SkyMall: A Genius Business Model That Ran Its Course

Yesterday, a staple that existed for the past 25 years announced that it is no longer.  The company behind the free SkyMall catalog that started in 1990 has filed for bankruptcy protection.

I remember the many times when I was bored on a plane and read the SkyMall catalog, usually for the pleasure pointing out the  ridiculous items they were trying to sell, wondering who the heck buys this stuff?   A question that I’m sure many other SkyMall readers have likely pondered as well.

Where else in the world could you find a $2,250 life-size Bigfoot Garden Yeti statue or a $339.99 self-cleaning cat litter box? Each item in the catalog was more outrageous than the other.  As the New York Times dubbed it yesterday, SkyMall was the leading journal of the stupid stuff people buy, no longer made viable through actual sales of stupid stuff.

What’s surprising is that SkyMall had brought in around $33.7 million revenue in 2013, but this shrank to just $15.8 million for the nine months ending September 2014. Just a few short years ago, SkyMall’s business was booming.  Even in 2009, despite the financial crisis, between website and magazine sales, the company was generating an estimated $130 million in revenue annually. So what happened?

With revenues clearly in free-fall, the company cited the recent changes in the rules regarding electronic devices in the sky coupled the proliferation of in-flight Internet access as the key reason for the sharp decline in sales.  Quite simply, with access to tablets and smartphone, people just aren’t bored enough to be reading the SkyMall magazine.

Despite the hundreds of jokes going around online around SkyMall’s demise and the many items that won’t be missed by consumers, SkyMall’s business model was somewhat genius for the times and has likely influenced some of today’s successful digital business models.

First, they knew that people on planes will not buy normal things that they find every day at the mall so they hit on highly unique, never-this-seen-before items. When you think about it in digital terms, you can call some of these items “viral”, meaning you’d be tempted to share them with your seat mate, if only just for laughs. While I have no idea how many people have actually purchased a Big Foot Garden Yeti, having these items in the magazine made it memorable and engaging and gave people something to share and talk about.  Eventually, all this buzz resulted in sales – and lots of them as people would remember the SkyMall brand and products and actually buy stuff through their website.

Second, and most importantly, it used to be the default boredom cure for 650 million air travelers a year.   Travelers who are captive and have lots of time to spare, were reading the SkyMall magazine cover-to-cover.  There are very few magazines (or any media in fact), that receives so much undivided attention in an age that’s just full of distraction. The magazine was SkyMall’s big competitive advantage and was the key to fuelling their success at the time. With so many captive eyeballs, the magazine in seatback pockets drove enough awareness to generate more than just laughs – it actually made good money and created a brand that generates nearly 5 million Google results.

Today’s cure for boredom is our smart phone or tablet, and every app developer’s goal is for users to spend more time in their application. The battle for captive eyeballs is furious and can get really expensive.

However, like every business model eventually does, as strong as it was, this one has run its course. While electronic devices and wifi on planes didn’t just emerge overnight, the company has done little to evolve its business model and ditch the magazine in favor of digital and other ways to capture and engage its audience.   The fast-charging technological change claimed yet another victim who couldn’t evolve their business model fast enough.

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One thought on “SkyMall: A Genius Business Model That Ran Its Course

  1. Reblogged this on SUSAN SMITH and commented:
    An great article which aligns to Jim Collin’s “Great By Choice.” It also speaks to the requirement to include External Scanning of competitors and substitute competitors on a regular basis. In this case substitute competition was found in our devices. Thanks Reuven for another thoughtful article.

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