Nineteen years is a long time to wait for an exit from your startup. Last week, tours and activities company Viator, which was founded by Rod Cuthbert in Australia in 1995, entered into an agreement to be acquired by TripAdvisor for $200 million, predominantly in cash. Viator works with local tour operators to give travellers the ability to research, book and review tours and activities across the world. The company is now based in San Francisco, and its largest shareholders are private equity firm Carlyle Venture Partners and Australia’s Technology Venture Partners. Cuthbert, who is the chief executive officer of Rome2Rio, has not had an active role with Viator since 2010, but remains closely linked to the company. Over the years it has raised $11.1 million in funding and Cuthbert says nobody has sold stakes in the company since venture capital got involved. “I guess after 19 years, that’s a very long wait,” Cuthbert says with a laugh. “After 19 years you’re not really a startup, you’ve got 200 staff, an established office, a lot of revenue and a lot of memories.” During that time the company had to negotiate a number of downturns that hit the tourism industry more generally, including September 11, the SARS virus, and the Bali bombing. He says the acquisition is validation of the tours and activities industry and will throw a spotlight on startups operating in the sector. “There’s been a lot of discussion about the importance of tours and activities, based around the concept that the reason people travel is to do things in a particular destination, skiing in New Zealand, seeing the Louvre in Paris,” he says. “Tours and activities are absolutely crucial to the whole travel model, yet tours and activities have never been central within the industry itself, flights and hotels have been. “Now there will be more of a focus from investors and major players in the space, on companies like Viator, but also companies that offer related services, software for tour operators, the whole ecosystem.” In a statement announcing the acquisition, TripAdvisor president and chief executive officer Stephen Kaufer says online and mobile bookings for attractions and activities offer a huge opportunity for the company. “Travellers want to explore local attractions while on their trip, and Viator’s depth in global attractions combined with their seamless booking experience will provide immediate benefit to our community, whether in the planning phase or on the trip,” he says. Subject to the completion of customary conditions, the acquisition is expected to close during the third quarter of 2014.
Yellow Pages directories have been appearing on doorsteps across Australia in recent weeks. As often as not, they go straight into the recycling bin. In the world of the internet and e-commerce, the very notion of a book the size of two bricks being the source of valuable purchasing information seems plain silly. Once directories like the Yellow Pages served a valuable need in most developed economies. They provided basic and inexpensive local advertising, especially for small businesses. As the internet emerged as the preferred means of accessing such information, the potential for directory owners like Telstra to translate directory information into a valuable online business opportunity seemed promising. As is often the case in the unpredictable world of the internet, it was not quite so simple. In January 2014, Telstra sold a 70% share of Sensis, its directories subsidiary, to a US hedge fund for A$454 million, only 2.4 times projected 2014 earnings. This is quite a turnaround from the A$12 billion value suggested to Telstra’s Board in 2005. At the time, Telstra’s chief executive Sol Trujillo declined to spin-off the business, suggesting Sensis (Telstra’s directory business) would be “bigger than Google”. Google Schmoogle? Indeed, with characteristic ebullience, Trujillo commented in November 2005, “Google Schmoogle”. Contrary to that prediction of sorts, since 2005 Google’s market capitalisation has increased tenfold, to more than half a trillion dollars. Among Trujillo’s many strategic mistakes, his misunderstanding of the relative potential values of Google and Sensis probably takes the cake. It’s fair to say, however, that Trujillo was not alone in misunderstanding the radical changes in the economics of information over the last decade. These changes have completely upturned the value of directories businesses globally. The investors who bought Telecom New Zealand’s directories business in 2007 for $2.1 billion (at an earnings multiple of 13.6 times) at the height of the private equity bubble have done most of their dough. Knowledge is Power (and Money) The 2.4 earnings multiple on the recent Telstra sale suggests two things - that the business is still profitable, but that profits are expected to rapidly erode. How can we explain this sudden, anticipated and precipitous decline in the value of information available through directories like the Yellow Pages? The economics of