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Travel Tech Essentialist #98: Zero-Click
The pandemic showed that we can take marketing down to zero and still have 95% of the same traffic as the year before. So we’re not going to forget that lesson. We are never going to go back to spending the same amount of money on marketing as a percentage of revenue as we did in 2019 — Brian Chesky, Airbnb founder & CEO, March 2021.
This week’s newsletter is sponsored by
It’s time for travel partners and insurance brokers to put customers at the centre of their delivery to offer protection, flexibility and personalized choices. A happy customer is a returning customer who brings lifetime value and revenue to today’s travel landscape.
In It’s Personal – The Future of Travel Insurance, Ido Hertz, VP of Product Insurtech, writes about how Pattern delivers on what customers want: simple options, a tailored experience, and flexible solutions.
1. Give value upfront with zero-click content
More than 66% of Google searches end without a click, as Google satisfies many queries without the user needing to click on a result. Zero-Click content is content that offers valuable, standalone insights with no need to click. It’s pretty much the opposite of clickbait. Zero-Click content means less time wasted for you. It adds value without needing to click. Clicking is an enhancement to the experience, but it’s not obligatory. This is what I try to do with this newsletter. Give enough value upfront, and if you want to learn more, you can click to read on (in this case, the full article by Amanda Natividad). But you don’t need to. Brand building is increasingly about building trust. Zero-click content does that.
2. OTAs post strong results in Q3 2022
Airbnb, Expedia and Booking all delivered record quarterly revenue and EBITDA. Airbnb had the largest revenue growth (32%) of all three, despite having the lowest marketing spend as a percentage of revenue. Airbnb’s marketing/revenue ratio is 13%, vs Expedia’s 42% and Booking’s 30%.
3. Airbnb’s focus on brand marketing seems to be working
Q3 was a good month for Airbnb:
Revenue of $2.9 billion was its highest quarter ever
Net income of $1.2 billion was its most profitable quarter ever
Adjusted EBITDA of $1.5 billion was a record best
Free Cash Flow of $960 million was the highest Q3 ever
Airbnb has made major changes to its marketing strategy in recent years. In 2019 it began trying to depend less on search advertising and to lean more on brand-building initiatives. Airbnb attributes part of its Q3 2022 success to its pivot away from performance marketing and toward PR, events, brand marketing and product marketing. According to Brian Chesky, Airbnb is no longer thinking of performance marketing as a way to “purchase customers” but more as a way to laser in to balance supply and demand. More than 90% of the traffic to Airbnb now arrives directly, unaided by search advertising. Somewhat similar to the concept of zero-click. It's rare to see a company reduce its dependency on performance marketing. Airbnb is an interesting case study. Read + WSJ.
4. How to build winning paid membership programs
Chinese platforms have been experimenting with paid membership models for over a decade, unlike in the West, where early experimentation has been fairly basic. This article by Connie Chan, GP at Andreessen Horowitz, dives into the opportunity for paid membership programs in the West based on learnings from China’s social media giants. It lays out four frameworks for designing successful programs and explores the impact of paid memberships on the consumer experience. Membership programs are not just a new revenue stream; more importantly, they can deepen user engagement and turn average users into super users.
5. Consumer subscription software report
Bullhound published a comprehensive report on the state of consumer subscription software (CSS). It also highlights case studies from travel companies RV Life and Scott’s Cheap Flights. A few of the takeaways:
The average rate of first-year subscription renewal is ~30% with best-in-class at >60%. Exceptional CSS businesses renew 50%+ of each annual cohort and 40% of Year 2.
Most apps have first-year renewals between 17% and 40% with Productivity tools and Lifestyle tools outperforming other categories.
CAC payback of <3 months is critical to counter the high churn of initial users.
50%+ of users coming through organic channels is generally considered great.
The true impact of iOS 15 is now clear. Many CSS companies have shifted spend toward the Apple store. Apple’s in-house ads were responsible for 50% of app downloads in 2022, up from 20% in April 2021.
6. Reshaping the airline organization for the future of retail
BCG and IATA coauthored an article on the airline industry’s transition from revenue management to offer management, a new approach to retailing products and improving the customer experience. In doing so, airlines need to build new teams and capabilities, reconfigure their processes, and adapt their employees’ roles, responsibilities, and ways of working. Read + BCG.
7. Semi-controversial thoughts on the future
Many interesting ideas in George Mack’s tweet thread. Here are a few that have an impact on travel innovation:
Slowmadism > Nomadism. Moving every 2 weeks makes for an amazing Instagram page but a terrible life. Slowmadism, moving between 2-3 locations per year, will become more popular.
Migration-as-a-service. Relocating is a nightmare and a bureaucratic mess. There will be a billion-dollar company that fixes this problem. Insured Nomads, one of the startups that I shared in my November cohort of startups in Travel Investor Network addresses a slice of this trend.
Company Tourism. Until VR hits its end goal, teams will 10x their creative output by being together in person - not remotely. B2B creative retreats will only get more popular. Examples: TROOP, TeamOut, BoomPop.
The World Is Flat. The winners of remote work will be skillful people in the developing world. The losers of remote work will be unskilled people in the developed world. Think of Steve Case’s Rise of the Rest, but on a global level.
8. Spotlight on airline tech innovators
Data and digital technology are transforming the airline industry. OAG highlights how 15 airlines (such as Ryanair, Easyjet, Lufthansa, Jetblue, and Southwest) are using technology to innovate in booking, check-in, boarding, flight operations, customer service and experience. Read + OAG.
9. Travel and Hospitality: global outlook and innovation guide
Euromonitor published a travel and hospitality outlook whitepaper. Some of the items it covers:
Travel is back. Staycations are slowing down while international travel is flourishing, growing 88% in 2022.
What key technologies do travel providers consider most crucial (data and analytics is #1).
How to manage external inflationary pressures
How consumers have shifted their focus towards activities, destinations and experiences that are most in line with their personal values and beliefs
(Note: a couple of the graphs in the whitepaper are missing legends)
10. Fundraising and M&A
Capital One invested an additional $96 million in Hopper. In March 2021, it led Hopper’s Series F round of $170 million, marking the launch of Hopper Cloud. This B2B initiative generates 40% of Hopper’s revenue.
On-demand car rental app Kyte raised $60 million in Series B in pursuit of becoming the world's largest operator of electrified fleets
Globaleur closed a pre-series A round of $2.5 million. The South Korean startup uses AI to help travel providers personalize guest offers and experiences.
Travel Investor Network
Travel Investor Network (TIN) is now one month old, and some of the most active and prestigious investors (VCs, Corporates, Family Offices, Angels) have joined the platform. In the first two cohorts (October and November), I’ve highlighted a total of 28 travel tech startups from 11 countries.
→ If you are a startup looking to raise a round (from pre-seed to Series D), maybe I can help. Please start by completing this form.
→ If you are an investor interested in joining the Travel Investor Network, please complete this form.
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Thanks for your attention, and have a great weekend,
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