With the recent announcement that Kayak will acquire SideStep, we wanted to examine the two travel search businesses and what they bring to the party. In this competitive vertical, it's good to have some visibility into their results.
At the SES-Travel show, held in Seattle last August, we heard from many travel search providers and learned about excellent conversion rates: 12-17% for air travel; 8-10% for car rentals; and 4-8% for hotels. Maybe that explains why there have been strong competitive entries!
Both Kayak and SideStep executives took pains to differentiate their offerings. Drew Patterson, who's VP of Marketing at Kayak, explained that Kayak was streamlined search, more like Google; SideStep was about social media and community, more like Yahoo. SideStep's priority was "to find the best deal or best reservation to meet your needs,” said Sam Shank, VP at SideStep.
It's easier to compare these search suppliers by analyzing their revenue contributions (per TechCrunch). Kayak said they supported $2.5 billion/year in ticket sales and earned $50 million revenues, which produced a 2% yield. SideStep supported $1.0 billion/year and earned $35 million revenues, or a 3.5% yield. However, this yield is inflated because SideStep revenues also included contributions from its TravelPost (user reviews) and TripUp (social networking) units.
Perhaps a more apples-to-apples comparison might be made from valuing unique visitors. In November, comScore reported about 5.25 million uniques from Kayak and 4.5 million uniques from SideStep. When we annualized these numbers, it translated to approximately $0.79 per Kayak unique and $0.65 per SideStep unique visitor.
In any event, there appears to be a lot of upside revenue potential from travel search volumes. In her SES-Travel keynote, Nancy Ramamurthi, Chief Marketing Officer for SideStep.com, claimed there would be over 100 million unique visitors in the next three to five years.
As long as the referrals model continues to work, Kayak is buying major market share and presumably efficiencies. It will be interesting to see how many metasearch engines continue to duke it out. Henry Harteveldt, a Forrester Research analyst, told the WSJ that the percentage of online leisure travelers using these engines has been holding steady, at 12% to 15% of travelers since 2006. Thus the upside isn't entirely clear at this stage.