The metasearch model, part 4: Startup space


Metasearch dates back
to 1999, when both SideStep and FareChase launched as search engines that
aggregated prices from other online sites.

The following years saw many additional entrants into the metasearch arena –
some created with that specific purpose, such as Skyscanner (2001), Kayak (2004) and Wego and Trivago (both
2005), and others that have added price comparison to their existing offerings,
most notably TripAdvisor and Google. (Yahoo purchased FareChase in 2004 and then
shuttered it five years later, and Kayak acquired SideStep in 2007.)

In a November 2017 report,
Phocuswright found nearly half (43%) of travelers in the United States use
metasearch sites to shop for flights and hotels. That’s up from 28% in 2010.

In recent years, with the rise of mobile, metasearch sites have been shifting
from strictly providing price comparison and referrals to getting into the
business of booking as well.

Newer entrants have also entered the field in the complex arena of
ground transportation, including GoEuro and Rome2rio, and for vacation rentals,
such as HometoGo.

But compared to other aspects of travel, such as tours and activities, metasearch
has not seen as much activity from startups.

For our final piece in this series, we explore the question of why the presence of metasearch startups is low, with
insights from a venture capitalist as well as two of the newer metasearch
entrants to hear about the challenges they have faced as they build their
businesses.

A
funder’s frame of reference

Christian Saller has a unique perspective when it comes to the topic
of travel startups and metasearch.

He was the co-founder and CEO of German flight search engine
Swoodoo and then served as Kayak’s managing director for Europe after that
larger metasearch company bought Swoodoo in 2010.

Then in 2013, Saller left Kayak to become general partner at
Holtzbrinck Ventures, an independent venture fund that primarily invests in
seed and early stage rounds of European companies. Saller manages the fund’s investments
in Dreamlines, Cabify, Tourlane and others.

I would have a very difficult time if I would present to my colleagues here that I want to invest in a new metasearch site.

Christian Saller – Holtzbrinck Ventures

And when it comes to the question of metasearch startups, he’s
rather pessimistic.

“I would have a very difficult time if I would present to my
colleagues here that I want to invest in a new metasearch site,” Saller says.

Unlike when he started Swoodoo, Saller says that nowadays
the technical aspect of building a metasearch site is much less complex – easier integrations of multiple suppliers thanks to APIs and overall improvements
in technology. That’s the good news.

But, on the flip side, the barriers to entry from a
marketing perspective are higher than ever. 

“There is no efficient marketing channel you can use on a
small scale to build a new metasearch site,” Saller says.

“Search engine marketing on Google is super competitive, and
no one is able to do it really profitably. SEO is pretty much dead, because – at
least in the travel space – Google doesn’t show any organic results any more.
They show like 10 results – they show ads, they show their own Google Flights
or Google Hotel Finder. And then Facebook never really works as a marketing channel
for anyone in that space, and TV is super competitive as well.

“To get any share of voice you would need a huge marketing
budget, and I don’t think any startups would get the funding to do this.”

Saller says the Google effect is immense, since it not
only controls some of the primary marketing channels, but it’s also pushing
aggressively into travel search itself.

“From a funding perspective, no venture capitalist wants to
compete with Google,” he says.

While he describes the metasearch space as “very crowded,”
Saller says one path to success might come from a startup that is doing something
particularly innovative and superior on the product side.

And that’s exactly what the founders of AlltheRooms and Bellhop
are trying to do.

AlltheRooms

AlltheRooms co-founder and CEO Joseph DiTomaso has one word
to describe the feeling he had as it prepared to launch the accommodations
metasearch site in 2014: fear.

“You are constantly concerned about competitors entering the
space,” he says.

“It was a bold challenge to step into a market where there
were entrenched players – multimillion-dollar players like Booking.com, Expedia,
Travelocity, the hotel chains, Airbnb, HomeAway, etc.”

But what DiTomaso and
his co-founder were building was different: a search engine to aggregate every
accommodation from around the world, not just hotels but also vacation rentals,
hostels, glamping spots and everything in between.

DiTomaso says his premise was to create “the Google of accommodation
search.”

