A model for Airline mobile, WiFi, digital entertainment, and “think outside the flight” continues to unfold

Looking at airline WiFi and passenger experience, it’s great to see technology from Gogo and other providers continue to improve and see airlines introduce variants along the lines of a model we introduced in late 2009 after thinking how a convergence of a handful of dynamic industries might occur: mobile technology, IFE, airline WiFi, and respective digital video/movie, book, game and music markets.

The key elements were:

1)       Use mobile technology and digital entertainment to drive ancillary revenue and disrupt the traditional cost-center IFE value chain

2)       Position passenger markets as a customer acquisition channel for strong consumer digital entertainment brands fighting a battle for “living room share” rather than try to sell content directly

3)       Deliver a more compelling online experience focusing on site experiences travelers engage in everyday life rather than a “walled garden” of tired brands like Skymall and HSN dominating portals such as “Skytown Center”

4)       “Think outside the flight” – own the itinerary to drive mobile engagement, capitalize more on explosive growth in digital media, and deliver relevant merchandising throughout the traveler’s “60-hour cycle”, not just on the plane

Since then, I’ve enjoyed seeing many airlines and connectivity partners download or view the model and talked with some directly, and it’s great to see these elements gradually unfold in various ways, albeit in fits and starts, with even better things to come.

For #1, this is clear now, but before we’d heard of the iPad and the mainstreaming of Netflix, Amazon Video, etc, it was a bit tougher to envision.

Now we’re seeing various models, either directly via new technology from traditional seat-back vendors, via Gogo (or comparable connectivity vendors), or via iPad rentals. It does remain to be seen whether airlines and Gogo can execute on promised technology improvements (Gogo’s announced GTO service), and if the model of selling content directly will drive WiFi adoption or result in significant ancillary revenue, but passengers clearly are enjoying greater options.


However, #2 could still offer more upside, of which a great example has now emerged in Southwest’s new service with the Dish Network, which provides free live TV in exchange for the passenger’s viewing of a short video for Dish Network and likely earns Southwest referral revenue greater than trying to sell movies.

Customer acquisition is critical in the battle among providers like Amazon, Netflix, Apple, Microsoft, Comcast, and movie studios themselves (via their Ultraviolet services), and as I suggested originally, the opportunity to feed customers to these firms fighting for “living room share” is tremendous.

Virgin Australia mobile IFE app

For #3, as we encouraged in “Part II: Can Airlines Power Ancillary Revenue with Digital Media and Wifi?“, the site experiences of Gogo and others are better, emphasizing brands consumers engage with on an everyday basis. Remember, Aircell’s (Gogo) and Row44’s original core competencies were telecommunications technology, and the consumer experience competency will continue to grow.

For #4, Virgin Australia’s new approach of “thinking outside the flight” to market its mobile flight app through the “60 hour cycle” using its knowledge of the customer’s itinerary is a great way not only to engage passengers, but also capture WiFi and digital entertainment revenue before passengers download it from own digital media services, a potential missed opportunity I’ve written about before…

Delta’s Amazon partnership and gate experience with OTG at various airports are other great examples of engaging the customer in the pre-flight and airport experience.

And as the annual APEX conference unfolds, during which Virgin America and Gogo plan to introduce their new service together, it will be interesting to see how airlines and their partners continue to develop new and creative variations on this model to deliver a better passenger experience and drive more ancillary revenue.


Gogo’s IPO – questions investors should consider

Gogo is pricing its IPO today (Update: it launches at $17 per share) after shelving its original plans.

Since I introduced new potential passenger experience and IFEC economic models in late 2009 that could capitalize on the coming growth in digital media and mobile technology, leverage the “60-hour cycle” of passenger engagement opportunity, and encourage airlines to “think outside the flight”, about 70 airlines and others with vested IFEC interests (Gogo, Panasonic, Amazon, etc) have talked with us or viewed them to inform their own strategies.

What can digital entertainment mean for airlines Jan 2010 cover

Progress has been good, and credit airlines and Gogo for improving a previously customer-challenged experience (when’s the last time you saw SkyMall online?) The “Think outside the flight” ecosystem has improved as well, with iPads at airport gates, food-ordering capability, etc.

But financial investors should consider a few key things:

1) Gogo’s penetration strategy in cutting deals with most domestic airlines has worked brilliantly, but the model is still based on paid WiFi, countering larger consumer trends toward free WiFi.

2) Employers may still be showing willingness to pay, but what is the elasticity of that pricing and demand?

3) How much of Gogo’s revenue growth is result of increased passenger demand per flight, or just additional plane installs?

