Wednesday, November 11, 2009

3 rules for what is needed to start a consumer information or UGC based online travel start-up

User/crowd generated content available through the mega review site TripAdvisor has done a lot of things to the industry. On the consumer side they arguably changed the purchase patterns by putting user generated content at the heart of the decision making process. On the hotel marketing side they generated a whole industry of review gaming and UGC manufacture. And...on the start-up side they have convince online travel entrepreneurs that there is a business model based solely on attracting customer because of users contributing their experiences, ideas, content and more is unbeatable.

I had one such company write to me recently called cost4travel. Their plan is for consumers to share with each other their experiences on the costs of travelling to various destinations and for various activities. The idea is that consumers will share the prices they have paid for the greater good of allowing other consumers to get user supported price estimates. Allowing users to search by cost as a first point of reference rather than by destination. Interesting idea and reminiscent of Joobili's idea of coming to the search process on a time/date basis rather than destination. The challenge for cost4travel and any business that needs a scale of user content or data is how to get that scale. In the perfect world consumers add all of the data you need. That, like TripAdvsor, thousands, then tens of thousands and eventually millions of consumers will add the content for you. The challenge is how to get the consumers to volunteer information when the initial content collection is sub-scale - when a contribution by the earlier users is not going to be responded to on mass by the contribution of other consumers. Finding a way to build a business model that depends on consumers contributing the answers and information before...well...consumers have contributed the answers and information. You can call this the UGC paradox.

I have been trying to think back on the early days of TripAdvisor as surely they had this issue but I cannot recall how they managed it. Can you? Therefore I moved to looking to two non-travel examples for inspiration. From these 2 I suggest 3 rules for starting a consumer information (UGC) dependent business in online travel. First the rules and then the inspiration.

My 3 rules on things you must have to start a consumer information or UGC based online travel start-up

1. You need a source of data to kick things off. Look for and index available data first. There will be little incentive for consumers to search or contribute without a baseline of data. When looking for this data do not be afraid to use expert or professional data. In fact seek out great quality existing content and add value to it by being the best index and distribution mechanism for it;

2. Reward consumers for entering data and content. Altruism is not enough to get consumers to give you data. You need to give them an reward. For example make data contribution a "cost of entry" for consumers. You have to give something to get something. Make it so that if a consumer contributes data, then they get a better result; and

3. Syndicate, distribute and get it out there. Make it easy, very easy for consumers to send the information around, blog it, share it, tweet it, swap it....get it out there.

Inspiration number 1 - Payscale

Payscale is a Seattle based salary and compensation site. Anyone can open a profile, enter in their skills, experience, location and job title. Payscale then matches you against everyone else in the Payscale universe of contributors and returns salary and compensation comparison information. Another UGC play that requires scale. It can only provide an information seeker with a valuable experience if there are millions of consumers contributing their skills, job descriptions and salary information. Scale they have. In Oct 2008 they reported 15 million profiles. But at the time of launch they probably only had a few hundred profiles (assuming they beta-launched with info input by friends, family and founders). Thus they kicked off the business and populated their database with statistical data from a variety of external (read non user generated) sources including government sources. Plus before you could access the data they had collected from others, you had to submit your own data. Means there was enough initial data to provide a answers to early customers and those customers had to submit more data. We learn from this that you need to collect some starting point data to kick of the business and will be more success if you reward consumers for entering data (in this case by making it a cost of getting a response).

