Analysis of Kayaks Multisided Business - Case Study Example

Multisided Business Model Name Course Instructor Date Analysis of Kayak’s Multisided Business A multisided business describes a model where a company brings two or more distinct but mutually interdependent groups of customers on the same platform. Such models are of significance to any one group of customers as long as the other groups are actively involved. The platform creates value for the multisided business by enabling the various customer groups to interact with one another. The main advantage of multisided businesses is the network effect. This describes a situation where the value of service for the various customer groups increases as the number of customers expands. To the multisided business, the network effect serves as a competitive advantage and a potential barrier to new market entrants (Rysman 2009, p. 126). Kayak has pioneered a successful multisided market for travelers and travel service providers. The company offers travel search engine services, catering for two main customer groups: travel service providers (such as travel agencies and hotels) and travel service seekers (travelers). The two groups of customers are distinct but interdependent in that neither group can exist without the other. Since Kayak serves two different customer groups, the company offers different value propositions to attract customers from either side. Notably, the company has a developed a dedicated website and mobile applications that enable travel service seekers to search and compare travel services from hundreds of travel service providers in an interactive and comprehensive display (Leena 2011). Once travelers find their desired travel products (it can be a flight or hotel), they are directed to the supplier of the travel service to complete the purchase. Travelers can also complete flight and hotel bookings directly from Kayak’s website. Travelers enjoy these services free of charge, which serves to reinforce the network effect as travelers are likely to recommend the services to their friends and families. Kayak’s multisided platform provide the other group of customers (online travel agencies, travel suppliers and hotels) with an efficient platform to market their products and services to focused and highly targeted customers. Kayak generates revenue by referring travel seekers to online travel agencies as well as the providers of flight and hotel services. The company has an interactive advertising platform dedicated to service providers. Through the advertising platform, service providers can place their marketing communications. Generally, adverts are the primary source of revenue for Kayak, which mean that the company must maintain good relations with travel service providers (Leena 2011). In developing the multisided platform, the founders of Kayak were motivated by the fact the traditional models which required travelers to search through several websites to look for their desired travel services were time consuming and frustrating. The founders then moved to address these frustrations by developing a system that brought together all service providers under one platform so that their customers could easily find them. Essentially, Kayak is built on convenience of information search and variety. The company’s search platform provides accurate and relevant information from hundreds of other companies’ websites in a single display, which eliminates the need for service seekers to visit several websites. Kayak’s targeted value proposition for the two customer groups serves to be its strength as it makes it possible to satisfy customer needs more cost effectively. Undoubtedly, Kayak’s multisided platform is a paradigm shift in the way in which conventional travel searches work. By enabling thousands of travel seekers and hundreds of travel service providers to interact conveniently under a single platform, Kayak has set new standards for service providers in the aviation and hospitality industries. Since Kayak does not charge to book travel seekers, its services are considered to be reliable with no risk of fraud. This aspect reinforces high levels of customer confidence, which is critical for the company’s growth. As Kayak seeks to consolidate its business and expand to new markets, there are immense opportunities that the company can exploit to grow further and expand to new markets. The most important of these opportunities is the strong growth of the online travel market. Millions of consumers are using the internet to search for services (Rysman 2009, p. 128). Kayak can benefit from this phenomenal growth by enriching its website with more search information including more travel alternatives, real time pricing data, and better electronic order processing capabilities. Instead of directing users to the service providers’ websites, Kayak should enable customers to complete purchases through its website. Kayak can also take advantage of the fact that its business is relatively new to expand into several countries. Actually there are no competitors for Kayak in any counties and therefore expansion is a profitable strategy for Kayak. Types of Intellectual Property that are Important to Kayak There are four major types of intellectual property that are