As the digital travel industry expands, Google and Facebook have unprecedented control over what content consumers interact with.
This control is set to increase at the detriment of both traditional and digital travel market players.
Google and Facebook represent two of the Gatekeepers to the online world at large. Rated as the 1st and 3rd most visited websites on the internet, they have a competitive advantage allowing them to tailor travel advertising to consumers and justify charging a premium.
Despite expanding their services within the travel market, Google’s revenue potential is far greater operating as a Gatekeeper than a direct competitor; the company received US$12.2bn in 2016 from travel advertising alone, compared to a total revenue of US$9.2bn from the largest online travel provider.
As consumers increasingly book travel online, the market is witnessing the rise of chatbots, user generated content and online reviews; these developments will only increase the control of the Gatekeepers.
As the dominance of Google and Facebook grow within the market, also by virtue of a decrease in competition at their hands; smaller providers will struggle to pay the advertising fees of the Gatekeepers and subsequently fall out of the market.
Disruption in the Travel Market
The travel industry is a global market place which contributed an estimated US$7.2 trillion to the global economy in 2015. The market consists of a host of traditional players, including; established hotels, airlines, and high-street travel agents. In recent years new disruptors have entered the market offering price comparison, online travel booking and alternative accommodation options.
These disruptors have appeared hand-in-hand with the rise of the digital era. Historically, when researching or booking travel, consumers would visit a travel agent and get advice from friends and family on where to travel. As the digital age has affected the way in which we go about our day to day lives, so too has it impacted the way in which we search for and book travel. A recent study by Signal found that of Australians who had travelled in the past year, 80% had planned and 72% booked their travel by using a computer, tablet or smartphone. As travel is increasingly planned and booked online, consumers are increasingly using online travel agencies (OTAs) and price comparison websites to research and book travel. This segment of the market represented 43% of the total online travel market in 2015, with the remaining 57% coming from online direct suppliers (e.g. online hotels and airlines). Currently, the global online travel market is estimated to reach US$1091billion by 2022, dominated by accelerated growth of OTAs, specifically the big four players in this market; Priceline Group, Expedia Inc., TripAdvisor and Airbnb.
The rise of the Gatekeepers
The online travel industry is increasingly falling to the mercy of a small number of “Gatekeepers” who effectively manage the way in which internet consumers interact with online travel content. These tech giants, comprising of Google, Facebook, Microsoft, Amazon and Apple, effectively manage the consumer interface with the online market. This position provides unprecedented control over what content consumers come into contact with on a day to day basis, and can influence movement of consumers between different online travel suppliers and OTAs.
Globally, the leading two Gatekeepers, Google and Facebook, hold respectively 10 and 7 minutes of user time per day, and are the 1st and 3rd most visited websites on the internet. Additionally, alongside their host of subsidiaries (Google: YouTube, GSuite. Facebook: WhatsApp, Messenger, Instagram) these two companies collectively encompass the majority of internet traffic, with Google’s own, YouTube placed as the 2nd most visited website on the internet. Facebook is the leading smartphone app, with an estimated monthly user base of over 126 million. YouTube and Facebook Messenger each attract over 100 million users per month, whereas Google Search, Google Play, Google Maps and Gmail total a combined 348 million users every month. With this magnitude of internet traffic, Google and Facebook are able to build up considerable user data profiles of consumers, and tailor content specifically around an individual. As described by Kenny Jacobs, the CMO of Ryanair:
“If a consumer is using Google email, Google calendar and Google search, they [Google] can really apply their insights in the travel category much more than anyone else. They know exactly what a consumer has been searching, they will know what a consumer has got booked. Google knows the consumer better than anyone else. That’s their unique advantage.”
Through this unique advantage, Google and Facebook can tailor their advertising more accurately to consumers, thereby theoretically creating a higher return on investment to those wanting to advertise on their websites. Likewise, with the high levels of internet traffic, the two tech giants can charge a premium to advertisers.