information is changing rapidly. Economists George Akerlof, Michael Spence and Joseph Stiglitz won the 2001 Nobel Prize for economics for their seminal work on the economics of information, especially information assymetries between buyers and sellers. Most famously among the suite of work done by these economists was Akerlof’s 1970 paper “The Market for Lemons”. Like all great academic work, its beauty lay in its simplicity. In essence, buyers and sellers have “asymmetric” information. In the example in his paper, the seller of a used car knows if it is a “lemon”, though the buyer rarely does. A consequence of Akerlof’s Lemons paper for sellers is that it made sense for them to signal to the market aspects of the quality of their products – by suggesting that they are selling “cherries” (great used cars) and not “lemons” (cars on their last legs). One simple way to do this was through advertising. This was especially useful where the buyer’s knowledge of the seller was limited, as would often be the case for the buyers from small businesses who advertise in directories like the Yellow Pages. Better information, less asymmetry The steep decline in the generic, supplier-provided data that is the essence of Yellow Pages has been driven by a set of related phenomena. First, sites like TripAdvisor have emerged to provide detailed and generally reliable information on services including hotels, tourist attractions, restaurants and the like. Importantly for Yellow Pages, sites such as these are becoming the first place for buyers to visit. As the quantity of collected reviews increase, the value of such sites increases greatly, as they provide a level of information on sellers that static directories cannot match. Second, the costs of “searching” for information is in steep and terminal decline. Once, buying a set of golf clubs for the best price, for example, required a multitude of phone calls or, worse still, visits to stores with pushy salespeople. Now, finding the best price in the market is a few keystrokes away through Google. Too late for Sensis? This begs the question – can the Yellow Pages reinvent itself to be a new portal for information on sellers that will be valuable for buyers, and thus continue to attract advertisers? The answer is probably not. As a late mover into such information provision, it will have an almost insurmountable challenge to build an equivalent body of information in comparison to its competitors. More so, it will be a generalist in an industry full of specialists, the last site visited by buyers and thus the least valuable site for sellers to direct their advertising dollars to. This makes the 2.4 times 2014 earnings paid in January for Sensis seem about right. Such a multiple suggests that this year’s Yellow Pages might be the last one to lob onto Australia’s front porches. If this is bad news for Sensis, it is good news for the millions of trees that will be saved! By John Rice and Nigel Martin. Rice is an Associate Professor in Strategic Management at Griffith University. Martin is a lecturer at the College of Business and Economics at Australian National University. Rice is a member of the National Tertiary Education Union and the Australian Labor Party. Martin does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations. This article was originally published on The Conversation. Read the original article.
Wollongong will be hosting the first Australian Social Media Tourism Symposium this month, gathering together heads of tourism boards and destination managers to explore how to use social media to more effectively engage customers. Conference coordinator Rodney Payne says the industry is facing significant disruption from start-ups. “There are lots of start-up companies trying to disrupt the norm and how business is done. It’s not just travel, but the internet really doesn’t like middle men and a lot of start-ups are working to cut them out,” Payne says. “If you look at a start-up like TripAdvisor and contrast that to how business was done 10 years ago, they’re one of the most powerful forces in travel now,” Payne says, adding that start-ups like Airbnb are changing what consumers expect from travel companies. Payne says there are “massive benefits” for travel companies that use social media well. “There are lots of opportunities to incorporate social and digital marketing because the travel consumer is so quick to adopt new tools,” Payne says. “The real benefit is to harvest the power of advocacy. We all knew on a hunch that word of mouth is the most powerful factor in travel, and now it’s on steroids and you can see it.” Several Australian start-ups have been making waves on the travel scene recently. StartupSmart spoke last week to one of the presenters set to speak at the symposium, Craig Makepeace, about how to turn a travel blog into a business. Two Australian start-ups made The Independent newspaper’s Best 50 Travel Websites list last month. For more information on how to launch a travel agency business, click here.
