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Facebook’s Monetization Strategy (Part 3)

Posted on Friday, Jul 27th 2007

I’ll give you one more vertical, and then stop. You can figure out the rest yourselves.

Travel is a great vertical for Facebook, and in fact, creating contextual services like Group Travel could be very cool.

According to the latest data published by eMarketer, online travel sales zoomed to over $78.8 billion in 2006 in the US and it is expected to continue to grow at a CAGR of 16.6% to $145.8 billion in 2010. The top 3 in the segment (with corresponding Web 3.0 analysis) are Expedia, Travelocity and Orbitz.

Expedia is the largest online travel company, headquartered in Bellevue, WA. It gets over 19 million unique monthly visitors. Expedia earns most of its revenue from commissions from travel services. Moreover, with an Alexa ranking of 426, and a click through rate of 4.9% for sponsored Ads, the advertising rate for Expedia ranges between $15 – $65 CPM.

Travelocity, launched in 1996 is owned by Sabre Holdings, which was recently acquired by Private equity firms TPG and SilverLake. Travelocity is ranked number two among the most-visited travel sites in the world with over 13 million visitors per month. Travelocity makes most of its revenues on commissions. Also, with an Alexa traffic rank of 604, and a 6.5% click-through rate, the advertising rates for Travelocity vary between $25 – $55 CPM. Travelocity earned revenues of $1.1 billion in 2006 an increase of 31% over 2005.

Orbitz, founded in 2001 is ranked third among the online travel sites with 15.2 million visitors every month. About 70% of its revenues are from Airline ticket sales. Moreover, with an Alexa ranking of 620, the advertising rate for Orbitz ranges between $20 – $65 CPM. In 2006 Orbitz earned revenues of $800 million with an EBITDA of $141 million, and has just gone public (Nasdaq: OWW).

Plus, there are Travel Search engines, Kayak, Sidestep, etc. which are all private companies.

So, wherever it is that Facebook wants to begin its verticalization strategy – in Matchmaking, Travel, Jobs, or Photos – it ought to make some good use of its currency, and consolidate a defensible position. And in that effort, we will also find out how strong their currency really is. Normally, roll-ups of private companies are very difficult. But in this case, as we have seen in Sequoia’s willingness to sell its way into the Facebook action, other VCs will also play ball.

[Part 1]
[Part 2]
[Part 3]

This segment is part 3 in the series : Facebook's Monetization Strategy
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Facebook’s Monetization Strategy (Part 2) - Sramana Mitra on Strategy Tuesday, July 31, 2007 at 6:03 PM PT

Too bad the whole article considers facebook's strategy as a verticalization, that is sooo 2000 (even featuring example from Yahoo).
Too bad, the article lacked vision.

Kevin Friday, April 13, 2012 at 1:10 AM PT