There was a time when I thought that the Internet spelt the end for intermediaries, or third-party agents. Surely, I imagined, users would go and transact direct with brands – from flights to banks, from insurance to mobile phones.
Agents have comparison engines to thank for averting disaster. Comparison engines finally showed the added value that agents offer.
Until comparison engines, third parties had been purely introductory agents. Think of a recruitment consultant – they are pairing together, or introducing – a candidate with their potential future employer. Estate agents do a similar role. And the Internet looked like it would disintermediate the middle man by offering a direct service.
Along came comparison engines and aggregators (on the Internet there isn’t much of a difference). Here we could see more choice, price comparisons, and feedback from other users.
Travel agents are still having a tough time economically. In the travel sector, the real winners have been startups and companies which have completely transformed themselves into a digital company.
One of the leading startups has been TripAdvisor. This is a completely new type of intermediary. It doesn’t have any stock in a traditional sense, and doesn’t even enable customers to book directly on its site. Yet TripAdvisor is growing at 25% year on year and has current revenue of $850 million, with a healthy 25% profit margin.
Financial Services: The utilities model?
We’re seeing the same story across many other industries – in retail (think of Amazon!), recruitment, real estate and finance. Finance is particularly interesting because financial services organisations could become “utilities” where customers go to a third party agency for a financial product (e.g. a loan), the cheapest one is shown and the user goes through to complete the transaction.
This is already happening with the insurance market – Compare the Market and other comparison engines have bigger brand recognition and fundamentally, loyalty, than the insurance companies it passes business through to.
Today’s question is whether insurance and financial companies want to be, or mind being, seen as utilities or value-add services. To answer this, it would be interesting to see the transactional statistics of insurance aggregators – to compare (forgive the pun) whether customers compare insurance companies and then click on the companies that they recognise.
If users are selecting the insurance companies which aren’t easily recognisable, it’s a signal that the industry has already turned into a utility model, and agents are here to stay for a while longer.