Why Is Apple's Mobile Travel Strategy Still Grounded?
by Glenn Gruber
Ness AVP Travel Technologies and Mobile Solutions
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.
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?
Photo Credits: iPhone image by BritishAirways. Used under Creative Commons SA license. NFC image via Shutterstock. iPod photo courtesy of Apple.
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