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588 days ago
 

Apple iTravel: So what happened to that?

It was almost three years ago that we all got first sight of what Apple might have in mind if it wanted to launch an assault on the travel industry.

After first being reported on the Patently Apple blog, iTravel (as it was labelled at the time) sent the travel industry atwitter (and on Twitter) about Apple’s imminent foray into the market.

It had already disrupted the music industry, the mobile carrier monopoly and re-imagined the entire way people viewed mobile devices.

So, travel was next. Why not?

As an industry that has changed relatively so little over so a long period of time, travel seemed ripe for disruption, right? Yet three years later, here we are and we got nothin’.

Zero. Zip. Nada. At least not yet.

Now you can see that we have Passbook. Sure, it has e-boarding passes. Many airlines have adopted Passbook. But Passbook doesn’t really impact the travel lifecycle very much. And it serves many masters in addition to travel – entertainment (MLB, Fandango), retail (Starbucks, Target).

In truth it’s as much about reducing the number of loyalty cards you have to keep in your wallet or your keyring than it does with actual commerce. But all that being said, it seems to be wildly successful, while wallets like ISIS and Google Wallet are struggling to get traction.

But I digress a bit on the mobile wallet.

But the story is far from complete. This past summer the US Patent and Trademark Office granted Apple a patent entitled “System and Method for Transportation Check-In”, which specifically calls out NFC technology.

Still, three years later. Zero. Zip. Nada. So, why is that?

To be or not to NFC

One of the key principles of the iTravel patents and mobile wallets seemed to be the integration of Near Field Communication technology, commonly referred to as NFC.

It was a technology to support very short distance, secure communication. It is a technology that has been around for a decade searching for a problem to solve. Wallets and checking in seemed to be that problem. I mean NFC was specifically called out in the patent.

But the iPhone4 was launched and no NFC. When the iPhone4S was to be launched people were saying it absolutely, positively had to have NFC in it. Nope.

Then before the iPhone5 launch, it was a virtual certainty. Android phones and even Windows Phones had NFC. It was time. And then it wasn’t.

Will we see it in the iPhone5S? At the launch of the iPhone5 Apple SVP, Marketing Phil Schiller said:

“It’s not clear that NFC is the solution to any current problem. Passbook does the kinds of things customers need today.”

In the end, I think pragmatism rules the day at Apple as its regards to NFC. Let me explain.

NFC has been integrated into many phones on the Android and Windows Phone platform. Though the primary use case seems to be sending sex videos to your spouse if you believe Samsung commercials…I mean sending content from one phone to another.

The problem with NFC as a reliable platform is infrastructure. The reason that Samsung has to focus on phone-to-phone transfers is that there is very little “receiving” infrastructure out there.

In the iTravel concept, NFC would be used at the check in counter, security screening, gate, car rental counter, the hotel. That’s a lot of different places in one trip.

For NFC to have real utility it needs to be in a very high percentage of these locations. It means that airports, airlines, car rental agencies and hotels – across many different brands – need to install NFC readers at their end.

Is it worth making NFC a lynchpin of your strategy until NFC readers are where you need it? One can say that it’s a bit chicken-and-the-egg, but I think there are a few other reasons why Apple isn’t in any rush.

Web services are hard

There is another big piece here – building a highly reliable platform that pieces all these elements together.

As we have seen over the past few years, Apple has tried to move into the web services business with features like Siri, Maps, iCloud, GameCenter and the Ping Music social network (the first two of these could play a big role in the iTravel system).

None of these have, shall we say, been overwhelmingly successful, to put it nicely.

Being able to offer highly resilient services is key if you are going to own your customer’s travel experience. Travel can be stressful enough on its own. If Apple had material failures of their application, the blowback would be huge.

To that end, All Things D’s John Paczkowski recently noted that Apple’s next battleground is web services. One more public failure after the previous ones might be crippling to Apple.

So I think Apple is in no rush to deliver iTravel. As I said earlier, the travel industry has been the same for so long, the time to market urgency isn’t quite so high.

It is true that Google is making many strides in travel, but even with the $700M acquisition of ITA Software, the pace of development hasn’t been as fast as many expected. And as we learned from Google Travel SVP Jeremy Wertheimer’s interview at PhoCusWright, “it’s a process”.

Travel is nothing like the music industry

Now the third piece of delivering iTravel to market is the hardest and perhaps close to impossible. In order for Apple to provide the comprehensive solution that iTravel purports to be, it needs to have the cooperation of the different players in the ecosystem.

Travel is vastly different than the music industry which Apple disrupted with iTunes. To start with, selling music wasn’t really where the money was. Today artists and labels don’t make most of their money from albums, they make it from tours.

Music is not a perishable good. In fact, it has an endless shelf-life. Also the content can be digitized and distributing music over the Internet was a cost reduction opportunity for distribution.

