Editor’s Note: This is the first installment in our Skift Startup Stories series. In it, we document startup problems, solutions, and lessons learned from different perspectives, hoping to learn what separates the winners from the losers.
You can read all the stories in the series here.
In the year In June 2013, Oyster.com, a website that featured real and professionally photographed hotel photos and expert reviews, fired most of its staff and put itself up for sale.
The Oyster expedition turned out to be a sadly common story in the history of travel startups, another unhappy ending.
Even then, the Oyster saga was somewhat different. Many failed travel startups are essentially copycat sites, producing a slightly different riff on a well-known song.
Billing himself as “The Hotel Told,” Oyster was certainly doing something different than everyone else.
In the year Oyster, founded in 2008 by Eli Seidman and Ariel Charitan, exposed hotel photo misrepresentations, comparing flawless and glossy marketing photos taken from hotels on sites like Orbits with a small or crowded pool or cramped guest room. A journalistic hotel review lists not only the attractive features of a property for prospective guests, but also the disadvantages.
But Oyster’s problem was that they didn’t have the audience and resources for a sustainable business, given the cost of sending employees or freelancers into the field to conduct hotel reviews everywhere and update them regularly.
Like countless startups, Oyster has worked hard to create a business model that can monetize its content.
Two years ago, when news broke that Oyster was trying to find a buyer, Oyster management told its employees that it had made nearly $500,000 in revenue in the first quarter of 2013. But in the year In late 2013, the hotel’s research and marketing was conducted twice. In the year Layoffs despite attracting Series C funding led by Travel Channel in 2011 and taking in a total of $18 million in venture funding since inception.
It was then and it is now.
Despite those early struggles, the prospects for Oyster today are bright as TripAdvisor bought the company in October 2013. The acquisition price can’t be huge: TripAdvisor didn’t disclose the purchase price, but it acquired six startups that year, including Oyster. Total Cash Estimate $34.8 million in net cash.
Unlike some of TripAdvisor’s acquisitions in recent years, such as Wanderfly, CruiseWise and TinyPost, Oyster Brand will live to fight another day.
Five employees have made the transition to the new Oyster at TripAdvisor, according to co-founder and current Oyster general manager Ethan Seidman, who was vice president of product under the old regime. Oyster today has about 35 employees and another 125 to 150 freelancers who work in New York City and London to review hotels and take photos.
The fixed cost of sending reviewers to hotels “has gone down a little bit, but that hasn’t really made a difference,” says Seidman. But what we have is a large audience. And that makes all the difference in the world.
The same website showed Oyster with 1.1 million site visitors in March 2015, and Seidman says the number was actually 1.5 million monthly visitors in the first quarter. At the time of TripAdvisor’s acquisition, Oyster had nearly 3,000 expert reviews of hotels, while Oyster now boasts reviews and photos of 10,000 properties in 76 countries.
Oyster.com’s “professional photos” are integrated into TripAdvisor’s websites as a way to provide more research coverage beyond TripAdvisor’s original user-generated content, and Oyster.com recently added panoramic images of guest rooms, lobbies, pools and beaches using fish-eye lenses. and high dynamic range photography with 2,800 properties.
Business model scale
It seems that observers – myself included – who thought that TripAdvisor was only interested in acquiring Oyster Hotel photography and other content and would eventually kill the brand, were wrong.
Oyster’s benchmark of 1.5 million monthly visitors is still very small, although Seidman says the company’s visitors and hotel content are growing significantly.
One thing Oyster now has that it didn’t have before is the power of TripAdvisor, which serves as Oyster’s largest referral site and distributes a sales force that includes Oyster hotel metasearch and advertising as part of TripAdvisor’s selling point.
Seidman also said there are vendors dedicated to selling oyster products.
Metasearch was Oyster’s main source of revenue before the TripAdvisor acquisition, and now it’s even more dominant, Seidman says.
TripAdvisor launched its own hotel metasearch product in 2013 and 2014.
“We will benefit from the scale monetization that TripAdvisor has,” Seidman says. “We make money through display advertising and metasearch the same way. We continue to do that and it’s flowing well. “
If your biggest revenue stream is from hotel metasearch, it’s best to have a high-influencer parent with the same product that sells both metas to customers as a bundle.
“So did we. [meta] product pre-discovery,” says Seidman. But now, instead of being in-house, we’re using TripAdvisor’s entire meta.
There are similar benefits to display advertising sales.
“Our display ad sales rolled into TripAdvisor sales,” Seidman said. “The general concept is the same. We get some economies of scale by going out and selling display, and with 1.5 million people, 20 million pages a month, it’s not just “Hey, Oyster,” it’s selling a broader set of products to the advertiser. Who can afford something so big?
There are some startups that have a different, if not unique, product, but they don’t survive because they have to compete with much bigger and sometimes smarter players for market share, or maybe the company isn’t different enough.
The case of hotel metasearch site Room77, which licenses its technology to Google and sends most of its workforce to collect payments on Google, comes to mind. Room77 had different features from competitors, including offering senior and military discounts and showing hotel floor plans and room views, but in the end, was everything different enough?
And Room77’s marketing resources had to compete with Priceline, Expedia and TripAdvisor.
“We went through a lot of struggles in 2013, and you need to have capital and scale to drive revenue,” Seidman says of Oyster. “We were small. We had a good product that people really liked. That hasn’t changed.”
Purchases are a two-way street.
If TripAdvisor gave Oyster the runway to grow its brand over the next few years, it would be based not just on the quality of the product or performance, but also on the acumen of TripAdvisor’s mergers and acquisitions team in looking at the product and knowing how. To use it.
“It was a really good lineup from Steve. [Kaufer, TripAdvisor CEO]Adam Medros [senior vice president global product] and David Crowther [president, Smarter Travel] Says Seidman, “Oyster fits how we think at TripAdvisor.” “It was nothing too vague. It was obvious. And that’s pretty obvious right now on TripAdvisor.com.
Oyster in 2010.
“Maybe when I was at Microsoft, I’ve seen things go wrong when you buy a company and you think you’re buying a really good, fully baked product,” Seidman says. “But it turns out you didn’t buy that right. They didn’t achieve that product-market fit,” he said.
Different approaches to the same problem
Seidman thinks the combination between TripAdvisor and Oyster works well because TripAdvisor is a user-generated content site at its core, and adding Oyster’s professional photos as a supplemental section provides additional research value, especially if hotels don’t have many user reviews. Oyster, meanwhile, remains a professional site.
“There is literally no user-generated content on our site,” Seidman says.
What sets Oyster’s journey apart from some of its peers that didn’t survive is that Oyster is attacking the hotel research problem in a different way — even if it doesn’t endear itself to many hotel marketing groups — and Oyster was lucky enough to find it on TripAdvisor.
What about the thorny problem of finding a business model to sustain sending all those freelancers around the world to spend time in hotels, taking photos and writing reviews?
“It was solved by a large audience,” says Seidman. “Instead of building a product for the one million people we had then, we’re now building for 1.5 million people on Oyster.com, 50 percent growth, and 315 million people on TripAdvisor.”
The jury is still out on how big the small brand can become, especially when TripAdvisor.com is attracting the mass attention of its parent company.
But Seidman likes the tools at hand these days.
Says Seidman: “We can just go ahead and do it. Here’s the concept, what you’re going to do. There is recognition at the heart of TripAdvisor, and it’s there, but the oyster can grow, it can run itself and it can climb and grow.
And that’s the plan.