Vertical Travel Search Engine Kayak CEO Steve Hafner (Part 6)

SM: The major gains from purchasing SideStep were adding their display advertising business and their email marketing platforms?

SH: That is right.

SM: How big was that business for them?

SH: Iit was half of their revenues. At Kayak we are much less commercialization focused. I am personally not a big fan of display ads. We are very careful how we take SideStep’s commercialization approach and apply them to Kayak. You will see some changes on the Kayak website based on insights we picked up and assets we gained from SideStep, however these changes are done in a very measured and controlled way.

SM: Their revenue was approaching $35M when you bought them?

SH: It was at $30M.

SM: Is that revenue stream continuing for you?

SH: That revenue stream is much higher now.

SM: What kind of ramp did you see in the first six months after you purchased them?

SH: It was a very impressive ramp. Going back to the analogy of Google buying Yahoo, just imagine Google powering the ads on Yahoo. The user experience does not change all that much but Google is able to monetize 30% better than Yahoo because their targeting capability is so much better. That is not a bad analogy when applied to how much better we can monetize the SideStep traffic.

SM: Let’s talk about applying a vertical add network within Kayak.

SH: One of items in the secret sauce of Kayak are our ads along the right hand side of our search results pages. These ads look very similar to the search result adds that Google or Yahoo provides. They are three lines of text and a hyperlink. The difference is that our ads are based on the actual search parameter. We know that Google doesn’t know the city pair and the travel dates. When American Airlines buys ads on Google they are buying out the keyword pairs. They buy phrases like “cheap Chicago flight”. The person might be searching for a flight from Omaha and American may not fly that city pair. American has wasted their money and the consumer has wasted their time. If the consumer does click the add they get to a page on American Airlines which does not have that much information on it because American Airlines didn’t know they were starting in Omaha.

With the Kayak model American Airlines ads will only show up on the routes they fly. When someone clicks on that add we pass the search parameters on to American. The result is you get a search results page on American that contains the actual city pairs. The ads are targeted which means they are more useful for the consumer and the results page is more useful as well. The net impact of that is a much higher ROI for American Airlines as well as for all of the other advertisers. It is also a much better consumer value proposition and it monetizes much better than Google does.

This segment is part 6 in the series : Vertical Travel Search Engine Kayak CEO Steve Hafner
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