The digitization of music also created an opportunity for new labels to spring up and artists to create, product and sell their music without the big labels.

The internet also significantly changed the process of consumers discovery of new artists. Things were changing and the labels needed a new approach anyway. They were open to a new deal. Almost none of these circumstances apply to travel.

Further not only do they need ascent to connect all the systems to manage through the entire traveler lifecycle, but the economics have to be agreed upon as well.

We all know that there isn’t a heck of a lot of margin to go around in the travel industry today. We also know that Apple likes to get 30% of all transactions made on iOS… and that is not likely to fly (pun intended).

If Apple can’t figure out way to make money on iTravel on their own terms, they’re not going to do it just to provide a free public good. Google might do it because they care more about learning consumer preferences so they can market their users to advertisers.

That’s how Google has approached Mail, Android, YouTube, Maps and all its apps. For all the successes in these web services, Google is still very much a one-trick-pony from a revenue and profit perspective.

Conclusion

In some ways, Apple is in the same place in travel as it is in TV. It does not have the content providers on board, so iTravel can afford to be a hobby, just like AppleTV. But they will be ready when the market is.

What are your thoughts?

NB: NFC image via Shutterstock.

 
 
Glenn Gruber

About the Writer :: Glenn Gruber

Glenn Gruber is a contributing Node to Tnooz and senior mobility strategist at Propelics, an enterprise mobile strategy firm.

Previously Glenn was AVP travel technologies at Ness Technologies, responsible for developing the company’s strategy and solutions for the travel industry.

Prior to Ness he held leadership roles at Symphony Services, Kyocera and Israeli startups Power Paper Ltd and Golden Screens Interactive Technologies.

He also writes a personal blog, Software Industry Insights

 

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  1. Drew Meyers

    “And also many of the mobile operators who would make nothing more than to get out from underneath the high subsidies and the guarantees that are commonplace when doing business with Apple.”

    Until someone builds a better, and “cooler”, phone — there is zero chance of moving away from Apple. And I don’t see anyone doing that anytime soon.

     
    • bob egan

      In developed markets, like NA that is certainly a true statement – despite the back office whispers within many carriers. However, outside the NA, the turn is shipment momentum in favor of alternatives from shifted a year ago – in particular to Android. Eastern Europe is a good example.

       
  2. Ron

    I think Chris Swaine’s blog post Apple vs The World is worth a read at this point. http://www.swaineview.co.uk/apple-vs-the-world/

     
    • Glenn Gruber

      Ron, I read the post, but I think the view is wrong. Market share is not only measure of platform success and certainly not Apple’s objective. It hasn’t been so for iPhones, iPods or PCs and notebooks. They strive for profit — isn’t that the true measure of a company’s success and what shareholders want?

      While maybe Apple only has 15% worldwide share in smartphone unit sales, they overwhelmingly win the profit share race with almost 75% of all profits in the handset industry. The only other handset maker that earns a profit of any significance is Samsung. HTC is about breakeven even though they just came off a horrific quarter. Everyone else is losing money. And even Google’s flagship handsets and tablets (Nexus4 and Nexus7) are essentially being sold at no profit. It’s the classic “don’t worry, we’ll make it up in volume” story.

      Interestingly, Samsung actually makes more profit on Android than Google does as a company. Further mobile ads are actually depressing overall margins as mobile ads garner lower rates, as mobile search and browsing are increasing.

      But let me address the unit share question. One reason that unit share is also misleading has to do with distribution. Android is far more widely available because of the variety of handset makers that product Android handsets and the cozier relationship most of them have had with carriers, letting them “control the deck” as they used to say. Apple phones are only even available on 200-some-odd carriers while Android is available over 500. Also Apple is not widely available in either China or India which has an a major impact on unit potential. Apple is breaking thru in China, though they still don’t have a deal with China Mobile, the largest carrier in the country.

      But look at the unit share that Apple has within carriers who sell both Apple and Android phones and you see a very different picture. In the US, Android had an unnatural advantage for the first 4 years of the iPhone as Apple was exclusive to AT&T while Android was available on all Big4 carriers (AT&T, Verizon, Sprint and T-Mobile) in addition to regional carriers.

      But now the iPhone has shown that when it goes head to head with Android within a given mobile carrier it more than holds it’s own. With only 3 models (and my guess is the 5/4S/4 sells at roughly an 80%/15%/5% distribution) Apple has between a 40%-50+% share across VZW and AT&T (I’m not sure what the Sprint stats are). And that’s with a higher average sales price. Samsung, HTC, Google/Motorola, LG and others collectively have dozens of Android phones in the market to achieve roughly the same level of sales.

      What this says is that ideas like cheaper iPhones (which would be inherently lower margin) to dirve unit share is really a red herring and only would serve to dilute profitability. It’s a sucker bet for those who can only conceive of increasing share by reducing price .

