A recent article by well known Analyst Imran Khan and his team at JPMorgan entitled ‘Nothing But Net’, his 2008 Internet Investment Guide pointed out many key factors and topics that will dominate both the business world and the internet over the forthcoming year and beyond. The article offers excellent insight into emerging technologies and fundamental market analysis, in particular offering market sector in depth analysis of Social Networking, Online Travel, Mobile Ad Markets, Ad Exchanges and the Search Engine Market.
Important analysis of the net as a whole pointed to a growth in the average CPM across 2008 and continuing on an upwards scale through 2011, additional increase in global broadband usage has pointed to increased search usage. CPM growth through 2008 is estimated to increase ahead of the market rate of broadband usage and consumer internet spend, continuing to capture the ever decreasing newspaper publication spend.
2008 will show Online Travel Agents continuing to face problems of a maturing market but its not all doom and gloom!, persuing growth in the Asian market may well be the best bet for those companies able to master global growth and global market demand. Positioning the company for global growth was one of the pre-requisites we outlined at the development outset, allowing us to seamlessly transpose from one market to another and operate on a global level will give us great leverage in balancing the mature European and US Online Travel Markets against the emerging Asian market. Global growth for 2007 was 20.1%, averaged over the US (12.5%), European (20.0%) and Asian Online Travel Market (44.8%). Clearly identifying Asian as a key dominator in growth over the previous year Imran Khan and his team at JPMorgan Equity Research have shown where Online Travel Agents will be focusing their attention over the forthcoming 3-5 years.
Historically internet travel users have been savvy and of all the web markets showing clear signs of experience, understanding of the web and its ability to source the correct product or service, evidence of this was shown in a survey carried out in the US by JPMorgan stating that of people who booked online 61% sourced their final purchase after visiting 2 or more travel related websites. Allied to this they also indicated that of the people that searched for travel 81.9% of them factored price as the most important factor when making a booking decision, thus reinforcing the pointer that Internet Travel shoppers are searching a few online travel agents for the best price. A clear winner in the Online Travel battle at present is Expedia, dominating searches, bookings and visits, 37.8% of travel bookings made in the previous 12 months came via the Expedia.com website alone. Alarmingly if you add this to the groups other brands, Hotels.com and Hotwire over 70% of the participants had booked under the group in the previous 12 months, a massive market share and overwhelming evidence if you needed some that they dominate the online travel market through price, ease of use and familiarity.
It has widely been feared that as Hotel chains and Airlines develop their own websites and invest in their technology themselves that they would undoubtedly increase their market share and start capitalising on the Online travel market for themselves rather than aggregators or agents. This has for the best part been achieved to relative success with 39.9% of the respondents stating that they prefer to book the flights direct from the Airline whereas 45.3% preferred to book direct through the Hotel chain themselves. Additionally package offerings do not appear to attract the weight they used to, as clearly shown with the modest decline in package holiday bookings, savvy internet shoppers preferring to purchase flights and hotels seperately.
Emerging markets such as Social networks and increasing advertising spend point to a consistent theme of web expansion, much has been themed of the web2.0, the empowerment of the user and as such I personally do not feel this has been acheived in the best part by Online Travel Agents. Developing travel to not only offer the user their shopping needs - competitive price, large choice, travel personalisation but to also allow the user an interactive experience to attract them to the website after the booking is a difficult proposition. Indicative signs of web growth and in particular increased user activity (more page views / clicks / purchases) allow me to confidently predict an upsurge in online travel as backed by the findings of Imran Khan. Albeit a difficult proposition of marrying social networking, travel user empowerment (reviews / events / geotagging / videos) and traditional travel booking, it is one that we are looking the market to follow. Surely online travel agents will realise that there needs to be an increase in the interactive elements of their commerce websites to fight the increasing growth of price comparison websites, Airlines and Hotel Chains.
Written By James McDowall, www.off2.com/
Related Links - www.morganmarkets.com/, www.techcrunch.com/
Acknowledgments - Imran Khan, Nothing But Net, 02 January 2008
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