A traveler shopping online in 2005 could check airline websites and online travel agencies, yet still visit several sites before deciding where to buy. Prices and available offers differed across those sources. Comparison required repeating the search and remembering the tradeoffs between results. KY2
Kayak
Kayak made comparison the product and sold the resulting travel leads.
What shaped Kayak
- 1 · 2005 to 2007Search across sellers answered a different part of the tripPaul English recalls wanting to compare several travel sites before purchasing. KY2 KY1
- 2 · 2005 to 2012Referrals and advertising turned comparison into revenueTravel suppliers and agencies paid for qualified referrals, while advertisers bought placements. KY1Aggregator Strategy
- 3 · 2007 to 2012Brand spending and acquisitions expanded the audienceKayak’s November 2009 account of its first national television campaign says research exposed low consumer awareness. KY5 KY1Brand Marketing
- 4 · 2011 to 2013Scale left important dependencies in placeKayak disclosed reliance on ITA airfare software after Google acquired ITA and introduced competing flight search. KY1 KY3
Arena: Market Conditions Before Kayak
How each step happened
Step 1 of 4 · 2005 to 2007
Search across sellers answered a different part of the trip
Paul English recalls wanting to compare several travel sites before purchasing. He and Steve Hafner built a search service that displayed offers and sent people to a chosen seller. The commercial service launched in 2005. KY2 KY1
The product could help a customer who already preferred buying directly from an airline. Its usefulness came from bringing offers together at the decision point. English says early web collection let the team start without waiting to negotiate with every supplier; that describes the initial method, not permanent freedom from supply agreements. KY2
The founder account is retrospective. Neither it nor the filing establishes complete market coverage or a controlled preference test.
Rivals Orbitz, Expedia and direct airline sites could complete purchases. Kayak competed for the comparison step and also sent demand to those businesses.
Step 2 of 4 · 2005 to 2012
Referrals and advertising turned comparison into revenue
Travel suppliers and agencies paid for qualified referrals, while advertisers bought placements. By 2012 some bookings could also be completed through Kayak’s interface. The company processed about 1.2 billion queries that year and earned $39.8 million in operating income. KY1
Kayak could earn from directing a purchase to another seller. That aligned its revenue with a common shopping behavior, but put commercial weight on the quality of the leads it delivered. A pure referral description fits the origin better than the entire 2012 product. KY1
Queries are searches, not unique travelers or completed trips. Aggregate profitability does not identify the return from each referral arrangement.
Rivals An online agency earned from booking travel; a referral service could monetize comparison even when the customer completed the purchase elsewhere.
Step 3 of 4 · 2007 to 2012
Brand spending and acquisitions expanded the audience
Kayak’s November 2009 account of its first national television campaign says research exposed low consumer awareness. It used advertising to explain the service. Acquisitions added SideStep, Swoodoo and Checkfelix; SideStep traffic was redirected to Kayak in 2011. KY5 KY1
The campaign addressed a distribution problem: a useful search engine still needed travelers to remember it when planning a trip. Acquisitions offered audiences in existing markets and entry into others. Consolidating SideStep also shows that buying a brand did not mean keeping it indefinitely. KY5 KY1
The campaign account explains intent, not measured advertising lift. Acquisition contributions cannot be separated from organic growth with these sources.
Rivals Expedia and airline brands already attracted travel shoppers. Kayak had to earn a place in that shopping routine before it could sell a referral.
Step 4 of 4 · 2011 to 2013
Scale left important dependencies in place
Kayak disclosed reliance on ITA airfare software after Google acquired ITA and introduced competing flight search. Mobile queries earned less revenue than desktop queries. Priceline completed the acquisition on May 21, 2013; its later filing valued the cash, stock and vested options at about $2.1 billion. KY1 KY3 KY4
The exit establishes the value of an operating search business at that date. A rival could still control an input to the search experience, and a growing channel could generate less revenue per query. KY1 KY4
This study ends at the completed acquisition. It does not assign subsequent Booking Holdings performance to Kayak.
Rivals Google could compete through search distribution and airfare technology. The comparison tests supplier dependence more directly than a claim that search volume alone creates a moat.
Key dates
- 2005Travelers can compare offers across sellers. KY1 KY2
- 2007-12Kayak acquires another travel-search business. KY1
- 2009-11-02Kayak explains its service to a broader audience. KY5
- 2011The company consolidates its US brands. KY1
- 2012Revenue reaches $292.7 million and operating income reaches $39.8 million. KY1
- 2013-05-21The completed transaction later carries a purchase value of about $2.1 billion. KY3 KY4
Sources
Oldest first.
- KY5 The story behind KAYAK national TV ads. Company account
- KY1 2012 annual report. Primary disclosure
- KY3 Priceline.com and KAYAK announce completion of merger. Primary disclosure
- KY4 2014 annual report. Primary disclosure
- KY2 Paul English on the original search model. Founder interview