Monday, November 14, 2005

Ryanair: test case for Web 2.0 business model

Last week the statement by Michael O'Leary of Ryaniar, saying that within 5 years airlines will offer free flights, as revenue will come from passengers gambling while on the plane, was breaking news on some web logs and web sites (yeah I am late again with this story).
O'Leary (it remains unclear whether he had too much Guiness when making his statement) said that introducing lottery scratch cards had shown that passengers were bored and looking for entertainment. O'Leary further believes that "entertainment is where the real money will be made in the future". So he launched the idea to give away free airline tickets, as money should be made by offering gambling through mobile phones

This sounds so much like the investment thesis I discussed in my posting on a Web 2.0 business model: you give away something for free, hoping to get back something valuable for free that was once expensive. Ryanair is expecting to trade seats in their air planes, for extra revenue that will exceed the revenue that will come from selling tickets for those seats. Will this work? Will Ryanair, that gained market share by taking on a different business model than their competitors (low margins, low service versus high margins, high service), succeed in expanding their market share?

It can go either way I think: either the Ryanair case will prove that the investment thesis on which Web 2.0 is based can work in reality, or it will show that in the beginning people will get interested because something is free, but once they find out it will cost them money (maybe even more than just buying a ticket) anyhow, they will lose interest and go for the safe bet (no pun intended ;-) ). Maybe it will only attract the kind of people you do not want to be on the plane with, but I must admit that I find it quite interesting what Ryanair is trying. At least it shows that they dare to be creative when looking for new ways to increase their revenue.

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