Today, with their European beachheads established,
Hoberman and company co-founder Martha Lane Fox
are convinced the Lastminute concept truly has
global appeal. Beyond Europe, however, they've
moved toward the joint-venture model, already
partnering with heavy-hitters such as Travel.com.au
in Australia and New Zealand as well as South
Africa's Tourvest. From a management perspective,
says Virden, wholesale startups of companies in
such faraway locales would have been agonizing.
"We're near Europe, so we can do those from here,"
he says. "Outside of Western Europe, you're looking
at joint ventures only. You get up to speed so
much faster. Are we ever going to have a Lastminute
Iceland or Lastminute Uruguay site? There's a
real diminishing return to that sort of expansion."
For him the crucial factor is the size of a country's
e-commerce market. If it's only in the hundreds
of millions of dollars, Lastminute won't be spending
much of anything there.
When you look at Lastminute's torrid year of
expansion, one question looms: Was it worth it?
Absolutely, says Hoberman. He touts new metrics
from NetValues, a French company that measures
Web traffic: Lastminute's sites have scored first
in online-travel traffic for Germany and the U.K.,
while Dégriftour's two sites and Lastminute
France have taken first, second and fifth place
in France. Plus, V2 has been running since August
on Lastminute Australia - just in time for the
Olympics - setting first-month sales records within
the company.
"If anyone has a chance at expanding across
Europe, it's Lastminute," says Fitzpatrick of
Lehman Brothers. "For those other companies that
have to deliver physical fulfillment, it seems
like a more hopeless task."
The company's deep cash reserves also help,
says analyst Phil Clark of Goldman Sachs. "They
know no one is going to get funded as a competitor,"
he adds, referring to the tight market. "So they
can expand with an eye to profitability, whereas
six months ago they would have tried to just develop
as fast as possible."
But the localization effort has been expensive.
During the year since it launched its first sites
outside the U.K., Lastminute's operating cost
is projected to have risen from $6.7 million to
roughly $60 million (with the largest increase
coming in sales and marketing, expected to rise
from $1.7 million to $27 million). The question
now for Lastminute is whether its expansion-country
operations can produce the revenue to offset their
bloating effect on the company's burn rate. Total
revenues were projected to increase from $300,000
to $4.5 million over the same period, though as
of June non-U.K. revenues made up only 11 percent.
The U.K. can't bear the weight of the worldwide
operation forever; the other sites have to make
money. Hoberman says revenues have jumped significantly
in France, Germany and Sweden - though Lastminute
declines to break down sales figures country by
country. The Dégriftour acquisition is also
expected to push revenues up and losses down.
For Lastminute, perhaps the biggest localization
move of all awaits: trying to crack the U.S. market.
Given the size of the U.S. e-commerce space, Lastminute
naturally wants a piece. But using the local-startup
model would be expensive, in essence it would
mean betting the entire company on succeeding
in the U.S. market; and Hoberman's not playing
double-or-nothing with the company. Meanwhile,
LastMinuteTravel.com is already operating in the
States, a situation that echoes the U.K. company's
mindshare problem in Germany. "If we go to the
U.S., we'll only do it with partners," Hoberman
predicts. "Then we could do it in a low-cost way.
But right now, it's Europe and Asia that are taking
off, so that's where we'll spend our money."