Revenue of Gatekeeps
Google and Facebook gain revenue from advertising and through their respective models can influence which online travel market providers consumers are exposed to. Google favours an advertising model where advertisers bid for key words and phrases that are relevant to their target market. Known as AdWords, this advertising model contributes 70% of Google’s advertising revenue, with the remainder being made up by AdSense, which allows website users to join the Google network and run Google branded ads through their own websites. Additionally, if website providers pay a premium, Google will feature their search results at the top of the results list. Google also offers Accelerated Mobile Pages (AMP), a service which improves the content of websites and advertisements when viewed on a mobile platform. However, when websites are viewed using AMP, the consumer effectively remains within the Google ecosystem, allowing Google to retain customer data. Additionally, AMP has raised concerns amongst website providers who believe that Google are “using it to shape how the mobile web works…and to ensure a steady stream of advertising revenue”.
Google, as the owner of Google Chrome, also offers ad blocking software for users of Chrome. This functionality is currently in redevelopment, with an updated version due to be released in 2018. Not all ads are blocked by this software; only those deemed by Google to be “annoying or intrusive”. Although Google claim the ad blocker will also target ads “owned and served by Google”, it is highly probably ads operated by Google will be deemed “acceptable” and pass through the ad blocker. With over 1 billion consumers using Google Chrome worldwide, this provides Google with unprecedented stewardship over which advertisements internet users are exposed to day to day.
Facebook operates on a “pay-per-click” scenario, where advertisers pay dependent on the number of times their advert is clicked on. Due to their extensive user base and acquired user data, Facebook is able to enable precision targeting directed toward those audiences most likely to purchase the product. Because of this, the company is able to charge higher pay-per-click rates than other providers. Facebook also offers Instant Articles, which transitions website articles, including their advertisements, so they can be viewed fully on the Facebook mobile app. In a similar process to Google’s AMP, the use of these articles keeps the user within the Facebook domain, allowing the tech giant to gain further consumer data.
Through these two advertising methods, Google and Facebook have considerable control over what travel content features on their websites and which consumers interact with this content.
Are Google and Facebook stepping into travel?
Aside from its position as a Gatekeeper, in recent years there has been speculation that Google has been slowly stepping into the travel market with an aim to compete against the OTAs, most notably Priceline Group, Expedia Inc., TripAdvisor and Airbnb. Since the arrival of Google Flights in 2011, Google has slowly been enhancing its offerings within the travel market, increasing the capabilities for consumers to book and manage travel plans directly. After the redesign of Google Flights in 2015, which provided the functionality to book hotel alongside flights, the tech giant released other travel offerings, including; “Book Through Google” which offers the ability to book hotel and associated travel directly on the Google home page and “Google Trips” an app which helps plan and manage travel both before and during the trip.
Figure 1. Google Flights home page
For the majority of searches undertaken through Google Flights, the consumer merely searches for their preferred hotel / flight and is then redirected to online travel suppliers or OTAs to complete the booking. This effectively gives Google a similar functionality to price comparison sites such as Trivago or Kayak. However, in a few instances Google has formed partnerships with online travel suppliers which allow the consumer to “book direct” on the Google homepage. Although this functionality has been created through a mutual agreement between Google and the travel company, it effectively cuts out the purpose of OTAs and price comparison sites.
Is this move a sign that Google is looking to compete head-on with the OTAs in the travel market? At Venture Insights, we believe this is not the case. Google, as a search engine, gains revenue through advertising, with this number estimated to have reached globally over US$12.2 billion in 2016 for advertising from the travel industry. By comparison, in 2015 the three largest OTAs respectively acquired a total revenue of US$9.2 billion (The Priceline Group), US$6.7bn (Expedia) and US$1.5bn (TripAdvisor). Therefore, Google’s revenue from travel advertising alone is considerably higher than the total revenue of the “competing” OTAs. Likewise, the four big OTAs represented 64% of Google’s total travel advertising revenue in 2016. Hence, if Google did look to directly compete with OTAs, there is a potential the company would put themselves at risk of losing advertising revenue from these travel providers. Which could in turn be revenue they would be unlikely to make up as a direct travel business. However, as a direct competitor they are likely to be able to gain additional and more sophisticated customer data, and could sell this information to the OTAs, thereby recouping revenue losses from advertising.