Sydney-based restaurant booking website Dimmi has signed a three-year deal with much-loved reality cooking show MasterChef Australia, just one month after partnering with TripAdvisor. Founded in 2009 by Stevan Premutico, Dimmi is a real-time restaurant reservation and review website, which has partnered with more than 2,500 restaurants nationwide since its launch. Backed by Telstra and Village Roadshow, Dimmi has entered into high-profile partnerships with Google and TripAdvisor, the world’s largest travel website. The deal with Google allows Dimmi users to make restaurant reservations in Google Search and Google Maps for mobile, while travelers using the TripAdvisor website or app have access to real-time restaurant bookings. Dimmi has now added Channel Ten’s reality cooking show MasterChef Australia to its list of partners, after revealing it has entered into a three-year exclusive agreement with Shine 360. Shine 360 is the rights and brand management arm of Shine Australia, which produces MasterChef Australia. Viewers of MasterChef Australia 2013 will be able to make real-time reservations at restaurants featured on the show using Dimmi’s technology. Access to restaurant bookings via Dimmi will be integrated into the MasterChef website, which will act as a year-round online dining guide, allowing consumers to find and book restaurants. Dimmi saw an opportunity to partner with MasterChef following a surge in demand for restaurants featured on the show, which Premutico has dubbed “the MasterChef effect”. “What we were seeing was a spike in bookings for restaurants that went on air,” Premutico tells StartupSmart. “As soon as they’re on air… on TVs across the country, the results are a pretty phenomenal uplift in demand.” According to Dimmi, a number of restaurants featured on the show last year saw a 1,000% spike in bookings “literally within minutes”. “That’s not good for the restaurants because they get slammed and they can’t handle the bookings, and it’s not good for the diners,” Premutico says. “This partnership will ensure a much better experience for viewers and for restaurants by helping them better manage this demand.” Signing the deal with Shine 360 happened pretty quickly, says Premutico, who believes Dimmi has earned a name for itself by being “the number one player in the market”. “It was a 12-month process. We were able to start discussions as soon as MasterChef got off air [in 2012],” he says. “There’s a track history here in terms of brand reputation, and the fact that Telstra and Village Roadshow are shareholders in the business [helped us sign the deal].” Nick Love, managing director of Shine 360, said his company is “delighted” to partner with Dimmi and Network Ten. “[This partnership will] extend the MasterChef brand and experience beyond the television program, linking fans of the show, masterchef.com.au and diners with the restaurants and their chefs that help make MasterChef Australia great,” Love said in a statement. But Dimmi isn’t stopping there, with Premutico revealing the company is on the cusp of announcing another major partnership, although he refused to offer any details. “The big one we’ll be announcing next month. It’s the big patty of them all – it’s taken us four years to wrap this one up,” he says.
Last week I experienced my first taste of controversy in this arena. I contrasted Posse to Foursquare in an interview with Fast Company, who ran it as a feature with the headline 'What Foursquare would look like if it had been founded by a woman'. The article sparked a barrage of comments and tweets arguing why Foursquare is or isn't a good product for women and how Posse shapes up. It's the first time we've been so publicly compared to a competitor; the experience was both flattering and scary – a tiny Australian start-up set against a US industry heavyweight. Posse is not a revolutionary idea; many competitors are trying to solve the same problem as we are. And being first in line to seek a solution to a problem isn't always best. I found this recent Techcrunch article interesting: it points out that almost all of the nine tech companies that have exited for more than $1 billion in the past four years haven't created a new product category. Rather, they have developed in areas where the existing solution isn't up to snuff. Facebook provided a better experience than MySpace or Friendster, and Zappos just sold shoes in a better way with better service. We designed Posse because we felt the existing solutions weren't working for us. Now that we've officially launched in the US, it's natural that we'll be compared to competitors. In my blog today, I wanted to reflect on the process we used to design our product and how we took inspiration and ideas from others, like Foursquare and Yelp. 1. Define the problem and the audience We started with a hunch that some people preferred recommendations from friends to reviews from strangers on Yelp or TripAdvisor. We also thought that the process of asking for recommendations from friends through email, SMS or Facebook was cumbersome and inefficient. We set up an initial 10 focus groups to test our theory and asked questions like, 'Describe the last time you were in a new place looking for a restaurant or hairdresser. What did you do first?' The most common answers followed a pattern of, 'tried to contact a friend who knows the area,' then, 'couldn't get hold of them so ran a Google search or checked Yelp'. We also asked group participants to recommend places to each other on the spot, so we could understand exactly why they enjoyed sharing recommendations. Not everyone had a problem with this. Some were happy to use Google or Yelp to find places. The people who were dissatisfied tended to be like us: slightly fussier urban types who wanted to visit the best bars, restaurants, fitness centres, hairdressers and so on. They needed recommendations from friends and almost panicked at the thought of going somewhere cold. We continued the interview cycle until we identified four audience definers: gender, age, behaviors, and 'preferences'. By this I mean, what they sought in recommendations from friends and why they enjoyed giving recommendations to friends. Three of the four audience segments turned out to be female, so while we didn't design Posse just for females, we expected that the majority of users would be women. This may appear cold and calculating: breaking down users into audience segments, then designing features and artwork to appeal to those users. It certainly helped us understand who would want to use our product and why they'd use it instead of the competition. 