Now four years later, AlltheRooms lists more than 14 million
rooms around the globe from partners including those “entrenched players” – Booking.com,
Expedia, HomeAway, Airbnb, Hostelworld, Skyscanner – and 400 others. The
platform has also secured several million dollars in funding.

“If you are going to enter into the metasearch space, it
does require a semblance of a perfect storm,” says DiTomaso.

If you are going to enter into the metasearch space, it does require a semblance of a perfect storm

Joseph DiTomaso – AlltheRooms

“You do need to be prepared to think about your approach to
marketing, you need to think about your customers and your clients and then the
right tech team and the right tech stack. Those are the ideas that end up
resulting in a successful company. I’m not sure most are thinking like that.
It’s hard, because there’s so much you could be thinking about, like cash flow,
revenue, investors.”

AlltheRooms’ staff has grown from two to a team of 30
employees, working on the technical challenge of aggregating millions of
listings with accurate descriptions, availability and pricing and on creating an
effective user interface and experience that drives loyalty.

DiTomaso believes it’s that focus on customer service that
will help AlltheRooms succeed, even as Google itself is marching down a path of
becoming “the Google of accommodation search.”

“They are trying. Technically they still aren’t; you can go
do a search on Google and see if you’ll see Airbnb. You won’t,” DiTomaso says.

“The interesting thing is Google doesn’t always get it
right. They will go down the funnel of optimizing the product for what shows
the highest revenue, not necessarily what’s good for you the consumer. And then
the other item is going to be can they drive traffic to those pages. They’ll be
able to do all of that to the degree they want to, but it’s not going to be a
core focus.”

Bellhop

Bellhop co-founder and CEO Payam Safa is in the early stages
of building his company, a ride-share comparison tool that launched in December
2017.

Meaning many of the challenges of creating a startup are fresh in
his mind.

“You need to be ahead of the market to be a leader in
anything. When you are kind of one of the first ones, an early mover, you
are almost seeing something the investors don’t see yet,” Safa says.

“It’s really hard raising money in that environment. But
if you are not a little too early, you’ll end up being behind. It’s a weird chicken-egg
kind of problem.”

And it’s not his only “chicken-egg” problem. He also faces
that dynamic as he tries to build the product.

“If you are a startup and you’re trying to be an aggregator,
you have to prove to your supply you can actually generate business for them in
a cost-efficient way and be a strong marketing channel for them,” Safa says.

“If it’s day one and you are literally nothing, how do you
go to a supplier and say, ‘Can we integrate with you and send you traffic?’ There
is zero incentive for them to work with you in that mode.”

Safa says it has used a variety of channels to drive app
downloads and reinforce brand awareness.

“Bellhop is both a new product and
new category, so our campaigns have to educate – most users have yet to start
comparing prices in this sector and are unaware of major price discrepancies –
as well as capture interest and drive the download action,” Safa says.

To raise funds to launch, Bellhop used the equity
crowdfunding platform Republic, and Safa says now the company is seeking a
Series A round.

“Going after those that understand your space and are
mission-driven to make an impact in whatever industry or vertical you are
operating in – for us mobility, transportation, smart cities … having
conversations with those players has been much more seamless and easy and
effective,” Safa says.

REGISTER NOW! Benchmark Capital, Altimeter Capital and others speak at The Phocuswright Conference 2018

Click here for details, tickets and the program for this year’s
event in Los Angeles, November 13-15.

Currently the app shows users availability and prices from
eight companies, including Uber, Lyft, Curb and Taxify, with more being added
each month.

Safa has plans to expand the platform to include other
forms of shared transportation, starting with bikes and electric scooters in
the next few weeks.

“There are 500 million ride-share users globally. That number
is going up to 600 million in the next 12 months or so. In terms of ride-share
players globally, this number continues to increase massively year-over-year. In
the United States alone, there are over 50 now – you have the two incumbents, and others are catching up and growing,” he says.

“When you look at bike and scooter share, just in the
U.S., 20 companies have come to market in the last six to 12 months. As an
aggregator it doesn’t matter what those modes are; it just matters that modes
exist.

We are agnostic, and the more of these that come to market and grow, the
better for us. Definitely it’s a global opportunity. It’s just a matter of how
much investor money we get to fuel that expansion rapidly.” 

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