Don't think so, Tom. PCLN subsidies just represent "sampling."
And sampling is just one of many merchandising tools that PCLN will use, along with advertising, corporate sponsorships, link exchanges, commission programs, etc. This is truly low-tech, no-brainer stuff. The beauty of PCLN's sampling is that it can be infinitely adjusted and turned on or off on a dime. In the physical world, sampling is much more complicated and it's still a huge business. Bet you have a T-shirt with somebody's name on it...
What's more, third-parties will be putting up most of the future subsidies--in order to lower their cost of customer acquisition. If it costs EGRP $250 to acquire a marginal customer and it can snag one by subsidizing an airline ticket for $50 or $100, it wins, along with PCLN and the PCLN shopper.
PCLN made a sweetheart deal with DAL to bring it in as a partner, attract the other airlines and jump-start the business. It got the job done early on and the deal cost PCLN nothing; to the contrary, it raised $1.5mm in equity. (Meanwhile, by your calculations, 15mm shares aren't worth $2B, they're worth only $187.5mm. So which is it?)
Anyway, you don't seem to appreciate that PCLN's not about airline tickets or hotel rooms--any more than AMZN's about books or CDs. AMZN's about real estate and PCLN's about transactions. Y'know, Tom, demand collection is pretty heady stuff and it rolls out easily to new segments. You might want to read up on it. Some have suggested that the PCLN model is the cleanest one out there--perhaps an order of magnitude better than EBAY's. Could any of this support a Big Time market cap, or are you just not "getting" it?
By the way, when PCLN starts offering gasoline, what will you be bidding for 1,000 gallons?
BAM |