Figure 2. Google’s global travel advertising revenue, share by online travel agencies (2016)
SOURCE: Skift, tnooz
Google Trips itself is a standalone app that aims to provide assistance for consumers before and during travel. It utilises user data to provide recommendations and advice for travel, but does not provide the functionality to search for and book travel. Therefore, this offering does not place Google as a direct competitor to OTAs. Instead, the primary focus of the app is to acquire and retain increased user data in order to increase Google’s position within the advertising market. The app provides recommendations for travel itineraries, including hotel bookings, transport, events, attractions, restaurants and local offers. The app functions as an enhancer to existing online travel services. Google gains revenue from travel companies who feature their product / service on the app. As more consumers use Google Trips, Google as a company is able to gain increased revenue from this offering, retain greater customer data and enhance their control of the travel market.
Figure 3. Google Trips App
However, as Google increases its offerings in travel, it likewise increases the “control” it has over the online travel market. Through their app, flights and hotel booking systems, as well as the regular Google website, Gmail and Google Calendar, Google can acquire a magnitude of consumer data and can tailor search results based on consumer preferences. Likewise, they can use algorithmic ordering to position travel providers within their searches, based on advertising revenue paid from these providers and the type of advertisements used, alongside user preferences, in order to position the correct advertisement to the right consumer. Google offers a wide arrange of different advertising options so depending on the different types and revenue models of these, the respective advertisements will appear in different locations and across different platforms. This unique position allows Google to effectively control navigation to travel market content on the web without actually being a key player.
Additionally, with Google’s high viewer rates and host of user data, they have a heightened ability to position advertisements in front of those most likely to respond to them. This allows Google to charge a higher Cost Per Thousand (CPM) for adverts placed on its platforms. From a revenue perspective, there does not seem to be an incentive for Google to move into the travel market as a direct competitor, given the company receives considerably more revenue through advertising than through booking and managing travel. Instead, the developments Google have made within the travel market appear to be primarily fuelled by increasing user data and managing advertising across a wider array of platforms to gain further advantage and therefore revenue from the travel sector as well as the traveller. Should they decide to directly compete with OTAs, it will be driven by increasing consumer data, rather than an overall desire to compete within the market.
In 2015 Facebook appointed their first ever Head of Travel and Education Strategy, with a key focus on assisting hotels, airlines, OTAs and other travel companies to interact with their 2 billion active users. As a company, Facebook have not been identified as moving into the travel market as a direct competitor. Instead, they have been working with established travel companies in order to promote advertising across the multiple Facebook platforms. Through the vast expanse of their services, and the increasing transition of consumers to online travel booking, Facebook’s control of the market as a Gatekeeper has been increasing.
In a similar format to Google Trips, Facebook released “City Guides” in March 2017. This service, while only available in the mobile app version of Facebook at present, provides recommendations of locations to travel to, based on the locations a user’s Facebook friends have visited and recommended. The service uses data from Facebook users’ “check-ins” and posts, and provides recommendations on where to travel, including events, restaurants, hotels and experiences at the destination. However, in addition to similar content shown on Google Trips, City Maps also offers the functionality to “Book Now” for selected travel providers, for example the Aria Resort & Casino in Las Vegas and the Eliot Hotel in Boston, this function allows the user to book directly with the providers without leaving the Facebook App. As with Google, this move to book directly through Facebook places the tech giant as a direct competitor to OTAs, cutting out the need to use OTAs for bookings. However, Facebook is only offering this service for a select number of suppliers who have a predetermined agreement with the Gatekeeper. Therefore, although posing some competition to OTAs, this does not cut them out of the market. However, should this offering grow in the future, alongside the reliance of consumers to use social networking as a means to book travel, it is possible Facebook could start to compete against the dominant OTAs. Additionally, by finalising bookings within the Facebook app, this allows Facebook to retain sufficiently more consumer data, enhancing their knowledge of the consumer and the market.
Figure 4. City Guides on the Facebook Mobile App
Will the Gatekeepers control continue?
As the travel market continues to shift online, the role of the Gatekeepers is becoming more apparent. However, the online market continues to evolve and grow. Venture Insights discusses what impact changes to the online travel market will have to the dominance of the Gatekeepers, focusing on four key areas of disruption: Social Media, Artificial Intelligence, Payment Systems, and Online Ratings and Reviews.
Social Media in Travel
Before the internet, consumers looking to book travel would source recommendations from friends and family. As use of the internet has grown, social media is now becoming a platform where travellers get advice on when, where and how to travel. When a person travels on holiday, pictures and videos from the trip, whether positive or negative, are usually posted online via social media. Likewise, if a consumer has an extremely bad experience, evidence and commentary surrounding this is often also publicised on social media.