4) Gogo’s product does not provide capacity for what passengers really want – streaming video and uninterrupted internet service

5) This is caused by constraints inherent in Gogo’s ATG model, which airlines adopted primarily because installation took only one night and cost half of Row 44’s satellite install cost (even though Gogo financed much of it).

6) Raising capital to upgrade to larger-bandwidth satellite connectivity and more global coverage is a great product idea…Gogo economic model challenges 2

7) However, investors should consider when the continuous capital investment cycle will ever allow the product to command pricing necessary to deliver a healthy marginal profit, or whether it will result in a marginal loss (see graph to right)

8) Is IPO capital actually going to fund capital investment for an unproven long-term profitability model or return capital to earlier equity investors and management?

9) In conjunction, since Gogo also just took out a $11o+ Million line of credit, it will be prudent to watch its capital structure over time

10) Will product suppliers – namely entertainment industry content owners – will provide attractive enough margins given the battles they’re engaging in with Netflix, Amazon, etc? My original model suggested customer acquisition relationships with the new digital media firms as they compete for share, so going it alone in dealing with Hollywood may not work

11) Will (or When will) the consolidated airlines, if Gogo’s profitability becomes attractive enough, decide to take a larger piece for themselves?

So it’s certainly interesting, and Gogo and its partner airlines have done a great job trying to deliver a better passenger experience, but the investor viewpoint may require a different lens.

Concur’s mobile voice search – another great step in business travel experience and productivity?

In somewhat understated fashion yesterday, Concur announced its new voice-driven mobile travel search.

Concur Hotel Booking input

Concur Hotel Booking input

This is a great step for a number of reasons. As mobile bookings grow, particularly for new hotel bookings and in-trip changes, any advancement that enables business travelers to cut friction out of managing their trips is fantastic.

And while this is cool technology, it also helps deliver what business travelers and their companies really need as hard travel costs and fees continue to rise with airline consolidation and a strong hotel industry – economic productivity.

This has been coming for a while. As Google announced its ITA acquisition in 2010, I showed via the linked presentation how a convergence of forces could enable Android voice search integration with ITA’s QPX airfare technology and why travel is a great candidate for voice to potentially help shift the consumer travel landscape.

And as I’ve worked with corporate travel clients the past two years, it’s even more applicable to business travelers.

Now, congratulations to Concur for making it happen, likely using its late-2012 investment in Evature, which seems to have pivoted to voice search after launching as natural language text search, and tapping the Android voice API.

Why is the timing right now?

Simply, voice engagement continues to go mainstream. Android searches were already 25% voice around 2010-2011. Siri, of course, received a lot of fanfare.

But it’s not just mobile. Microsoft continues to push its vision in the striking example of its new Xbox One, architected to markedly drive voice engagement in the living room with its hardware install base and 45-50 Million Xbox Live subscribers.

For travel specifically, as I wrote earlier:

 “Travel is still a commerce category that needs innovation…the beauty of Expedia and others is that they gave consumers the ability to cut inefficient offline search and intermediary steps and costs and go directly to the transaction.

So could natural language voice help cut inefficient online steps and costs? Current online booking UI’s…were great advancements, but still create friction. GDS’s create friction and cost.”

So back to the subject of business traveler productivity – how can we offset those costs?

  • Voice technology isn’t just about convenience…
  • Avoiding typing and drop-down menus can easily save a minute or three, and those minutes add up…
  • Imagine  saving just  ½ hour out of the entire booking and itinerary management process…
  • For a company whose employees take 100,000 trips, value that time at even just @ $100/hr…
  • that’s a $5 Million economic productivity gain…annually
  • Even as a soft cost, it’s a nice bite out of those increasing airfares, ADRs, and lovely ancillary fees

So what’s next?

TMC’s can continue to improve their own product, and for open booking via Concur, the opportunity for suppliers to capture business travelers by reducing friction in their own sites and apps should be compelling.

As for voice search, we’ll see how adoption takes, so keep on talking…

The Olympics and the Connected Trip Experience

Note: Originally published for IFExpress, I have included the IFExpress introduction with full article text and link to IFExpress below.

Image credit: IFExpress

“Now that the Olympic feeding frenzy is over, we thought we would offer one last Olympic-related opinion editorial tidbit for our readers. Aviation writer/consultant, Jonathan Alford (See Below) offers his spin on an Olympic experience in relation to IFEC, a concept he calls “Total Trip Experience and Connectivity”

As London continues to bask in its well-deserved post-Olympics glow (though Prince Harry clearly basked in a different glow), it’s good to recognize what most fans can’t see – the effort to stage a successful Games by working across a vastly complex ecosystem of hundreds of Olympic operating functions, security agencies, National Organizing Committees, media, and more – all of which compete as ruthlessly for resources as the athletes compete.

