Hub Premium
Some once thought that Internet would wipe out the middlemen, leaving no role for agents. Now, one needs to look no further than Expedia, Priceline, Amazon or e-Bay, and realizes how wrong such no-agency conjecture turns out to be.
Not only does Internet not kill the middlemen, it allows the smart agents to create and add value in ways and scales which, counter-intuitively, surpass those higher up in the food chain.
For example, check out the public financial information on Ctrip's website - an online travel portal focused at China - one readily works out an operating margin of over 34% for 2010. I doubt very much how many airlines or hotels came close to achieving that, though an airport might.
How could an agent possibly add more value than its principal in the chain? I guess because an agent in cyberspace is not just an agent anymore, but can become an enormous aggregator which facilitates an abundance of informed choices. It is its hub status which enhances the bargaining power of an aggregator and enables it to capture a substantial part of the premium from its suppliers - another winning game of convergence.
Not only does Internet not kill the middlemen, it allows the smart agents to create and add value in ways and scales which, counter-intuitively, surpass those higher up in the food chain.
For example, check out the public financial information on Ctrip's website - an online travel portal focused at China - one readily works out an operating margin of over 34% for 2010. I doubt very much how many airlines or hotels came close to achieving that, though an airport might.
How could an agent possibly add more value than its principal in the chain? I guess because an agent in cyberspace is not just an agent anymore, but can become an enormous aggregator which facilitates an abundance of informed choices. It is its hub status which enhances the bargaining power of an aggregator and enables it to capture a substantial part of the premium from its suppliers - another winning game of convergence.
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