2. Who has previously tried to solve the problem? Why did they succeed or fail? For this exercise, we mapped out every platform, past or present that had tried to solve social search. Yelp and Trip Advisor obtained lots of reviews and great data but failed to get a high enough proportion of their users writing reviews to show what your friends think of places. Both sites seemed littered with irate customers writing negative reviews. These upset the merchants, and many users we interviewed were skeptical about who was writing the reviews. Apps like Stamped and Fondu emerged to solve the social recommendation problem, but appeared to fail because not enough people were making recommendations to sustain long-term engagement. The only platform we could find that had managed to crack the problem of persuading lots of socially connected people to give it content was Foursquare. To understand how, we interviewed 100 Foursquare users. We invited friends who used the platform and put up posters around our office building offering to pay anyone who used Foursquare $50 for an interview. I wanted to know what was so compelling about checking in on Foursquare. We found that the overwhelming number of people who responded to our ads were male (+80%) and I was amazed when they described how they used the product. One guy told us about how he drove out of his way home every day to check-in at a supermarket where he was the Mayor. Others said they would check-in to places that they didn't even visit as they walked past. They were addicted and didn't understand why. As I struggled to make sense of check-in addiction, I couldn't help but notice the parallel between what these guys described and the behaviour of my small male chihuahua 'Steve' who dragged me to random posts, marking that he'd been there more than other dogs. Many women using Foursquare wanted to secure recommendations from friends for the best bars and cafes but found it frustrating that the most popular places around them were subway stations, people's offices or alleyways. They also didn't like 'checking in', broadcasting where they were, and were irked by random guys asking to be friends with them. I'm not saying that Foursquare, Yelp, Trip Advisor and many other local discovery platforms aren't great products that are loved by lots of users. Foursquare in particular was revolutionary in the way they use game mechanics and design to make participation in their platform fun: Posse and many others since have taken inspiration from these ideas to develop other products. I'm just saying, this is a process we went through: analysing the competition to design what will hopefully be a better product for a certain part of the market that doesn't seem to be well served by the existing players. Story continues on page 2. Please click below. Above: Steve the dog. 3. Designing the principles behind our solution Once we'd defined our problem, our audience, and analysed the competition, we created a list of principles. These principles underpinned the product for which the platform we designed would work. They included statements like: >Our audience make recommendations to signal social status. >Our audience like to collect and display their favorite things (Pinterest/Wanelo). >Our product category is so competitive that our product must be delightful and fun so people want to share it with friends. >Our audience doesn't want to earn currency for making recommendations but love recognition with authentic unexpected gifts from their favorite retailers. There were many others. 4. Designing the product With these principles in place, we set about designing the actual product. It all came together surprisingly quickly. The whole team took part in daily product design and we brought in lots of outside help for fresh perspectives on ideas. This whole process of defining the problem and audience, analysing the competition, designing our product principles and then the product took around four months and involved more than 200 outside interviews before the first line of code was written. It's something I didn't do the first time around when I built a site for selling music tickets. While we're constantly evolving and coming up with new feature ideas and design improvements, the fundamental strategy behind the product is solid and hasn't changed. Execution is the next big challenge and we're getting better at that too. We're still a tiny team with an early product that doesn't really stack up against the competition yet. Who knows if we'll make it? We're giving it our best shot. I know most people who read this blog are in the process of starting a company. I think that an in-depth analysis of the competition is vital, without fearing to enter a product category because of the big incumbents there already. We've found it helpful to take inspiration and learn from the successful trailblazers in our field, and if others do the same then we'll all end up with better products as a result.
