Boliga, Expedia and others are at war. Who wins?
Price comparison and customer power caught my attention after a radio news item in Florida in 2011. I talked about Expedia and Boliga and what happens when customers start their search with an intermediary.
Price comparison and customer power are connected
I thought giving consumers an overview of several suppliers in one place was useful. But I could also see a conflict over who had the relationship with the customer.
If customers first visit a comparison service, suppliers can become more dependent on being visible there. That was the shift I wanted to discuss.
My examples were travel and property
I was reacting to news about American Airlines and Expedia. In the video, I guess at the parties’ motives and possible negotiations. That’s my speculation, not inside knowledge of their agreements.
I also explain that I’d noticed missing photos of my house on Boliga and asked why. It got me thinking about estate agents’ role and where customers found properties.
A question of owning access to customers
I compared it with newspapers, which had previously been an important route to homebuyers. The internet could change who charged for bringing together and displaying what was available.
Figures about traffic, employees and revenue in the video are my rough estimates or things I’d heard. They aren’t documented company information.
I asked the question openly: What should a supplier do if another company gained more of the customer relationship? The story and assessments are from February 2011.
Also read about starting with one market.
A radio news item in Florida about American Airlines
I’m listening to the radio here in Florida. One of the news items is that American Airlines is no longer on Expedia. It makes me think about the power struggle between those providing the product and those bringing customers together.
For years, airlines have sold tickets themselves and through travel agents who received a fee for referring customers. Then services like Expedia arrived, where you could search and compare tickets from several airlines. I also mention Momondo as something people may know that kind of search from, although Expedia does more than that.
In my description, the intermediary gets paid when a ticket is sold. The airline gets customers, and consumers get a service. It can seem nice for everyone until disagreements arise about money and access to the customer.
Who decides what the customer sees first?
I imagine a service like Expedia might start demanding more. Let’s say the payment was 50 or 100 kroner per ticket. Those are figures in my hypothetical example, not information about their actual agreement.
What happens if the intermediary asks who’ll pay most to appear at the top? Even with the same ticket price, the order makes a difference. It can also be a question of whether the cheapest or second-cheapest ticket gets highlighted.
My thinking in the video is that perhaps Expedia has put the thumbscrews on the airlines and American Airlines is therefore pushing back. I don’t know their negotiations. I’m trying to understand the business conflict the news makes me see.
Why were there no photos of my house on Boliga?
I experienced something that sparked similar thoughts in Denmark. Home was the estate agent I was using to sell my house. When I looked on Boliga, there were no photos with the property.
I asked Boliga why and was told Home had blocked it. In the video, I said several estate agents were doing that. That’s the explanation and situation I was responding to in February 2011.
One reason for choosing a large estate agency chain can be its many branches and ability to reach lots of buyers. I loosely mention a thousand branches, but also say I don’t know how many Home has. I didn’t know the actual number.
But if more homebuyers start their search on Boliga, it’s less obvious that the big chain’s branches alone provide a special advantage. A smaller estate agent next door can have its property shown there too.
I use a hypothetical example where 80 per cent of traffic goes through the portal, while also saying that’s probably not the case. The question is: If the chance of selling the house is equally good, why should the customer pay more at the big chain?
Branches become a different kind of competitive condition
Home and others with many branches need to pay staff, rent, electricity, insurance and all sorts of other things. A company working online can have a different cost structure.
I’m not saying the estate agent doesn’t matter. But if customers see the same chance of selling their property, competing with high fixed costs becomes difficult. For the seller, getting the damn thing sold as quickly as possible matters.
That’s why I see a power struggle. The portal gains some of the access to buyers that estate agents previously controlled more.
Cofman and the battle over holiday-home searches
I also use holiday-home rentals as an example. I’d noticed Cofman in searches such as "holiday home Bornholm". My impression was that they’d started search engine optimisation early, before several others properly got going.
I compare it with companies including DanSommer and find it interesting who gains power when customers’ searches start somewhere other than with the original rental company.
I offer very loose images of five or six people in a basement in Jutland, but also say they could be in a golden palace for all I care. I don’t know their current office or staffing.
I also mention a figure of 160 million kroner a year that I’d heard. I didn’t even know whether it was revenue or profit. So it should be read as my uncertain account in the video, not an accounting figure. My point was that an intermediary can build a large business through referrals without owning the goods or properties being offered. Also read E-pusher about my experiences of online sales and marketing.
From Berlingske’s property adverts to an online portal
In the property market, I compare it with Berlingske Tidende. I’d heard that, at its peak, the newspaper could bring in ten million kroner on a Sunday through property adverts. That was something I’d been told, not something I presented evidence for.
As I saw it, the newspaper could tell estate agents: If you don’t participate here, you lose access to an important share of buyers. Estate agents had tried their own distributed newspapers, but I thought they’d never really shifted the power.
Then came the internet. Now estate agents might think they’d bring properties together themselves and escape the old payment. But then a service like Boliga could come in and gain a position resembling the newspaper’s: The place where buyers started.
I don’t imagine the portal would necessarily get the same large income as the newspaper. On the other hand, it wouldn’t need the same organisation either.
My rough calculation compares ten people earning one million with a thousand people earning ten million. It’s an illustration of the relationship between income and organisation, not the companies’ actual staffing or earnings.
Price comparison and customer power: What would you do?
For consumers, I think getting an overview of the market is fantastic. Who’s cheapest, and who’s best? But for the business that previously had the customer relationship, the change can hurt.
I don’t think more houses or airline tickets are necessarily sold just because a portal arrives. What interests me is that power and money can shift between companies.
This post is really an invitation to discuss the trend. What would you do if you were an estate agent or American Airlines? Are those kinds of services good for business, even from the supplier’s side?
And what happens to consumers if some companies are no longer included in the comparison? Then the overview isn’t complete either. In the video, I guess more airlines might follow because they’d want to save the payments to intermediaries. That was my expectation at the time, not something I knew would happen.
I think it’s a bloody exciting development. What do you think?
Best wishes, Martin
Hej Martin.
Jeg forudsiger, at ejendomsmæglerne vil gøre, som de gjorde, da den trykte "Ejendomsavisen" og de andre trykte medier skruede prisskruen for annoncer en tak for højt op.
De startede deres egen version af samme type medie, kaldet "Boligmarkedet". Hvis Boliga får for stor succes, kan de store ejendomsmæglerkæder med deres enorme samlede markedsandel lave deres egen prissammenligningsside.
De er som sådan allerede gået igang. Du vil på flere af de store ejendomsmæglerkæders hjemmesider kunne se, at de begynder at markedsføre hinandens huse. Og Boligmarkedet er allerede så småt kommet online i e-papers form på boligm.dk
Din ejendomsmægler, Home, er dog ikke med i de andre stores fællesskab. Nogen kunne finde på at sige, at de ikke kunne få lov at få stor nok indflydelse i "de stores fællesskab", så de valgte at gå solo.
De bliver helt sikkert spændende at se, hvad der kommer til at ske.
Dbh. John