Inspiration number 2 - YouTube

YouTube is the biggest UGC site on the web. Without user generated videos YouTube is dead. The purist YouTube UGC argument is that YouTube over came the UGC paradox through timing in technology and social desire. That is launched itself at exactly the right time - when the desire for consumer sharing of videos matched the technology capability to shoot and upload in moments. However the real truth (OK arguable truth) is that what made YouTube popular enough to attract scale in UGC videos was not UGC videos. Rather it was copyrighted material. In particular consumers uploading and then sending to each other copyrighted material from Viacom (Daily Show, Colbert Report, MTV videos) and NBC Universal (Saturday Night Live). Before videos like Dancing Matt and LonelyGirl15, the huge YouTube hits were videos like SNL's Cronic of Narnia (no longer avail on YouTube). YouTube was built on the back of sharing professionally produced copyright material not UGC. Don't believe me? Then think back to the first time you were sent a YouTube video. I'm betting it was a clip from a TV or a music video. Still don't believe me? Then look at the list of top watch videos of all time. Seven of the top eleven are music videos or clips. YouTube's early value was in being a repository and distribution means for non-UGC. The learning from this is don't discount "expert" or professional data. If fact you may want to encourage it. Secondly we learn - make it easy, very easy - for consumers to send it around, blog it, share it, tweet it, swap it....get it out there.

So from YouTube and Payscale I have developed my three rules for launching UGC based start-ups. There will be more rules for making it a success but these are my view on what you need to get started.

Anyone one out there remember the early days of TripAdvisor well enough to add to the list of rules? More ideas in the comments.

thanks to richbeechina for the crow shot


Claudeh said...

Interesting to look at for the TripAdvisor early days

Their message in August21 2000:
" TripAdvisor helps you efficiently search the web to find personalized leisure travel information. With TripAdvisor you can confidently plan your next trip."

Interesting stuff with others years

Tim Hughes said...

@Claudeh - thanks for the tip about the wayback machine

Grayum_ian said...

Great article, Tim. I apologize for getting distracted, but I wouldn't mind hearing more about cost4travel's business model?

I have had to deal with price disputes before and saying "Saw it for cheaper on this site" doesn't hold too much weight as there are a near infinite number of variables to consider (hotel occupancy, currency fluctuation, season etc.,) I agree with using the service as a guide for someone that has no idea what cost range they would be looking at when researching a destination, but I think that consumers would consider using the site as a soapbox to drive down their holiday prices. I could be wrong?

Michael Grove said...

Tim, agreed. What you are describing are participative architectures where the more that participate the greater the value for the participants. Real Travel is a good example. Mike

Tim Hughes said...

@Ian - thanks for comments. I think you are right. The founders approached me by email a week or so ago. I focused my comments back on the data collection side but you are right there are questions on the data authenticity. Again not unlike the problem that TripAdvisor has on ensure that reviews are legitimate (remember my post recommending TripAdvisor move to no stay no say).

In cost4travel's defence they are very early in the start up process.

Tim Hughes said...


thanks for tip on Real Travel. Will check it out

Jared Salter said...

I think the days of building an independent UGC community are gone. If I'm already sharing my opinions and reviews on Facebook, Twitter, TripAdvisor, etc., am I really looking to find another place to contribute UGC? Don't think so. The key is tightly integrating with existing communities like Facebook and Twitter. Trazzler and Ruba come to mind as two new travel sites that have taken a good first step. For example, rather than wait for visitors to post a review you can proactively request advice from your social graph and in the case of twitter any responses you receive can be filtered come back to your site as shared UGC. This at least solves the problem of community/UGC fatigue and lack of reach.

Tim Hughes said...

@Jared - great comment. Thanks. Am working on part 2 of our interview. Should be up no later than Monday

Unknown said...

We started as a search engine for travel...and so we searched the web and brought back opinionated articles from newspapers, magazines, guidebooks (all that we could find online), and classified them carefully according to the city/hotel/attraction that was referenced in the article. User reviews (UGC) came a bit later, but to your point, we had a good product (valuable to visit our site) before we had our first user review because we had tens of thousands of valuable articles indexed the day we launched.

Steve Kaufer
CEO, TripAdvisor

Tim Hughes said...

@Steve - thanks very much for the comment. Appreciated.

Toby Hicks said...

Very good review and analysis. It is certainly tough to get the ball rolling on a site like that.

Perhaps a kind of game design would be an attractive way to incorporate the incentive system.