      Apple’s real opportunity for more units is through more distribution.

       
      • Bob Egan

        I failed to even remotely understand the logic behind Chris’s post. With your fan of Apple or not you have to give them credit for inventing this era of the smartphone industry. While at the same time flipping the business model on its head. From a profit standpoint Apple has literally gutted manufacturers who were chasing unit volume, including Samsung, and notably Nokia.

        There is no question my mind that overtime the smartphone market from a hardware standpoint will commoditize. We’ve seen this in other industries including PCs. But if I were sitting in a leadership role at Apple I certainly wouldn’t be in any hurry to foster that shift.

        I have a worry about Apple it’s not about their ability to innovate it’s about their ability to innovate within the closed ecosystem while being fiercely under attack by the likes of Amazon and Google and Microsoft. And also many of the mobile operators who would make nothing more than to get out from underneath the high subsidies and the guarantees that are commonplace when doing business with Apple.

         
        • Chris Swaine

          I suppose my logic is coming from 2 places. While I agree that profit is king, I’d personally like to see the split between hardware profits and profits from the App Store.

          The apps available for the iPhone is what really revolutionised the handset / smart phone market, to date from what I’ve been able to find the best guestimates are that 35 Billion App downloads have taken place, assuming only half of them where paid for that’s still a big chunk of change (Apple take 30% of all spend to my knowledge).

          A larger market share (and in turn user base) would have a direct impact on the micro transaction side of their business pushing value through the roof.

          I think there are some great counter points to my post here and I welcome discussion, because in all situations there are reason to do or not do something in business. Weighing up the two sides and aligning with your organisations strategy and vision are key, to me that’s what Apple has done.

          Again I’m a fan of Apples devices and I would have like to see them capitalise on their share and I think it would be great way of driving innovation, because when they bring out a new concept or idea you already have a large chunk of the user base embracing it.

           
  3. Ron

    Unfortunately simplicity and innovation has died with Steve Jobs. If Apple couldn’t get maps right on a phone what chance have they got innovating the travel market.

     
    • Glenn Gruber

      Ron, I don’t think that’s right at all. It’s easy to say that Tim Cook is no Steve Jobs, and that all hope is lost. But I suggest you read this HBR article for a more balanced view http://blogs.hbr.org/pallotta/2013/01/the-market-wants-apple-to-unve.html

      I would also submit that it’s easy to make fun of Apple for Maps, but that maps is not easy. Remember Nokia paid $8 Billion for NAVTEQ. On that note, this is an excellent article about the value of maps by Asymco’s Horace Dediu http://www.asymco.com/2012/12/18/how-much-to-maps-cost-and-what-are-they-worth/.

       
      • Joe Buhler

        Glenn: You’ve beaten me to the punch with your reply. Your comments pretty much reflect my own thinking. Harping on the Maps issue is really getting old and tired. It was overblown to begin with, as a majority of users had no problems with Apple Maps at all. Granted, this wasn’t Apple’s finest hour but to claim that it signifies the end of Apple’s ability to innovate or – if they really focus on it introduce an iTravel product is ludicrous at best.

         
  4. Joe Buhler

    The key sentence to remember in this entire discussion is this one:

    “Passport’s simplicity is really it brilliance” – Simplicity is Apple’s credo and it hasn’t died with Steve Jobs!

     
  5. Timothy O'Neil-Dunne

    One of the critical questions with any mass deployment of new technology has to be adoption. Our friends in the Peninsula (Both Apple and Google) are fighting with one other member of the big AGFA 4 (in this case Facebook) seem to enjoy p*ssing on each other. So there is a lot of hot air about nothing.

    It harkens back to a big fight in the 1980s when AA and UA battled over ATB vs Optical bar codes of tickets. ATB won and cost the industry untold millions in useless hardware. NFC could replace boarding passes. But so could QR codes. Indeed the latter are very much cheaper.

    So this battle is a waste of energy. We should be looking (like Veuling) to actually get rid of boarding passes altogether. Using NFC as a boarding pass seems to be a real waste.

    We are close – let’s use really simple technology to reduce the cost per transaction to a fraction of what it is today.

    And Apple… your patent was really a waste of time. And the US Patent Office should be taken lashed with a wet noodle for giving the patent award.

    Cheers

    Timothy

     
    • Glenn Gruber

      Timothy, I wouldn’t say the patent was a waste. It has forced the industry to at least think about this stuff again. The world needs grumkins and snarks to keep the creative juices flowing.

       
  6. Bob Egan

    Glenn,

    It’s probably important to deconstruct many of the issues you raise.
    The first is to decouple NFC. As others have pointed out, we’re at least two years away from any adoption volume even by early adopters. That’s really just simple math. Handset volumes aren’t there, lots of infrastructure needs to roll out ( remember, touch n pay, is an emulation mode within the NFC spec but its really RFID, NFC’s dumb cousin).

