When Does Business Sense Become Nonsense?
A lesson — sort of — in ecosystems.
By Art Jahnke
July 30, 2003 — On the plains of Tanzania, where just about anything
can happen, the symbiotic relationship of tickbirds and buffalo
provides excellent content for public television nature shows. [Add
british accent here:] As many as a dozen tickbirds may live on the back
of a single buffalo, feasting on the bugs that feast on the beast. The
buffalo doesn’t mind the company. The birds, after all, keep the insect
population in check and they also provide a kind of natural alarm
system, hissing like snakes when lions and other predators approach.
On the
Internet, the business world’s equivalent to the plains of Tanzania, a
website called BiddingForTravel has a similar relationship with
PriceLine, the bovine-size site where travelers bid for an acceptable
price on hotel rooms, airline tickets and rental cars. Sheryl Mexic,
the Houston-based former legal secretary who now spends 16 hours a day
running BiddingForTravel, started collecting customer feedback on
PriceLine in August of 1999, just 18 months after the launch of the
Internet’s first big bid-for-travel site. Initially, she says, hers was
a simple message board on Yahoo where PriceLine users would report how
much they paid for hotel rooms and other services. But so many people
volunteered so much information, that she built a separate site and
moved its hosting to a company that specializes in robust message
boards. As traffic continued to grow, Mexic started selling ads, and
she set up affiliate relationships with online travel companies. Today,
she says, the site has about 6,000 unique visitors a day, and she earns
what she describes modestly as enough money to support herself.
Despite the
long days, BiddingForTravel has been good for Mexic, and it would seem
to be good for PriceLine, whose customers can save the expense of
bidding more than they have to. But the cozy relation between PriceLine
and BiddingForTravel is not good for everyone. The hotels that sell
their rooms on PriceLine cannot fetch prices as high as they would if
buyers were not so well informed from BiddingForTravel. Last year, when
some of those hotels read in the Wall Street Journal that
PriceLine was actually working with BiddingForTravel -- paying
commissions to the site through an affiliate marketing deal -- they
demanded that PriceLine sever ties with Mexic. PriceLine’s response was
the kind of no-brainer that Brer Rabbit would love: Please don’t make
me stop paying commissions to that third party-site. PriceLine ended
their deal with BiddingForTravel, but BiddingForTravel remained as
helpful as ever to PriceLine customers.
These days,
PriceLine Vice President for Communications Brian Ek bends over
backwards to avoid any endorsement of BiddingForTravel. “Our view is
that there is not much we can do about [BiddingForTravel],” he says.
“BiddingForTravel is the natural outcome of freedom of speech. It’s
neither good nor bad, it’s just there.”
Ek’s
reluctance to utter a kind word about BiddingForTravel is particularly
strange for someone who admits that PriceLine itself once considered
adding a similar service to its site. In the end, he says, the company
decided that such a service would conflict with the agreement they had
with suppliers. So instead of telling customers how much they would
have to bid, Ek explains, PriceLine decided to give them clues,
publishing, for example, the percentage of the retail price of trips
that has been saved by recent bidders.
Some
observers of the online travel business say Sheryl Mexic is lucky that
PriceLine’s suppliers want her to go away. That’s because, they say,
Mexic depends on the threats of PriceLine’s suppliers almost as much as
she depends on Priceline. Without those threats, PriceLine would launch
its own version of BiddingForTravel, and then BiddingForTravel could
face serious competition from, well, Priceline.
On the
Internet, and on the plains of Tanzania, ecosystems are often more
complicated than they seem, but even by Internet standards, the twisted
tale of PriceLine and BiddingForTravel seems bizarre. Does PriceLine
really have to bend to the demands of its suppliers? Shouldn’t the
powerful travel site ignore the whining of its suppliers and give its
own customers the information that they really want? What have they
really got to lose? Is this business sense or nonsense?
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