This User Generated Content (UGC) is becoming more influential for travel recommendations globally assisting travellers determine destinations, mode of travel and timing when consumers are booking travel. A recent study by Mavrck found UGC, not just travel specific, generated 6.9 times more engagement than brand-generated content on Facebook. Consumers tend to have a higher trust and acceptance of recommendations from their connections online than from advertising pop-ups of unknown or branded suppliers.
At present, however this consumer trend is more passive than active, with consumers unintentionally being exposed to recommendations through social media posts, rather than actively asking for travel guidance. However, Facebook is developing its platform to make UGC an active source of travel research. This is predominantly via their City Guides service, which is entirely built on Facebook user recommendations. Likewise, Facebook has added a recommendations function within their home page. When a user types a post that asks a recommendation, Facebook will automatically display the post in a recommendation format (see Figure 5) to get the attention of other users.
Figure 5. Recommendations request on Facebook
With recommendations through social media increasing, travel companies are progressively trying to improve their social media presence to attract and retain customers in a more personal setting. This includes the use of messaging services such as Facebook Messenger and WhatsApp, platforms operated by Facebook. Travel companies, such as Qatar Airways, Emirates, Cathay Pacific and Turkish Airlines, are among the highest companies globally to repost UGC content on Instagram, with 60%, 20%, 33% and 26% respectively of their Instagram content originating from users.
This shift towards social media advertising and UGC further expands the control and influence of the Gatekeepers. Facebook, who dominates the social media market and has ultimate control over content posted on their multiple platforms, has the ability to manage the travel content posted and reposted across social media, including within City Guides. This allows the Gatekeeper to control and influence the content on their social media sites, and subsequently which travel providers gain better marketing and advertising opportunities. As online social recommendations and UGC become more dominant, the control of Gatekeepers, specifically Facebook, is only set to increase.
Artificial Intelligence Virtual Assistants and Chatbots
Artificial intelligence (AI) is being used within the travel market to provide advice and assistance when booking travel. AI enabled virtual assistants are increasingly popping up online, and when integrated into a messaging service they are known as chatbots. They are emerging as the new user interface for planning and booking travel. A virtual assistant or Chatbot uses consumer data to understand and tailor recommendations to the customer, including location, previous chat history, emails and personal preferences. In the last few years a number of different types of chatbots have entered the market.
Website Based Customer Service Virtual Assistants
These chatbots sit within company travel websites and use pre-programmed interactions to mimic human conversations. They usually appear as a pop-up at the bottom of websites, allowing the consumer to easily communicate with the host website. These bots are the most primitive of all chatbots and tend to be limited in their functionality; only able to guide a user through the company website and answer FAQs. Examples include: Ask Julie, a virtual assistant for Amtrak, and Ask Ana, a virtual assistant for Copa Airlines.
Figure 6. Virtual Assistants from Amtrak (top) and Copa Airlines (bottom)
SOURCE: Amtrak, Copa Airlines
OTAs and direct travel providers are developing chatbots to interact more effectively with and manage the queries of new and existing customers. These chatbots sit within social messaging services, allowing the consumer to merely “text” a request to the chatbot to receive an answer. These bots also allow the user to search for and book travel in one seamless process within the messaging app. This ease of use is causing growth of these chatbots within the travel market. Facebook’s Messenger and WhatsApp products, which both have a global monthly user base of 1,200m, are the primary messaging services being used at present to host chatbots. WeChat, a Chinese messaging service, not affiliated to a Gatekeeper, has a monthly user base of 938 and is also used for Chatbots within the Chinese market. For the Chatbots, the messaging services purely host the bot, but in doing so, can control which OTAs and direct travel providers use their services, whilst monitoring what content is shared, the way content is shared, and having and withholding access to private messages and personal data, which they can utilise to promote their position in the market. Put simply, the messaging services are extracting maximum data at the lowest price to enable them to sell the maximum amount of data at the highest price. The data acquired through this method similarly is of a higher quality than that gained through a website alone. Use of the messaging service provides Facebook with data that has a persistent user ID, contextualisation, personalisation, whilst allowing the social media giant, and those using the messaging service, to build up a relationship with the customer.
As of 2017, this type of chatbot is the most dominant in the market and is anticipated to increase, which will once again provide Facebook with continued and growing control over the travel content that consumers are exposed to.
