Is's ticket to ride valid on the route to the stock market?

Profile picture for user slauchlan By Stuart Lauchlan January 8, 2015
Summary: is a dot com survivor that's about to head out onto the stock market, but does it have enough of a competitive differentiator today for long term success?

find trains mobile trainline

This morning’s news from that it plans a £500 million floatation on the London Stock Exchange next week has been long expected, but it’s no less impressive an achievement for all that.

The online train reservations and ticketing operator started life back in 1997 as an offshoot of Richard Branson’s Virgin Trains company, selling tickets from a call center. It tapped into the dot com boom and went online.

Today its app has now been downloaded 7.4 million times. The website boasts 20.8 million visits a month with the firm claiming to sell a train ticket once every 2.5 seconds and that customers pay an average of 43% less for tickets. Equally important in the chaos that it is the UK rail network, you don’t have to line up at a ticket office. was bought out by private equity firm Exponent in 2006 for £160 million. Last July Morgan Stanley was hired by Exponent to explore a potential floatation, then valued at around £400 million, but this fell victim to market jitters around technology stocks and never came to pass after bidders such as the US VC firm Francisco Partners didn’t meet the asking price.

In a statement to the stock market this morning, the private equity-backed site said it hopes to raise £75 million, which would value it at around £500 million.

Clare Gilmartin, chief executive of, said:

We are witnessing continued strong growth in rail and, having experienced first-hand the transformative effect of online and mobile in other e-commerce markets, I am hugely excited by the opportunity that the fast-developing online rail market offers.

So what will investors get for their money? Well, is the biggest train ticket seller in the UK, although Gilmartin, an eBay veteran of ten years, reckons that penetration is still only around 27% of the total opportunity, compared to 40% in some European territories. (There are plans for further European expansion, with partnerships in place with rail operators in Germany and Italy, where as legend has it the trains do run on time!)

The company can also boast 15 years of year-on-year revenue growth. Ticket sales were £1.42 billion in the financial year to March 2014, giving the site revenues of £107.4m, up from £106m in 2013, although profit was down 1.7% year-on-year to £39.2 million.

One point of note: management teams have always positioned the firm as a technology company, not a rail intermediary or a retail firm. The firm has always seen technology investment as a key differentiator and has made significant inroads into cloud computing and mobile development. Around two-thirds of total visits to the company website are made on mobile phones.

My take

It is impossible to describe to the uninitiated just what a horrendous experience using the rail network is in the UK. While those of you in the US and continental Europe may grumble about the vagaries of your own services from time to time, let me assure you, they are as nothing compared to entering the ante-chamber of Hell that is a UK railway terminus.

Trains station full
Welcome to the ante-chamber of Hell

A good case in point is the utter collapse of the network over the recent holiday season as engineering works,  intended to reverse decades of neglect and underinvestment by government after government,  saw thousands of people stranded and unable to reach their destinations.

And on the days when the trains do all work (which isn’t that often!), travellers are confronted by a baffling array of ticket pricing options that would pose a deciphering challenge to the likes of Alan Turing, never mind a commuter in a hurry. Find yourself inadvertently buying the wrong ticket and you face a hefty fine, a nice revenue stream no doubt that does nothing to encourage simplification of ticketing.

This is the unholy mess into which pitches itself. The messaging is compelling: order online from your desktop or your mobile device, get a cheaper deal, don’t worry about having to stand in line at the ticket office. It’s a nice idea and one that the firm has spent a great deal of money marketing and pushing out through costly, peak-time television advertising.

The trouble is…it’s not true. Or at least, not entirely true at any rate.

Yes, you can order online and get a cheaper rate, but not always. I’ve personally experienced situations regularly where the price I get from going directly to the train operator, Virgin for example, gives me a better rate and doesn’t charge me the £1.50 transaction fee that does.

There’s an interesting future challenge here for It’s undoubtedly the case that more and more operators will want to pitch their own competitive offerings, potentially with better discounting and incentives. thetrainline,com does have a head start here as the UK operators inability to get reliable wi-fi to work on trains is testament enough to the lack of investment (or interest) in IT to date.

As for the ‘not lining up at the ticket office’ bit, well, yes, that’s true up to a point. If you can plan your journey far enough in advance, then will mail your tickets to you.

But if you’re going on a journey at short notice, you end up having to line up at the automated ticket machines on the station concourse, most of which are every bit as busy as having to line up at the ticket office. All that’s missing from the experience is the truculence of the staff behind the ticket counter!

I was amused this morning to read the experiences of Techmarketview’s Richard Holway - a great champion of UK tech firms, but a Trainline virgin:

The problem I have with came to the fore this morning when I decided to ‘give it a go’. After all, surely it would save that queue at the ticket office/machine on the station? So I applied for my Farnham/London return with my Senior Citizens card and it came up with my usual fare of £15.90. So I pressed the button to buy at which point it added 75p handling charge. Was it worth it to the avoid the queue? Let’s give it a go…

And that’s the rub. It then told me that my tickets would be available within 2 hours for collection at a ticket office/machine of my choice… Maybe booking tickets for journeys like this are not what is all about.

rail network delays
A typical day on the rail network

What’s needed of course is to be able to download the ticket directly onto a phone or a tablet, but that’s going to mean train operators investing in scanning tech for their on-board staff. So while that two-thirds of traffic coming from mobile devices stat is impressive, the harsh reality is that using your phone or your tablet as an electronic ticket can only be done on 17% of current available fares.

As Holway notes:

It’s interesting that digital services in the transport sector has the lowest level of user satisfaction and usage of any major sector. The Financial Services industry scores the highest on both counts. And that is despite the almost universal acceptance/use of digital services in the airline sector and the pioneering work of things like the Oyster card on London Transport.

If can produce really useful apps for train travellers allowing them to cut through the labyrinth ticket prices/operators and producing an ‘e-ticket’ for use at the ticket barrier, then it could well be on to a winner (certainly with me) But methinks it has quite a long way to go.

Quite. But that either means getting the rail operators to spend money on tech investment or the likes of deciding to take the hit and subsidise that in partnership with them. I’m not seeing either as a likely outcome at present. And that’s why I don’t use any more.

But three cheers at least,  from a patriotic point of view, for a British dot com survivor heading out into the public market. That at least, I can get behind.