You squeeze into your seat in the airliner, buckle up and then, against your best judgment, you start asking your seat mates what they paid for their airfare.
That's what Oren Etzioni did on a flight in 2002 and he discovered that, of course, others paid less for their tickets. Even worse, said Etzioni, a professor of computer science and engineering at the University of Washington, "they bought later than I did."
Etzioni, the brains behind such early Internet companies as MetaCrawler, a search engine, and Netbot, an online comparison shopping service, figured this was a problem that computers could solve. All he would need is a mountain of data to mine for information about seat supply and demand and an algorithm to predict how the airlines' algorithms were going to price those seats.
A brief student project proved that, indeed, computers could be far more reliable than a Magic 8-Ball. So Etzioni helped to create Farecast, an airfare search engine that also predicts how much the price of an airline ticket will rise or fall over the coming days.
The company was originally named Hamlet because its motto was "To buy or not to buy." That is the question, but the name was nevertheless a little obtuse for people on the Web rushing to look for cheap fares. The pun on "forecast" is a little subtle, but an easier association for travelers to make.
The company has attracted US$8.5 million in venture capital, most recently from Greylock Partners, which has backed the college social networking site Facebook and the vote-on-the-news site Digg. It also received financing from the Madrona Venture Group, the Seattle concern that is staking Redfin, the online real estate broker; ShareBuilder, an automatic stock investing site; and PayScale, a site that gives consumers salary data.
Farecast could become a great tool for consumers because it uses much the same techniques that airline computers have used to extract the maximum amount of money from the flying public. It is the latest Web site to harness cheap computing power to hazard predictions on all sorts of everyday things and make the data available to consumers.
One such site introduced earlier this year was Zillow.com, the real estate voyeur's guilty pleasure. It mines data in county land records to hazard a guess on the value of 65 million homes across the US. The Seattle company says its "Zestimate" is within 10 percent of the selling price of a home, though many users have noted that the inaccuracy of the public records distorts the price estimates. Nevertheless, it is popular. In May, it had 2.4 million visitors, according to comScore, making it the ninth-most-visited real estate site.
Inrix, based in Kirkland, Washington, crunches data to predict traffic. It measures the speed of a half million commercial vehicles, like delivery vans and taxis, equipped with GPS receivers and also figures in information on weather and the scheduling of schools, factories and concerts.
Its Dust Network not only monitors the freeways, but the arterials and side streets as well, so that when a freeway is jammed and the arterial routes start backing up, the Inrix computers alert the driver to the least-busy alternative.
Farecast makes the same assertion for airline tickets.
"This is Shopping 2.0," said Hugh Crean, Farecast's chief executive. It goes one step further than Web sites like Kayak, Sidestep and Yahoo's Farechase that search the listings of the airlines and travel sites like Orbitz and then display the best deals.
A traveler picks the dates and destination of the trip just as he would at any other online airline travel site. Farecast makes a list of the scheduled flights, listing them from cheapest to most expensive.
What's different is that at the top of the screen is an arrow that points the direction Farecast's computer thinks fares are headed. Farecast even specifies how much.
How do you know the computer is right? You won't know that until after you buy and neurotically check back to see what happened. Testing over the last few weeks suggested it was right about 75 percent of the time, exactly what the company said its overall success rate was.
To get you to trust the site, the Farecast computer also tells you how confident it is of its prediction.
"This is predictive technology -- we won't achieve clairvoyance," Crean said.
Airlines have been good at what the industry labels as "dynamic pricing." At a moment's notice, they can drop a fare to fill up an otherwise empty plane or raise a fare for a flight it predicts will be packed.
Now the tables have turned. Farecast computers try to outthink the airlines' computers. Farecast buys data on the availability of seats and their prices from ITA Software, a Cambridge, Massachusetts, firm that also sells the same data to travel agents, travel Web sites, computer reservation services and the airlines themselves. Farecast has information on nearly all the carriers except Jet Blue and Southwest.
With 50 billion prices in its five-terabyte database, the computer uses an algorithm that focuses on the volatility of airline prices and how it relates to airline inventory. Farecast says it monitors 115 indicators that are reweighed every day for every market, about 2,000 city pairs when the system covers the entire US. Not only does it follow supply and demand, but also other factors that will shift traffic patterns, like the weather and who wins the National League pennant.
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