Figure 7. Chatbots from Expedia (top) and SkyScanner (bottom)
SOURCE: Expedia, SkyScanner
Stand Alone Chatbots
New chatbot products have also entered the market from non-established travel market players, one key example being Hello Hipmunk. These chatbots similarly sit within messaging services, thus providing Facebook with heightened control of content and data within the app, including what travel content is consumed. Compared to the OTA chatbots, these new providers tend to offer increased functionality, as the chatbot itself is their primary business offering. For example, Hipmunk offers two features; an email service and a calendar service, as well as the messaging interaction. The calendar operates alongside Google Calendar and the email with Gmail, subsequently providing Google further access the user’s travel plans and content. As with the OTA chatbots, the dominance of these within the market is likely to increase, as consumers seek out more user-friendly methods of researching and booking travel. As these bots are currently highly dependent on both Google and Facebook, their rise will coincide with increased control of these two Gatekeepers. Some other examples of standalone chatbots are: Claire, created by 30SecondsToFly, Carla, a personalised travel assistant from Carlson Wagonlit.
Figure 8. Chatbots from Hipmunk (left), Carlson Wagonlit Travel (middle) and 30SecondsToFly (right)
Despite technological advances, some consumers, specifically those in older demographics, are still reluctant to rely on artificial intelligence to make travel bookings. Therefore, a number of companies are implementing chatbots which are combined with a human team. Due to the nature of these chatbots, they tend to operate in standalone platforms (not controlled by the Gatekeepers) and have more of a niche / premium market. Therefore, Google and Facebook would not “control” content within these bots. Examples include Pana, which advertises itself as a personalised travel concierge available for assistance before, during and after travel.
Figure 9. Examples of Pana Assistant Chatbot conversations
A further development in the control of Gatekeepers is that of payments. Currently, the majority of online travel payments are completed via an online system which sits within an OTA or direct travel providers website. However, Apple Pay and Android Pay are increasingly becoming an option for consumers when they pay for purchases online. Through these payment systems, Apple and Android retain all consumer data surrounding the payment, without sharing any content with the host website. Currently Google and Facebook do not have online payment systems, but they are both undergoing developments in this area, with Google having launched Google Wallet in both the UK and US, and Facebook developing Facebook Messenger Pay. Currently payments within WhatsApp and Facebook Messenger are limited, with consumers being redirected to another app or website to process payments. Messaging apps are considered the next frontier for digital commerce, with in-app payment offerings anticipated to grow rapidly. Once fully released, these payment methods from both Google and Facebook will likely dominant the market, providing more control and increased data exposure for both the Gatekeepers.
Online Ratings and Reviews
A dominant area of the travel market is online ratings and reviews. TripAdvisor built its business around this area, branching out into bookings as the company expanded. Through TripAdvisor, customers can freely publicise their thoughts of a travel experience, potentially undermining the brand in the process. This has created a significant impact to the marketing initiatives of travel brands, who now have to ensure consistency of product through both their internal marketing and consumer generated opinions. Both Facebook and Google are moving into this space and opening up the scene for even more disruption to traditional marketing. As discussed earlier, through UGC and City Guides as well as the ability to ask for “recommendations” on Facebook, social influence is leading the way in consumer travel choices, paved by the Gatekeeper. Likewise, Google also has a space within this market. Before booking travel, consumers are “googling” locations and viewing recommendations from Google Reviews (Figure 10).
These processes once again provide both Google and Facebook with unprecedented insight into the travel market. As consumers increasingly use UGC and online reviews for travel advice, the control of both Facebook and Google will increase.
Figure 10. Google search results for a Sydney Hotel
The Future of the Online Travel Market
The travel market is currently highly controlled by the digital Gatekeepers, and is only set to grow as the role of the internet and the dominance of Google and Facebook in the lives of travellers grows. As this occurs the importance of OTAs and comparison sites is likely to decrease, as consumers search for and compare travel options solely through the Gatekeepers. As a consequence, competition within the online travel market may drop, as smaller providers will be priced out of the market by bigger players who have larger pockets to invest in premium advertising positions on Google and Facebook. Therefore, despite not competing directly within the market, both Google and Facebook have a considerable, and growing ability to dramatically shape the online travel market into the future.