    As others have – and you – point out, arranging travel is complicated and unlike the music industry disrupting distribution and pricing models ( what apple did ) is even more complicated.

    Passport’s simplicity is really it brilliance. It provides convenience to the consumer by reducing up to 4 draconian steps (unlock phone, find app, open app, navigate app) and helps brands streamline their
    visibility when it’s important w/on disenfranchising consumer brands.

    What i think this means is that before Apple steps into travel, I suspect, it has to fully wager on it ability to make money via distribution, transactions and enablement. Today, it’s clear they are working on enablement. Baby steps.

     
  7. Sceptical corporate traveller

    A further thought – maybe Apple are smart enough to realise that a nicely constructed set of patents would allow them to cream off a small licensing payment from a very large number of travel events (on any platform!) without ever having to get into the messy business involving inventory? That would be a neat move for making money out of a notoriously profit free industry such as air travel!
    Whether such patents would stand up to challenge is an interesting question, as is how they might be circumvented.
    Maybe Apple are cleverer than we think!

     
  8. Sceptical corporate traveller

    Great article Glenn – your are right on the nail with the issue of inventory and control thereof. Apple achieved that for music, but will NEVER have that for the travel industry, for a whole host of reasons. All the rest of the presentational stuff is nice, but beside the point.

     
  9. Norm Rose

    Glenn, I agree that the NFC piece requires the infrastructure in place to add value along the journey. It is my belief this will not happen any earlier than 2015. The importance of Passbook/Google Wallet is very much about understanding preferences and targeting ads and services based on greater customer insight.
    In 2013, we will see the beginning of major shifts in product/service targeting as more airlines launch merchandising platforms on their dot-com sites. Mobile distribution is a big part of this change and I believe the Passbook/Google Wallet provides a foundation for a more comprehensive view of the customer, as the overused phrase implies – greater share of the customer’s wallet.
    The biggest opportunity may likely be with tablets. Delta’s new immersive tablet app reflects a shift to better capture the traveler end to end trip needs. I see these tablet apps accessing tablet specific content (provided the user gives permission). Yes, iTravel /Google Travel have not materialized to any great extent, but I would not count them out as mobile (tablet and smartphones) become the primary platforms for travel search and e-commerce with Android and IOS dominating the platforms globally.

     
  10. Marston Gould

    There is a big difference between filing a patent on an idea that you generate vs. actually going to execute that patent yourself. Apple not only knows this, it knows that travel is not what it is known for nor what it would likely ever be successful with. You are probably more likely to see Amazon build a UPS / FedEx competitor where they fly their own packages around the nation for delivery than you are to see Apple create a travel business. If anyone is going to create a travel business, it will be Google. Apple thus is just sitting on this patent waiting for someone to want it or infringe it.

     
    • Glenn Gruber

      Marston, I think we are in general agreement, though if it is something Apple puts its mind to, they can do it. When you are sitting on $120B+ in cash, many things are possible. If they chose to (not that I can see it happening), they could buy Priceline outright and still have almost $100B in the bank.

      However (and goes for Sceptical Corporate Traveller too), I don’t see them licensing the patent. They have never done so on anything important. Look at all the patent battles they are having with Samsung/Google. Their goal is never to license, but is largely to block competitors from pursuing a path they have laid out or already blazed.

       
  11. Joe Bühler

    Hasn’t happened yet, but eventually will. Apple won’t likely focus on it until they have figured out how add real user value. And, as has been mentioned, travel is a harder nut to crack than many think and Apple can’t ford to blow it.

     
  12. Sandy Gennrich

    I agree that it is a bit of chicken and egg. In the US at least, the networks have laid out a roadmap for EMV adoption. And some have included contactless terminals in the roadmap. While there are no mandates for either issuers or merchants to adopt, the first critical date isn’t until 2015. Should Apple integrate NFC before merchants widely adopt contactless terminals? If Apple integrated NFC, would merchants be more likely to invest in contactless? Who moves first?

     
  13. The Cruise Authority

    Other than maybe booking some airline tickets, or some basic hotels, I can’t see how this could ever happen. I own a travel agency, and even the simplest trip is complicated in its own way. And when you get into more complicated trips like vacations, who would ever attempt to book something like this?

    The point in the article which seems to be most relevant is the concept of “blowback” – trust me, in this business, you only get one chance to screw up someone’s trip and they are gone forever. Can you imagine Apple getting blamed for an airline delay, or someone getting bumped from a hotel, and then suffering the withering comments about never purchasing another Apple product again.

    Travel is a one-at-a-time business for the most part, and can’t be commoditized (believe me, many have tried) like music or books. I just don’t see it.

     
 
 

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