on 10 December 2009
Kayak is blaming the rise of the iPhone and the popularity of its app but the metasearch engine has effectively turned its strategy on its head by saying it will now take bookings for customers.
The company has released a new version of its iPhone app and says in 2010 it will be taking bookings via handsets.
These aren’t ordinary bookings, of course, but what sound like good old fashioned “give us your credit card details and we’ll do the booking for you”.
Users will be able to register their details on the app and then Kayak will make the booking on their behalf, notifying them when the transaction is complete.
Details are a bit sketchy at this stage, with a briefing given to IT site GigaOM in the US, but a UK official plays down the development slightly and stresses that Kayak “will not own the customer”.
What it does mean, however, is that Kayak will have to create a significant new department in its ranks to handle credit card bookings on the behalf of users.
In some respects the move makes a lot of sense for meta players offering mobile apps such as Kayak, mostly because once a search is carried out on the handset each user is at the mercy of the mobile version of the referred website to make the booking.
In other words, finding a relevant flight or piece of accommodation on the mobile meta site has the potential to descend into irrelevancy as the airline or hotel may not take mobile bookings, or the process is convoluted and not particularly good – leading to frustration with the user.
The second version of the iPhone, released this week, comes on the back of enormous success for the first app in the US where it currently sites at number five in the top free products in the iTunes store. It is number 20 in the UK charts.
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My interpretation was that Kayak would use some form of secure method to transact the booking on the seller web site on behalf of the user.
This would mean the travel seller would remain the merchant of record and retain responsibility for all customer care. Kayak would continue to be a source of the referral, but much more actively involved – negating the need for the traveler to complete the form on the travel seller’s website.
Kayak however would “own” all the customer profile and credit card information. As a result, Kayak winds up owning the customer in terms of a long-term relationship. On an individual transaction basis, applicable information would be transferred to the travel seller to effect the sale.
Kayak would own the customer, but would also be empowered by the customer to temporarily pass on their information to the travel seller on a transactional basis.
If Kayak is successful, travel suppliers might not own the customer, but they may be able to rent them periodically from Kayak…
Robert: I would have to think there would be some push-back from travel suppliers if Kayak ends up owning customer information. Will suppliers be less willing to work with Kayak because of it?
Perhaps “owning” the customer information is not the best term. Let’s say the customers “entrust” their profile and payment information to Kayak. The supplier would own the customer information for the transaction the same way they do now.
The difference is that Kayak becomes a stickier starting point for the travel search process instead of each individual site – I see this as a natural extension of meta-search.
This should work the same way Amazon transacts with its merchant network. The profile / payment information is held by Amazon and seamlessly and securely transacted with the seller.
It’s a very savvy strategic move by Kayak. Consumers should love it as it adds convenience and simplifies the travel booking process. Suppliers will still get all pertinent customer information, just like the customer typed it into the form on their site, but suppliers will lose some ability to advertise directly on their website, but that has already occurred if they are working with Kayak since they normally are deep linking to the purchase page.
Kayak could use a secure token to pass the information to the supplier site through a single signin process or to have the airline web page pop up with the confirmation information – that might appease the suppliers a bit. It will be interesting to see how they implement it.
I think I’m reading this the same way you do Robert, and in that case I like it. Similar to Apple’s itunes, you enter all relevant data once, and then from then on you just type a password when you’ve found a suitable flight and Kayak goes off and books it for you automatically. So Kayak populates whatever forms need populating at the supplier and you’re good to go.
Sounds like a winner, in fact it might be the first time meta search has made sense to me as a business. If half the users on meta search nowadays are like me, they use it figure out the airlines supplying a city, then book direct with the airline…
Side note, I’ve mentioned kayak and momondo to tons of friends, yet none of them can remember the names, let alone spell them… Fly.com has some advantages there!!
Robert and Sam: Here’s an issue. How is Kayak going to book airlines using all of your frequent flyer info? Are you going to want to give all of that information to Kayak? What about for hotel loyalty programs? Same issue.
Dennis, if I’m happy storing my credit card info with Kayak, I doubt I’d hesitate giving them the number of my frequent flyer program. Miles can typically be credited at check-in/after the flight/trip anyway though, so I hardly see that as a stumbling block, unless I’m missing something?
Sam: I agree that credit card info is a more sensitive area than frequent flyer numbers. I was thinking about the complexity. I think most people probably belong to more than one program, and a bunch of hotel and car loyalty programs, too. And, I don’t know about you, but trying to get credit for frequent flyer miles after the fact can be a pain in the butt.
Agreed regarding the pain of registering the miles after the fact, but I guess my point is that for most bookings that’s a secondary fact to just getting the booking done from the mobile device. I don’t think it would be too difficult to do that if they’ve sorted out how to actually make the bookings automatically using the customers details, but guess we’ll have to wait and see what they’ve cooked up. Should be interesting either way!
I think it’s a fantastic move consdering that most travel suppliers are far from ready to take bookings on mobiles. This way, Kayak is moving first to allow users to book on mobiles and become the defacto mobile travel application.
Travelfusion should be inspired by this move, as they’ve been doing exactly this behind the scene booking for years and on tens of airlines, but only for B2B.
Someone explain to me how Kayak maintain PCI compliance with their proposed modus operandi (ooh, getting latin in!)
