traction, but (at the risk of sounding very old-fashioned) I’d start thinking about revenue models pretty quick, especially as funding may be difficult later this year. The high-profile backers will help though.
There is, and will continue to be, demand for high-quality and informative content, and video will remain an important part of this. I am concerned that there’s a limit to what a hotel will pay for video content, which may cap the upside for the B2B here, B2C is very crowded.
Personalising recommendations, especially via friends’ networks, is very powerful and I think the Facebook application is a good move. I am concerned about barriers to entry and timing. Certainly following the Zeitgeist!
Alex Saint: co-founder of Dealchecker
The site is beautifully simple but my one concern is how far can it spread its appeal? If you travel
frequently and want to keep in touch with other travellers, then it’s a fantastic social networking tool, but other than that? Ruling out the advertising business model may be something the company has to revisit.
The service is really cool but without comprehensive, worldwide hotel coverage it’s not going to cut it as a B2C site. B2B seems the way to go, focus on the service provision and let the others worry about cracking the eternal traffic problem.
Our hands down favourite is VibeAgent. A slick and innovative user-interface, community content and powerful meta-search all in one. Let’s hope the site is getting a decent deal from its retail partners for the bookings it will undoubtedly create.