Queensland business 1800Approved has tonight been named Australia’s Fastest Growing Start-up at the 2013 StartupSmart Awards, sponsored by DFK Australia & New Zealand, after racking up a stunning $20 million revenue in its first four years. 1800Approved headed a top 50 list of rapid-growth start-ups, landing it a $10,000 advertising package from Private Media, StartupSmart’s publisher, and a $10,000 strategy review and planning workshop from DFK. The financial brokerage, which provides finance on everything from homes to motorboats, was founded by Rodney Michail and Angelo Lauro in 2009. It posted an impressive $20 million revenue last year, placing it well clear of SCO Recruitment, which came second for the third year in a row. WA consultancy Primero Group was in third. This year saw a record number of entries received by awards organiser www.StartupSmart.com.au, Australia’s leading resource of news and advice for start-ups. Eight other individual categories also saw notable winners, including Boardcave.com, which won the Best Start-up Product award. The site, set up by Queensland surfers Ryan Mets and Chris Greben, allows users to customise their surfboards before purchasing them, allowing manufacturers in their industry an easy path to the ever-increasing online market. Meanwhile, InsideTrak, created by Mike Larsen, took out the Best Online Strategy award. The innovative site allows employees to rate their bosses, with job seekers able to get a Tripadvisor-style insight into their new workplaces. Nineteen-year-old Ash Davies won the Young Entrepreneur of the Year award for his work on Tablo Publishing, a venture that allows authors an easy way to publish their books digitally. The awards were held at the Victorian Investment Centre in Melbourne in conjunction with major sponsor DFK and supporting sponsor Small Business Victoria. Oliver Milman, editor of www.StartupSmart.com.au, said: “We are delighted with the record number of entries to the awards, which demonstrate the exceptional depth in strength in Australian entrepreneurialism.” “The judges had the hard job of choosing between a number of fantastic early-stage companies. What makes their achievement even more impressive is that many of them started during the worst days of the GFC, requiring exceptional hard work and innovation, particularly in the online space, to succeed.” To read profiles on the top 50, click here. To find out the trends that underpin this year’s list of Australia’s best start-ups, click here. The winners: Fastest Growing Start-up: 1800Approved Best Start-up Product: Safescape Best Services Start-up: Boardcave.com Best Online Strategy: InsideTrak Best Green Start-up: Greensense Best Start-up Investor Award: AngelCube Best Start-up Idea: Tweaky Best Young Entrepreneur: Ash Davies of Tablo Publishing Start-up Hero: David Regenspurger of Energy Intelligence
A trip overseas was the original inspiration for Stufftopia, which helps people find things to do anywhere in the world.
Imagine if you could find out the truth, warts and all, of what it was like to work at a business before you applied to a position there.
Businesses large and small are rushing onto Twitter and Facebook in an attempt to engage with customers.
The company that acquired trip planning app TripIt has launched a $150 million fund, which will be used to invest in start-ups focused on innovations in the travel and expense space.
A new report highlights key trends in the travel and tourism industry for start-ups to tap into, including a new breed of tourist from emerging countries, and the rise of digital detox holidays.
Google has acquired the Frommer's travel guides in a move which is likely to impact the online listings of travel and tourism operators in Australia.
Travel is a glamorous sector, conjuring up images of beaming air stewards and sun-kissed beaches. But can you turn this into a profitable business?
Shoppers may well be hindered by the reluctance of the likes of David Jones, Myer and Harvey Norman to offer comprehensive online stores, but that isn’t stopping them from turning to the web when planning a purchase.