of great concern to Kayak. These are copyrights, trademarks, patents and trade secrets. Copyrights are used in business to protect original works such as authorships of computer software, artistic works and music. Kayak can use copyright to protect its intellectual properties against reproduction, adaption or reproduction. As a matter of fact, Kayak has built an elaborate ecommerce platform that can be used both on web-based and mobile-based applications. The platform is the primary source of the company’s competitive advantages and hence the need to protect the platform’s software through a copyright. A key advantage of using copyright protection is that it does not require any investment to maintain or obtain it (Burk & Mark 2009, p. 85). Therefore, Kayak will not incur any extra costs but will benefit immensely from the protection of its artistic works, especially software. By using copyrights, the company will get automatic recognition and diverse legal rights to any work produced by its designers, artists and software developers. Copyright will prevent Kayak’s competitors from plagiarizing the company’s software for use as their own creations. Patents grant property rights for specified inventions, allowing patent holders to prevent others from using, commercializing or making the invention. In order for a business to qualify for patent protections, its inventions must be useful, non-obvious and original. Kayak’s multisided business is an original idea, of immense usefulness and quite non-obvious. In fact, Kayak was the first company to to start its kind of business in the industry and is by far the largest market player (Perelman 2004, p. 91). Therefore, Kayak’s business is strongly patentable. A patent will give Kayak exclusive rights which will allow the company to achieve rapid market growth during the period when the patent is in effect. Through the exclusive business rights, Kayak will attain strong market growth because it will prevent competitors from commercializing its inventions. A patent will also give Kayak an opportunity to sell or license its business ideas to other companies. This will be a good source of extra income for Kayak. Trade secrets are the confidential information held by companies about business formulas, processes, techniques, strategies and other aspects that they wish to keep secret. Trade secrets help businesses to gain competitive advantages over their rivals in the industry. Examples of trade secrets that Kayak can keep include computer algorithms, market survey results and customer lists. Some of the strategies the company can use to protect its trade secrets include restricted access to certain information, restrictive covenants for employees leaving the company and non-disclosure agreements. According to Burk and Mark (2009, p. 64) external parties such as vendors, suppliers and consultants are the most likely entities that infringe on companies’ trade secrets. These entities should be required to sign confidentiality agreements before doing business with Kayak. In order for Kayak to make long term gains from its trade secrets, it is important for the company to train its employees on how to protect trade secrets. Employees should be well educated about the company’s confidentiality policy and how to go about it. All emails and documents originating from the company should bear an indication that they are confidential or private. Employees should also be encouraged to make unnecessary copies or discuss company information in public arenas. In addition, the company should develop secure IT infrastructure with multilayer encryptions, passwords and access controls to limit access to any information that constitutes trade secrets (Burk & Mark, 2009, p. 64). Trademarks are symbols, phrases, design features or words that distinguish one business brand from another. Trademarks are the most important aspect in business management (Perelman 2004, p. 92). Companies use trade secrets as a sign of identification to distinguish their products and services from the ones offered by competitors. They aid in brand recognition and are therefore valued highly. Kayak has developed a very strong brand because of its innovative business idea. In order to reap the benefits of its brand equity, it is essential that Kayak protects its trademarks by registering them with appropriate agencies. Registration will enable Kayak to prevent other companies from using trademarks that are similar or same as those of kayak. This is important for kayak considering the phenomenal reputation that its brad has acquired in the market. Trademarks can enable thousands of Kayak’s customers to make informed and safe purchasing decisions. References Burk, D and Mark, A 2009, The Patent Crisis and How the Courts Can Solve It, Chicago: University of Chicago Press.  Leena, R 2011, In Front Of Its IPO, Kayak Reports Growth In Revenue But Income Down, viewed October 6, 2015,  http://techcrunch.com/2011/05/27/in-front-of-its-ipo-kayak-reports-growth-in-revenue-but-income-down/  Perelman, M 2004, Steal This Idea: Intellectual Property and The Corporate Confiscation of Creativity, Boston: Palgrave Macmillan. Rysman, M 2009, ‘The Economics of Two-Sided Markets’, Journal of Economic Perspectives, Vol. 23: pp. 125-143. Read More