In yet another sign of the consolidation and disruption taking place in the digital travel space, LINE Corporation, which runs Japan’s dominant messaging app, has taken a 34% equity in Venture Republic (VR), which operates “Travel.jp” Japan’s leading travel metasearch.
The dollar value of the deal is unknown but it is described as a “capital and business relationship” in which three new directors and one new corporate auditor from LINE Co. will sit on the VR board. Current CEO Kei Shibata and COO Kenichi Shibata will remain as company’s representatives.
The move follows the announcement made late last month by LINE of its intentions to enter travel as part of its plan to develop the LINE Commerce gateway “enabling users to start every shopping journey from within LINE”, said Takeshi Idezawa, CEO, LINE Corporation.
“Based on this partnership with Travel.jp, LINE Travel is the latest service to join the LINE Commerce gateway, and will enable users to search for, compare, and book domestic and overseas trips. Travel.jp is also providing its online travel guide media service with rich content provided by travel experts. As such, I am pleased to be able to provide quality one-stop travel service through this partnership.”
The Venture Republic team with Kei Shibata sitting front right
Yeoh Siew Hoon caught up with VR’s CEO Kei Shibata to get into the background and intention behind the new deal.
Q: Why this move at this time? Why did you sell 34% of your company to LINE?
It is very obvious that the messenger platform is becoming a dominant communications platform by Internet users in Japan and other parts of Asia.
LINE alone owns 75m monthly users, almost everyone who has a smartphone in Japan uses LINE. After they launched their e-commerce business and food delivery, they saw good results – that’s why they thought travel is a natural extension.
For us, one of the triggers was when we saw how, after publishing our guide content on LINE, our subscriber base went from zero to 500,000, and now it’s 700,000. We have a touchpoint every single day, it’s very sticky, people are opening our content everyday.
It therefore makes sense for us to do something more with the messaging platform.
Q: Who made the first approach?
I personally know the management team of LINE so, in a way, that’s lucky. We started the conversation a few months ago.
Q: Clearly, you also saw a need to evolve your travel metasearch business, because it’s getting harder to acquire customers.
The way I saw it, the market was saturating on the web browser and desktop. Search queries on Google were not growing on the web platform. Where were they going? Mobile or messenger or specific apps like Facebook or Instagram. We saw the shift in users. We had found a way to acquire more users for our metasearch business through content and that strategy, started six or seven years ago, has paid off. We now have 15m monthly users and are still growing 30-40% a year.
Now we have identified another fish pond in the messaging platform.
Today’s world is all about user acquisition. The more users you have, the more powerful you are and you can negotiate with suppliers.
Q: And LINE benefits from your travel expertise in turn.
LINE already started other e-commerce businesses with similar metasearch concepts. They are not going the Amazon route, so they are a natural partner for us. They have no expertise in travel, which is such a complicated business with complicated distribution. It makes sense for us to work together.
Q: It’s rather similar to how Naver works with HotelsCombined in South Korea, except that partnership is without equity.
The way I see it, that can have some limitations and vulnerability. If you are just an enabler, why do they have to keep working with you? Having equity makes for a stronger relationship.
The other great potential of the LINE platform is that it’s all based on app and personal IDs. And with personalisation the next big thing, this will allow us to offer personalised search as well as personalised recommendations on in-destination activities. If it’s raining, we can recommend indoor activities, restaurants, using push notifications, based on our content of 27,000 articles.
It enables us to offer an end-to-end journey. People talk about it but no one – Booking, Expedia – has done it yet.
Q: Is this deal with LINE exclusive? In their release last week, they say they’d be working with “more than 250 popular travel sites including JTB”.
I can’t give details, but our relationship is something significant.
Q: A lot of Japanese companies now want to go global, including VR which now has interests in South Korea and Singapore. Does this agreement with LINE limit you since it’s mainly dominant in Japan?
LINE is also becoming a dominant platform in Taiwan, Thailand and Indonesia. We recognize the opportunity outside Japan down the road but at this time, we are focused on the Japanese market. The Japanese domestic market is huge but we see the opportunity ahead as well.
Q: It is clear the growth in Japan’s travel market is mainly inbound – outbound and domestic are flat. How does this give you an advantage in the inbound market?
We don’t see any immediate impact on our inbound business. However we have a solid business in Singapore and South Korea now and we are starting to see inbound business developing from Trip101 and All Stay.
The most immediate impact is domestic, that’s the biggest pie.
Q: That makes you a formidable competitor then to companies like Rakuten, JTB and Jalan.
Not really, they are good partners and they will continue to be good customers for our metasearch business.
Q: Unless you start to offer instant booking? That would make sense since we are already seeing a trend towards conversational commerce, where everything up to payment takes place within the app and LINE has LINEPay just like WeChat has WeChat Pay.
We do see some limitations in the metasearch model on a platform like LINE and it does make sense to complete the transaction in one platform.
Q: You have been in the metasearch space since 2001, longer than any of the other players around like KAYAK, Skyscanner, Qunar, Wego.
Yes, Japanese are known for their longevity.
Q: Do you accept that it’s harder these stays to be an independent and that you have to surrender to a giant to survive?
I don’t see it as surrendering, we still own the majority and Kenichi and I still run the company. But yes, it is harder for independents now. It is not easy at all to stay relevant and independent, in healthy shape. The battle is for user acquisition.
Q: You mentor a lot of startups. What’s your advice to them then?
It’s all about focus – either horizontally which is geographic expansion or vertical, the area of business. You either want to do one thing or the other. For us, Travel.jp is about focusing on one single market and do everything. For Trip101, its focus is content and expanding geographically. You have to be aware of your position with a clear sense of focus.
Q: Clearly metasearch is struggling. What’s the next wave in metasearch?
Yes, I was reading articles about Booking Holdings buying HotelsCombined and analysts saying they were puzzled. Some are struggling because fundamentally the value of metasearch is limited.
In a smartphone age, you have to have the entire experience in one app – with metasearch, you have to go to different websites, opening new browser tabs. It’s not providing the best user experience. It’s also commoditised – a lot of APIs are out there and it’s not hard to do metasearch service.
In the early 2000s, it was more challenging to build a metasearch product and user acquisition was in a different phase. You buy big traffic at low cost and sell traffic at higher cost. Now that margin has shrunk.
That’s why we believe in the content model – to change from a provider of limited functionality to a more varied offering. It was necessary to differentiate.
Q: Why didn’t you sell 100% of the business and make a full exit?
This partnership has tremendous upside. If you see the great potential upside, why not stay in?