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by patio11
5709 days ago
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Startups are not exactly the sum of their current business frozen in amber. For example, at the moment they're tied at the hip to Orbitz and get very, very little of the value created by a ticket purchase. I bought a roundtrip to DC with them for ~$300, and they probably saw $3 or so from that. However. If they prove in micro-scale that people buy more tickets through their interface than the interface of competing providers, then the carriers have a huge, huge incentive to deal with them directly and cut Orbitz out of the loop. And then its like "Hey, we're 1% more efficient than the current leader of a multi-billion dollar market which has no switching costs." I wouldn't regret being in that situation, because there is a range of predictable next actions and almost all of them result in good stuff for the founders. And if they can't sell tickets with all the gnarly fulfillment and credit card processing done by Orbitz, great. Learn the interface paradigm doesn't add value now before you spend several million on building out the company to support it. Their core source of business risk is the hypothesis that demand is not extrinsic: that you can increase the number of tickets sold by making the process suck less. (The working hypothesis in the travel industry is that the economy offers exactly X trips per year, X is both unknowable and cannot be altered, and marketing/pricing merely distribute X among the various providers. This is what the experts think. If the experts are wrong, Hipmunk walks away with money hats. If the experts are right, they're not necessarily sunk.) i wouldn't consider a large base of online fanboys to be a significant competitive advantag I'd consider that virtually a license to print money in a high-value vertical with an SEO that knows what they're doing. |
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(That said, I could definitely imagine an Orbitz/etc TechCrunch-reading management buying Hipmunk instead of assigning some devs to build it inhouse.)