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Online takes the 'A' train.
By Yeoh Siew Hoon ~ thetransitcafe.com
Thursday, 27th November 2008
 
Advertising is the new black as everyone scrambles for new revenues, as Yeoh Siew Hoon discovers at the PhoCusWright conference in Los Angeles.

Once upon a time, I used to cover the publishing and advertising industry. As editor of Media in Hong Kong, I got stuck into CPMs, readership surveys and viewer ratings.

It was thus with a sense of déjà vu that I sat through the PhoCusWright conference in Los Angeles and realised that I was now back in the advertising industry.

Yes, the "A" word is on everybody's lips – from Kayak to Expedia to Google, everybody is looking to advertising to deliver a new revenue stream, over and beyond the transaction model.

Travel sites have become media sites, and online travel agencies and metasearch engines have become publishers. It's now a blend of PPC and PPA.

Travel is only following the bigger trend – MySpace has created MyAds which allows clients to create their own ads. It reported brings in daily revenues of US$150,000 a day and is projected to earn MySpace US$1 billion in 2009, according to Philip Wolf, CEO and President of PhoCusWright, in his opening speech.

Another analyst said it represented the "most exciting opportunity" for OTAs. The reality is, travel business will be bad next year and OTAs are pushing hard to bring in alternate revenue streams.

President and CEO of Expedia Inc, Dara Khosrowshahi (pictured top right), for instance, is expecting advertising, which now forms 10% of revenues, to grow faster than core revenues.

In the changed environment, it's the search sites that are the happiest. The premise is, people will still need and want to travel and when they do, they will use search sites more to make sure they get the best deals.

Kayak's co-founder and CEO, Steve Hafner (seated left with Philip Wolf), is happy with the financial meltdown. "It will stop those pesky start-ups from getting money and it will give us opportunity."

He said that OTAs had lost half of their traffic since June but "consumers are still searching relative to consumption, that's helped us".

Unlike OTAs, Kayak's challenge is not product, but audience. And that's something Kayak will be focusing on delivering, he said. "We are good at website design," he said, unlike OTAs which he said have "cluttered and ugly websites".

The biggest competitor that every OTA and metasearch site has is Google, of course. Is it friend or foe, the eternal question?

President and CEO of Priceline, Jeffrey Boyd, was asked an audience question – "What if Google stopped sending traffic to you and started selling travel?".

His response, "Google is an important advertising partner. Travel is the biggest vertical for Google in terms of advertising dollars. OTAs drive profitability in that model. It would not be in their interests to do so."

In the "Ask Google" session, managing director, travel, Rob Torres was asked the question about whether there was conflict between search engine optimisation and customer experience.

His response was the standard one – that Google remained focused on the user experience and the relevance of search results.

He said Google had no intention of becoming a transaction company. "Our priorities remain – how do we actually deliver to the user what he is searching for and how do we surface that information more quickly?"

As for what will be the killer combination, Wolf said, "Smarter searches and relevant results."

Yeoh Siew Hoon, one of Asia's most respected travel editors and commentators, writes a regular column on news, trends and issues in the hospitality industry for 4Hoteliers.com.

Siew Hoon, who has covered the tourism industry in Asia/Pacific for the past 20 years, runs SHY Ventures Pte Ltd. Her other writings can be found at www.thetransitcafe.com

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