From Gigaom
“The company is building a wallet system to allow users to book travel using their Kayak accounts. They’ll be able to use their saved credit card, frequent flier numbers and flight preferences, and Kayak will then go enter that data into the providers’ sites”
Yes – they can store the security code – if they are a payment processor – but that is tied to them – not able to be transmitted around the place.
Hence if they are working with credit card security codes it must be the money they are transferring to airline partners (e.g. Kayak operating as an agent) rather than the credit card details. As they can’t be storing the security code…..
That is the million dollar question….
Great conversation here about Kayak’s new approach. It looks to me very much like Kayak has got it right by focusing on the customer experience and making it as easy and seamless as possible. This is key to success, especially for mobile bookings. In return, I gladly give them my frequent flyer account info and credit card and I’m sure this will be the case for many travelers. Looks to me their offline brand campaign is one more key tool to establish themselves as a trusted player for exactly that purpose.
I actually share Kevin’s initial view described in the article.
I do not see how different this is, for example, from an OTA booking an LCC using an aggregation engine.
The aggregation engine carries out the transaction on behalf of the OTA (or the consumer directly for those aggregators that also have a B2C business), without displaying the supplier site and the user is notified of the transaction having completed, with the passenger email passed to the supplier for post booking service.
All the passenger profiling, PCI compliance etc. is also already there either in the OTA engine or the aggregator engine.
I do not see this as a new model, not even with their focus on the mobile market; there are other OTAs that already support mobile for simple bookings.
Kayak will be very similar to an OTA but get paid for the referral by the supplier rather than charging a booking fee to the traveller and staying clear of the customer service obligation.
This model has been there for a while, even amongst our customer base.
What Kayak has going for them is a great market penetration and this is a good way for them to monetise even further on their traffic.
Alex, maybe they charge the customer’s card, then just use their own credit card with the airlines, good way for them to get a lot of frequent flyer miles from their bank
Alex’s PCI comment and the frequent flyer points are good observations.
What I wonder is if Kayak just sees those as technical details that will be addressed in due time, but recognizes the vulnerability of OTA’s now and thinks it’s more important to make a move to establish a strategic beachhead in mobile booking.
Given that Kayak’s been, as Joe points out, investing a lot in offline marketing – including most of the full-page iPhone co-op ads in USA Today – perhaps they’re betting on how difficult it could be for an OTA that’s been successful on one platform (PC internet) to transition that success to a mobile platform?
As just one example, OTA strengths online in driving massive traffic by indexing tons of pages for SEO and outspending on SEM are basically non-existent on mobile at this point, so if Kayak’s investing heavily in driving penetration for its mobile apps before the OTA’s do, the OTA’s might be well-behind already.
Any other thoughts?
Great comments – A couple additional items to add.
Dennis & Sam – I don’t think the Frequent flyer data is an issue. Ask Traxo – they are asking for every frequency program ID out there and people are obliging. If Kayak provides value, keeps them secure, and earns the trust of their customers, there is no issue, most people will be happy to provide them. The key is earning the trust.
Alex, Sam & Jonathan – I don’t believe PCI compliance will be an issue for Kayak. They do not need to store the security code – it can be entered by the user at the time of sale to validate the purchase. The code can be encrypted and passed securely to the merchant without ever being stored by Kayak.
Joe, Roberto, Kevin – I still see Kayak strictly in the Meta-search space. One key to producing more relevant meta-search is having better profile information. That enhanced profile information also provides a better mobile experience by reducing the required amount of typing. It seems to me that the expanded profiles will also enhance the browser search & booking experience as well.
By triggering the purchase transaction, Kayak will get better clarity regarding true conversion statistics and revenue generation. Knowing the customer has committed to a booking also helps improve the reliability for TravelPost reviews – perhaps introducing the potential for a “confirmed traveler” seal of authenticity on the reviews.
One additional benefit is that the Kayak Ad network should be able to monetize the enhanced profile information by charging advertisers a higher CPA based on improved targeting and conversion while offering site visitors more relevant offers and promotions.
It looks like a win-win-win for Kayak, the traveler, and the advertisers. Suppliers may also win if they provide a strong brand franchise, comparable product, compelling marketing and competitive pricing. The potential loss will be traffic to the travel supplier websites prior to booking, although there may still be ample opportunity to upsell and cross-sell travelers in the post-sale / pre-trip phase.
But the big win is in the mobile space… It’s already hard enough for these iPhone users to simultaneously drive, talk on the phone, text their friends & eat fast food. Kayak just made it a bit easier for them to add booking travel to their multi-tasking list.
Kayak will see huge mobile internet traffic growth – as long as these iPhone users manage to avoid becoming mobile highway traffic fatalities.
The strategy to gain a leading position (and brand) on mobiles before everyone else wakes up is crystal clear. Applause.
The only other comment I’ll add is that performing a behind the scenes booking can become uber complex with fare unbundling or a-la-carte pricing models, where airlines/merchants add options, alerts, T&Cs or diverse degrees or cross-sell on their checkout pages.
In my opinion that’s the single toughest nut to crack for Kayak as a data intermediary.
I find it hard to believe ota’s will willingly give up the purchase path so easily. Lose the potential for upsells?