In 2002, I had the privilege of working for the Salt Lake Winter Olympic Committee on our executive program management and operations team, where I realized the blood of hospitality and travel also courses through a Games – through thousands of volunteers, staffers, and vendors – as an Olympics is geared to three things:

  • delivering a great experience for athletes and guests
  • providing inspiration to the world
  • making money, of course

The air travel ecosystem is complex as well, and as the role of IFEC and ancillary revenue continues to grow, it occurred to me that an Olympic Committee’s model of integrating multiple components of the transportation and destination experience could serve as a framework for airlines’ emerging desire to extend their customer relationships through
the total trip – via IFEC and mobile technology, personalized content and services, and improved airport experiences throughout the “60-hour cycle” I’ve referred to before.

Olympic Committees work closely with airlines, gateway and host city airports, hotels, and host cities not only to ensure appropriate security, but also facilitate a seamless immersion into the destination through the inbound flight, airport experience, ground transport, and relevant destination content.

The role of transport for an Olympics, like for any travel experience, is a challenge.

As soon as I arrived in Salt Lake, I was asked to take over Olympic Media Transportation – rebuilding a severely flawed system to serve 13,000 broadcasters, journalists, and photographers.

Never mind I had zero transportation experience, but I did recognize transportation would rarely be viewed by media as enhancing their jobs, but could easily detract from them by putting competition arrival times, deadlines, and their work at risk if executed poorly.

And since media influences the perception of the Olympic brand and host city in the eyes of the world, we needed to ensure media could do their jobs without fail. In fact, my goal was to avoid having transportation in the news at all – cynical, but realistic, since it’s typically mentioned only when things go wrong.

Sound familiar?

Travelers think similarly – the flight may not enhance a trip, but can easily detract from it.

Continue reading →

What Delta’s Amazon deal signifies for ancillary merchandising and digital entertainment

Note: This article appeared as the inaugural article for IFExpress.com’s “Speaker’s Corner”

Though I have worked in travel technology, strategy, and finance for years, I’m also a consumer and have enjoyed commenting, as you can see from other articles in this site, hoping to identify ways in which airlines, WiFi providers, and other partners can create a better – and more profitable – passenger experience.

In late 2009, mobile technology, fierce competition in digital media and entertainment markets, and airline WiFi installation trends seemed to present opportunity as they converged.

At the time, I encouraged the air industry to take an approach with a few basic elements:

1)       Use mobile technology and digital entertainment to drive ancillary revenue in a departure from the traditional IFE value chain

2)       Position passenger markets as a customer acquisition channel for strong consumer digital entertainment brands and to deliver a more compelling experience

3)       “Think outside the flight” with mobile and location merchandising to expand revenue opportunity

Now Delta, Amazon, and Gogo are following this model and proving that the 60-70 million passengers domestic airlines carry each month are recognized as a potentially large customer acquisition battleground in the cutthroat digital media and entertainment industry fight for “living room share.”

So for the travel industry, this is not just IFEC anymore – and thinking in the context of the broader Digital Media industry could be constructive.

What’s so special?

Continue reading →

Apple, Siri, Google/ITA, and the growing potential of mobile voice recognition to alter the travel search landscape

With the passing of Steve Jobs, the impact he and Apple have had on our lives and technology is well-documented, but what’s taken a temporary back seat in Apple news, albeit for good reason, is the new iPhone 4S and its clear focus on Siri’s voice recognition platform.

How could this impact travel? About 18 months ago in Spring, 2010, when Google first announced the ITA acquisition, followed by the controversy of Fairsearch and DOJ proceedings, I identified a convergence of forces that could enable Android voice search integration with ITA’s QPX airfare technology (click link to see original analysis) and shift the travel landscape further (see graphic at right).

Potential voice search partner paths (from October, 2010 Google-ITA deck)

I also noted the potential of Apple’s integration with Siri to enter the market, though it would still need the fare query platform, and now that Siri has launched and been somewhat of a revelation (usage has reportedly been 10x what even Apple anticipated), could we now be on the verge of another serious potential player in travel search and demand fulfillment?

This time last year, voice search was projected to be 15% of all searches by 2015, but that did not seem to account for what Apple could do. Android searches were already 25% voice, so along with Microsoft’s voice integration through Windows Phone, Xbox Live, Kinect, and coming Windows 8 platforms, natural language voice engagement is finally going mainstream, and that 15% may end up being quite an underestimate.

Siri tells you she doesn’t do flights – yet

We’re not there yet, but imagine when she does respond to a basic voice query such as, “I want to fly from Seattle to Boston from December 21st to December 28th on American Airlines.”

