The transportation industry has been completely and dramatically upended by the rise of car services like Uber, Lyft, Via and similar companies. By tapping into the latent potential of car owners to provide high level services, these companies have carved out massive market segments leading to equally massive valuations. Yet, growth in this hyper-competitive sector is limited by both the intensity and breadth of competition. To maintain their rapid progress, these companies must constantly seek innovative ways to reach new users and widen their access to those in need of a ride.
As a result, Uber has been looking into new methods to increase their market share including diving into the travel sector. The idea is to essentially channel the insights from Online Travel Agents (OTAs) like Orbitz, Expedia or Priceline to create a full door-to-door travel experience. Now, you wouldn’t just book your flight and hotel, you’d also make sure that getting to and from the airport on both legs of the journey is covered.
But the idea of an app economy business like a car service simply entering a new vertical market is not as simple as it sounds. However strong the transportation giant is, entering into a sector as competitively contested as online travel is going to be intense. How intense? Online and mobile traffic present a unique picture that could hint at the Uber’s ultimate viability in this space.
How Easy Is It To Be Discovered?
The key challenge to entering a new space is firmly establishing the company within that sector. However, what becomes blatantly obvious after even a cursory look at online traffic data is that the online travel sector is filled to the brim. This saturation leads to intense competition to be discovered by prospective travelers.
This chart shows just how saturated the market is:
As is evident, traffic in the travel industry is incredibly fragmented. Even the largest player in this space – TripAdvisor, a review site with relationships with nearly all OTAs – only grabs 5.4% of the overall traffic. Second, direct search and referrals amount to as much as 80% of web traffic for many of the top ten OTAs. In fact, even the outlier among this group – Trivago – still gets nearly 50% of its traffic from these two traffic sources. Third, no OTA in the top ten has social traffic accounting for more than 1% of their overall visits, meaning that the brands are built slowly over time and aren’t as impacted by social media spikes.
These realities lead to the conclusion that brand awareness in the OTA sector is incredibly important. These companies don’t spread via viral means. They attain status over time, which increases as their brand becomes more associated with being a leader in the space. Entering into a market like this is incredibly challenging and requires a brand to think differently about getting involved.
Who Owns The Traffic?
While the online traffic is clearly fragmented, it is also simultaneously heavily consolidated. Priceline and Expedia are both overarching companies that own seven of the top ten OTAs. The result is that while these properties compete for attention, they also refer traffic to each other. This combination of highly intensive competition and heavy reliance on referral traffic from competing sites places a high barrier to market entry for any new player.
Where is the Traffic Coming From?
As mentioned above, social is a relative non-factor in OTA traffic while search and referrals are the key traffic drivers. For overall web traffic, Expedia and Booking.com (owned by Priceline) own the highest share of traffic at nearly 3.4% and 2.3% respectively. Yet, while these numbers are impressive, both rely heavily on paid search traffic which can be costly when it comes to keyword competition. On the other end of the spectrum, Hipmunk and Orbitz lead the pack in direct search at 51% and 44% respectively.
Any company deciding whether or not to enter a new industry or vertical needs to appropriately utilize market intelligence. Without access to actionable insights and information, it is difficult to even for a giant firm like Uber to make an informed decision. The data shows that even for a giant like Uber, the path is less than obvious. Discovering online traffic sources, strengths, and weaknesses, provides unique insights into how these companies operate. This data provides a critical picture of how a brand like Uber could carve out a role in this space. Recognizing their clear advantage in social media, and understanding how critical referrals and general search traffic are in this sector are essential for any brand trying to make its way in the online travel market.
Entering a new vertical will always present a variety of challenges that any business will have to consider before launching a new product or service. Yet, by understanding how digital traffic flows, companies can discover the insights necessary to make better decisions and deploy them more effectively.
For more insights on the travel industry and to discover the data behind any vertical, contact us for a live demo.