Kayak Private Sale, the travel metasearch company’s upcoming offering of exclusive hotel, flight and vacation package deals to registered users, is an interesting product name for a company considering an initial public offering, but I digress.
A departure from Kayak’s core metasearch business, Private Sale has raised some eyebrows in Australia and the U.S.
Fellow Tnooz node Tim Hughes, writing for his personal blog, The BOOT – The Business of Online Travel, pointed out that getting into the exclusive deals’ business makes Kayak “a zero percenter no more” in terms of an operational-costs’ advantage. And former Kayaker Drew Patterson notes that offering exclusive deals is not part of Kayak’s traditional DNA.
Hughes says that, with private deals, Kayak likely would lose the cost advantage that comes with not having to support an ample sales staff because someone is going to have to go out and strike those exclusive supplier deals.
And, Patterson, the founder and CEO of private-sale [lower case] vendor Jetsetter and a former vice president of marketing at Kayak, also raises some issues.
Patterson has lots of respect for his former colleagues at Kayak, but points out that “the challenge for those guys is that this looks a lot different than their core business.”
In other words, Patterson points out that Kayak metasearch is all about being unbiased and comprehensive, whereas exclusive deals/private sales are much the opposite of that.
Patterson doesn’t give as much emphasis as Hughes to the “zero percenter” issue, noting that Kayak already has “a decent sales organization.”
But, Patterson argues that Kayak, which heretofore has concentrated on its media business, will now have to focus to a greater extent on the booking and overall customer experience, processes that “are different than Kayak’s DNA.”
However, Kayak has a bunch of smart people and a “top team,” Patterson says, so he’s confident Kayak is up to the challenge.
So is Patterson worried that Kayak’s entry into exclusive deals will hurt Jetsetter’s business since that is Jetsetter’s core business?
“Not especially,” Patterson says. “I don’t think this is top of mind to them.”
Yes, for the Kayak Team, private sales or not, a public offering, i.e. an IPO, perhaps is much more top of mind.
When you already have an audience, you don’t have to have any sales stuff and strike any deals. The deals just come to you. It is just a different spin of a publishing model, where the publisher gets paid to display stuff to (a lot of) eyeballs.
If it works, it’s yet another revenue channel for the same asset (user base) hence great stuff.
The only catch is that as with all publishing models, it works as far as advertisers get a return – i.e. targeted audience buying the advertised products. No good targeting – no sales – no ads. But at least Kayak can already enter with a big audience which is the best possible start in this game.
Daniele: I’m not understanding you. Kayak is talking about offering exclusive hotel deals to a subset of registered users. Exclusive deals. How will Kayak get those deals? Snap, crackle, pop?
Hi Dennis,
it’s just marketing. Exclusive does not mean cheaper, right? As far as I can see they already have ad sale teams in touch with hotel chains, so offering an additional service to existing advertisers is an easy step.
The real news to me would be if Kayak really started buying distressed inventory to resell it cheap (as in the established opaque models ala Priceline). But according to your information they are still going to redirect users to the partner sites. That makes sense to me – becoming a real agent/merchant does not fit with Kayak’s DNA. I see this more as a private Travelzoo model.
Lastly – pre-IPO times. Even a small bell or whistle with a potentially large multiple attached to it is good.
PS – I am not affiliated with Kayak.
(Sorry – I found a typo in my previous post – “sales stuff” > “sales staff”)
I think Daniele is right on – the deals should come to them pretty quickly, espec in this environment. I wonder how much they’ll put into checking / verifying them before publishing as that’s a constant frustration.
I also wonder if bringing DealBase into the fold could help – perhaps since they already have a history with DealBase’s team via Travelpost acquisition.
Also as Daniele pointed out re the multiples, any solid new revenue channel or at least testing of them should be good for a roadshow, and the beachhead they’ve established in mobile has already been touched on here as well.
should be fun to watch…
For travel industry insiders it might look initially like the logic is missing in this decision but as Daniele points out this decision actually makes sense and the timing too. Like the OTA’s post 9/11, I don’t think a significant lead generator like Kayak should have any problems getting deals from suppliers to push through their channel and nick the dollar somewhere along the line.
As a supplier let me tell you – with their reach they won’t have an issue getting deals…