Continue reading →

Amazon launches bold digital media expansion. Airlines (and hotels) – don’t wait until travelers get on the plane…

Amazon has dominated the eBook market with its Kindle, is vertically integrating into eBook publishing, and as anticipated, today it launched its new Kindle lineup, clearly targeted to take on Apple and Google’s Android marketplace in the broader digital media industry.

Amazon’s new Kindle lineup

Consumers will have 4 dominant hardware options with Apple, Android devices, Amazon, and Microsoft – if it can get its tablet and Windows Phone act together (don’t underestimate its Nokia deal prematurely) to leverage a 35-Million-strong Xbox Live base.

All zeroed in on using that hardware penetration to sell digital media content and services, so virtually any traveler carrying a device will have unprecedented access to huge libraries of content only 1-touch away.

So beating the drum again (see articles below) – while the in-flight product is clearly improving, airlines, Gogo, and Row 44 (as well as international services) need to think outside the flight and use their primary advantage – the itinerary – the holy grail of any merchandiser.

Continue reading →

Could the new Android market and cutthroat digital media industry ground the new Gogo before take-off, and what can airlines do?

I noted previously that the transformation of Gogo’s and airlines’ approach to in-flight WiFi and entertainment is a positive step for consumer experience and, depending on how well they execute, potentially economically beneficial. Gogo has done an admirable job aggregating airline passengers to create a potentially effective channel and opportunity, and Row44 seems to have an updated focus on consumer content experience.

However, it seems their plans – publicized as of this week’s APEX conference in Seattle anyway – may risk not getting off the ground as much as anticipated if they and airlines do not continue to take steps to compete in a fast-moving digital media industry.

That’s right – the broader Digital Media Industry.

This is not just In-Flight Entertainment and Connectivity (IFEC) anymore. A new, less-myopic mindset is needed.

Continue reading →

Groupon’s challenges in China. What does this mean for its Expedia partnership?

In this article, Timothy O’Neil-Dunne and I raise potential issues for Groupon and Expedia in China and ask what it could mean for their travel partnership – if China is in the plans*

Last week, various media reported that Groupon let go a large number of staff and is closing up to 41 offices of its Gaopeng.com joint venture in China.

While it is not surprising a foreign company is experiencing challenges entering China, and Groupon’s PR professionals position its actions as normal strategic adjustments after entering a new market full-bore, the scale and immediacy of Groupon’s actions are noteworthy given that it entered the market with such force and pulled back so quickly.

Its issues may lie in the hard knocks many foreign companies, including Expedia, had already experienced, chief among them underestimating the foreign investor-averse and government forces just underneath the surface-level opportunity of China’s potential market size and support of capitalism-style commerce. The constraints of China’s foreign-investment, labor, and media policies, as well as promising but still immature online and mobile transaction markets – all critical for Groupon – are a few indicators. For other hard lessons, just ask Google and Best Buy.

The seemingly simple, yet complex lesson heard over again? China is different. And though whatever segment of China’s projected US$486 Billion in domestic travel spend in 2014 (source: WTTC), of which US$78 Billion may be online spend (source: iResearch), is attributable to group and/or daily deals, it’s bound to be a sizeable market. And it’s in a land grab that can enable irrational capital investment decisions, just as it is elsewhere.

Which brings us to our Groupon-Expedia-China questions. How does this affect plans for the Groupon-Expedia partnership in China – if there even are plans – and why do we question it?

Continue reading →

What can mobile, digital entertainment, and ancillary merchandising mean for airlines?

In late 2009, I began looking for gaps in the travel market where mobile technology could deliver new opportunities, and I zeroed in on emerging markets for airline ancillary “merchandising,” and digital media technology, concluding that streaming in-flight entertainment could be a greater revenue driver than Aircell’s and Row 44’s paid WiFi approach – and deliver a better experience for travelers.

Ancillary revenue in the form of controversial baggage fees was, frankly, low-hanging fruit and warranted in many ways. But given airlines’ lack of core competency in merchandising, we seem to be hearing a “sell, sell, sell” approach and travelers characterized as a “captive market” rather than consumers that pay for and deserve a great in-flight experience. While the opportunity is good, it could be more rewarding to devise strategy from a consumer perspective.

The potential upshot? Gain advantage, deliver a positive traveler experience, and drive more WiFi engagement and merchandising revenue with customer acquisition models to finance WiFi rather than paid WiFi and paid download models.

Here is Part I of the presentation from January, 2010.

In December, 2010, I took an updated look on progress in the industry and observed that there is still much opportunity to deliver a better experience and differentiate competitively:

Here is Part II:

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