Last week, Child 1 and I watched the Lehman Brothers trilogy, a play that traces the story of the three Lehman brothers, and their descendants, who created the (in)famous Bank of the same name. Their business empire didn’t start as a Bank, though. Rather, it started as a textiles’ trader which went on to become a general trader, before tapping into the cotton trade business, as intermediaries between the cotton producers and the mills, and so on and so forth. Each stage of evolution built on insight acquired during the previous one, and resulted not only in a change of what was transacted but also the constellation of customers, suppliers, business partners, etc…
Then, yesterday, while cleaning my Papers To Be Read folder, I came across one paper that was also looking at business model evolution – though, it was focused on TripAdvisor.
The paper was authored by Cristina Alaimo, Jannis Kallinikos and Erika Valderrama-Venegas, and reports on the findings from a longitudinal study of a company that, I think, changed how we choose and book travel accommodation, as well as how we assess and experience a venue. The findings are reported in the paper “Platform Evolution: A Study of TripAdvisor”.
The authors identify three key stages in the evolution of Trip Advisor. In the first stage, Trip Advisor was a search engine, which indexed travel information that had previously been fragmented across a large number of websites. This was funded through display advertising, and travellers were clearly a client / user of the information assembled by TripAdvisor. Gradually, TripAdvisor moved to a model whereby travellers were no longer just the client – they became data producers, in the form of product reviews, comments and other data about their experiences, which flowed to TripAdvisor via the App and other collaborations (e.g., Open Table, Facebook, etc). Then, TripAdvisor evolved into an End-to-End Service Ecosystem. Rather than just helping travellers identify and shortlist hotels, TripAdvisor also displayed real-time information about availability, and allowed travellers to book directly on the platform:
TripAdvisor started to introduce a range of end-to-end services whereby users could get through the entire travel consumption process, from search destination to actual hotel reservation, without leaving the platform. (page 5467)
TripAdvisor also teamed up with services such as Deliveroo, to expand the range of services’ available to travellers, all accessible through the TripAdvisor platform.
| Stage 1 | Stage 2 | Stage 3 | |
| Activity | Search Engine with a travel focus | Social Media | End-To-End Service Ecosystem |
| Business model | Media model, funded through display advertising | App development | App acquisition, integration of services |
| Key platform Functionalities | Indexing and ClassifyingSearching (multi query) | Networking Producing & Consuming content (wikis, rating, review- ing)Personalizing results (filtering, selecting)Subscribing | Comparing (price and content) BookingBidding |
| Data type, enabling the key platform functionalities | Hotel data Destination data Product data | Social data (actions and opinions by user platform participation)Network data (friends’ and friends of friends’ data from social media platforms) User Generated Content (reviews, forum, Q&A) | Real-time transaction data (Booking generated by users and Bidding generated by hotels and OTAs) |
| Key partners | Advertisers (OTAs and big hotel chains and travel sites at the beginning) | Social media platforms | OTAs IBEsSharing economy platforms |
Alaimo and her co-authors summarised TripAdvisor’s evolution as thus:
(T)he three stages in TripAdvisor’s evolution are conditioned by the platform functionalities implemented in each stage and the data types produced and exchanged among different groups of users. Platform operations are, in turn, conditioned by the dynamic forms of user involvement the platform designs and their interdependencies. Forms of user involvement often work in tandem with specific platform functionalities to establish complex user model configurations that are eventually reinforced by the overall platform strategy.
The social data and search capabilities cumulated in the first phase became integrated in a much more comprehensive redesign which sought to accommodate additional forms of user involvement, most notably user generated content and various forms of user inter- action during the second stage of the platform evolution… The searching functionality was empowered by popularity and other measures that could be computed on the basis of user involvement… These changes also enabled the development of several other services such as dining reservation, flight booking and vacation rentals, all linked, in one way or another, to user generated content and user interaction within the platform and across platforms… Taken together these new features and data- resources brought the transition to the third stage and the transformation of TripAdvisor from social media to all-in-one-place destination for travelers or data services ecosystem…. In the third and current phase of its evolution, TripAdvisor acquires the status of a hub of a complex data-service ecosystem. Its central position derives from its capability, built over the years, of producing multiple data formats and multiple user models to differentiate and expand the scope of its data services. (Pages 5468-9).
This very readable paper makes for a very interesting case study about business model evolution, a depiction of the role of web-users as key, yet unpaid, enablers of the business model of social media platforms, or simply a trip down the memory lane of digital platforms. You can find it here.
Ana Canhoto 