With the start of the long Memorial Day weekend upon us, maybe you'll soon be boarding a plane for a fun getaway. Maybe you're already sky high. Even if not, take a moment to think about one of the conveniences of modern air travel: wireless connectivity.
Each time I fire up my laptop and hit that magical 10,000 feet at which I can connect to the plane's Gogo wireless net, which in turn connects to ground-level cell towers, I am rather amazed by the technology in action, and the innovation that brought it to travelers like you and me. As I write, having just listened to Gogo's Yang Chao, vice president of finance, describe how the startup applied business analytics to revenue forecasting, I'm rather in awe of that part of the business, too.
For those of you who haven't flown in the last couple of years, Gogo offers fliers using laptops or other WiFi-enabled devices to get online, generally for a fee. While business travelers benefit from productivity boosts, leisure passengers get to have fun in air, downloading movies or apps in flight. Through advertising partnerships, passengers can get special online shopping deals, too.
Since launching its air-to-ground wireless service in August 2008, Gogo has captured an 81 percent market share of the installed base, said Chao while speaking at The Innovation Enterprise's Business Analytics Summit in Chicago yesterday.
She explained further: Gogo has contracts with nine out 10 North American commercial airlines, with service in 1,800 commercial aircraft; adding in business aircraft brings the total of Gogo-equipped planes to around 6,400. Gogo seems ubiquitous to me, always the provider if wireless connectivity is an on-board offering on my flights. So who, my fellow attendees and I wondered, are its competitors? Panasonic Avionics and Row44, she said.
As a groundbreaking startup, Gogo sits at the intersection of three industries, Chao noted: airline, telecom, and Internet. That, plus having no historical data on which to build, made developing revenue projections a rather "daunting task." That's clear when considering the 3,000 percent (yes, that's three zeros) variance in revenue projection with which Gogo initially worked.
To better understand where it sat, Gogo began by studying the impact of the macro and micro economical environment, then took into account the complex characteristics marking each industry segment in which it played. It had to take factors such as airline seasonality, telecom operations and cost infrastructure, and online click rates into account, for example.
Additionally, Gogo studied the differences among its customers, airline to airline, and the end users -- consumers who want leisurely pursuits and productivity-seeking business travelers. And it factored in considerations such as product and service offerings and technology options. On the latter, for example, Gogo recognized that over time, capacity would likely stress its air-to-ground network and satellite would need consideration in its revenue projections, Chao said.
When Gogo started its revenue projections, she elaborated, it focused on three sets of analysis:
- Airline impact, assessing variables like aircraft capacity, flight distance, number of flights, load factor, and type of carrier in terms of customer "take rate."
- Product and channels, including one-time use vs. subscription purchase, direct sale vs. indirect channel sale (through partners like American Express), and for its online advertising service, online visits, and impressions.
- Pricing and market adoption, with service initially priced based on flight length but more recently on the demand base, Chao said. A fundamental business driver, she added, is average revenue per passenger. "We had to find our balance in maximizing take rate and revenue, and we've found this to be a better metric for measuring our business."
By applying such analysis, Gogo was able to bring down that initial 3,000 percent variance in revenue project to just 1.5 percent last year, and Chao added, year to date, it is at less than a 1 percent variance. That certainly makes figuring out what's what with the budget a tad less daunting, I'd say.
Are you a Gogo fan -- and, if so, of its service or its analytics... or both? Share below.