Get ready for the next big dust-up on the
Web. In this go-round, it is the meta-searchers and
screen-scrapers, in alliance with big-name portals and suppliers,
squaring off against the online agencies.
At stake is the
allegiance of the online travel buyer, and by some accounts the
outcome could reshape online travel distribution and the Internet
balance of power. Consider that developers for IAC/InterActiveCorp,
which bought TripAdvisor this year, are testing variations of the
travel-destination research site and directory in case IAC
determines that it wants -- or needs -- to get into the
screen-scraping game.
And Yahoo, which
purchased FareChase, is readying a new travel-search
product.
The result could
be a next-generation of travel search engines that promise to
further reduce distribution costs for suppliers and take market
share from the online agencies.
The
meta-searchers and aggregators promise that distributing through
their search engines costs a fraction of what it does through
offline and online agencies.
For example, one
search company, while acknowledging that supplier direct is the
least costly channel, claimed it costs an airline $8 to sell a
ticket through the meta-searcher compared with $22 through an
online agency and GDS and $27 through an offline agency and
GDS.
Different
strokes for ...
The
meta-searchers and aggregators are a diverse group with varying
operations and business models. There are the screen-scrapers like
Kayak, FareChase, SideStep, Mobissimo, Qixo, Cheapflights and
Agentware, which crawl the Web conducting dozens of simultaneous
searches of supplier and agency Web sites and presenting the
results to consumers in a comparison-shopping frenzy.
SideStep and
Cheapflights, for instance, generally have business agreements with
the online agencies and supplier sites they search, but in the past
FareChase and Qixo were criticized -- and in FareChases case sued
-- for unauthorized scraping.
Most of the
search companies only sell travel, but at NexTag and others
consumers can comparison shop for digital cameras, mortgages and
fragrances as well as hotels and other travel inventory.
Their business models are
all over the map. SideStep, for instance, earns licensing fees, a
revenue share and gets paid in some cases on a cost-per-click
basis.
Kayak, which is
in beta test, gets compensated primarily on a cost-per-click basis,
but that set-up changes with some partners. Some of the scrapers
get paid from suppliers per transaction -- as opposed to just
clicking to the site -- and at least one collects a service fee
from consumers.
Companies like
Travelzoo, which had net income of $2.1 million in the third
quarter and boasted advertisements from 317 suppliers and agencies,
takes in all of its revenue from online advertising.
The company
recently started displaying the booking engines from travel
advertisers, which also pay Travelzoo per consumer
click.
Another company
that uses the advertising model is IACs TripAdvisor, which markets
itself to consumers as a destination-research tool.
Paid
search
Most of the
travel-search engines are part of the paid search trend, with
suppliers and agencies advertising their specials and paying the
search companies on a cost-per-click or transaction
basis.
As travel
marketers are well aware, Google and Yahoo lead the field among the
paid-search companies and get millions of dollars in revenue from
travel advertisers, although the two portals dont break out how
much.
The importance of
paid search is undisputed. The Interactive Advertising Bureau (IAB)
noted that in the second quarter search [covering all industries
and not just travel] continues its popularity and has been embraced
by advertisers due to its innate relevancy, the simplicity of the
results and because advertisers can determine more precise response
rates.
From
second-quarter 2003 to second-quarter 2004, the IAB reported,
online search advertising grew from $481 million to $947 million, a
97% increase.
All eyes
on Kayak
Some of the buzz
about travel search is tied to the start-up Kayak Software, which
brings together Chairman Terry Jones, the former Sabre and
Travelocity leader; CEO Steve Hafner, former executive vice
president of consumer travel at Orbitz; director and investor Greg
Slyngstad, former senior vice president of destinations and lodging
at Expedia; and Chief Technology Officer Paul English, the ex-vice
president of technology at Intuit.
After leaving
Travelocity, when Sabre took it back in-house, Jones became a
special venture partner in General Catalyst Partners (GCP) in
Boston, which has a stake in NLG, and GCP took an equity position
in Kayak, as well.
GCP co-founder
Joel Cutler, a former NLG official, asked Jones to help the
venture-capital firm look at ways to increase its involvement in
travel.
We were looking,
at General Catalyst, for companies to invest in, and Joel and I
were very interested in search, said Jones, who was a board member
of Overture before Yahoo purchased the online-search marketing
company. We both feel that the paid-search model works in
travel.
Search companies
like SideStep, Qixo and FareChase have been around for years and
have made inroads, but they have not dominated online distribution.
Jones believes new search players like Kayak are ready to make
their mark, even in a crowded field.
They know
it works
We think the time
is right, Jones said. Paid search is really working now on the Web.
Its very successful. Suppliers of all kinds of goods -- not just
travel -- understand it. They know it works. So the educational
part of the [supplier] market is done.
Travel-search
engines such as Kayak are trying to tap into consumers
comparison-shopping habits.
I knew and we
said publicly at Travelocity that while 4% or 5% of people buy
[when they shopped on Travelocity.com], about 75% of the people who
search actually went, but they bought somewhere else, Jones said.
They bought from a travel agent, or they bought from a supplier on
the Web, or they called, or they went in the store. They had a lot
of different ways of buying. These people are searching multiple
sites, and they are buying where they want.
So we [at Kayak]
said, Why dont we build a site where people can search multiple
sites and buy where they want? So with Kayak, you can search over
50 Web sites, hundreds of airlines and thousands of hotels, and you
can select where you buy. We think there are a lot of consumers who
want to do that.
If the emergence
of travel search engines isnt yet widely anticipated, major online
agencies are taking notice and, in some cases, plotting
counter-measures.
The
counterattack
Kayaks beta, in
addition to scraping supplier sites, was also retrieving results
from Travelocity and Orbitz. Travelocity recently told Kayak that
its scraping of the Sabre consumer site was unauthorized and that
Kayak should cease searching Travelocity.com.
Well evaluate
each [screen-scraper] over time, but were not convinced that any of
them are good for consumers, suppliers or us, a Travelocity
spokes-man said. We see these engines as commoditizing travel at a
time when were working hard with suppliers to go in the opposite
direction.
Orbitz and
Expedia appear to have taken even stronger actions against the
meta-searchers. Orbitz has a multiyear partnership with SideStep,
and an Orbitz spokeswoman said Orbitz is re-evaluating that
relationship.
Although neither
side will talk about it, Orbitz also appears to have an agreement
with Kayak, which may be short-lived. Thats because Orbitz, which
was purchased by Cendant, contacted other screen-scrapers,
including Qixo and Mobissimo, demanding that they remove Orbitz
inventory from their searches.
Just more
spam
Over at Expedia,
Steven McArthur, the president of Expedia North America, said the
company views unauthorized commercial searches of its sites as the
travel-search equivalent of spam.
We are incurring
costs, and we have no desire to incur those costs and to impact our
real customers experience, said McArthur. In that sense, its a
nuisance. Its trespass.
Since August,
McArthur said, Expedia has been sending cease-and- desist letters
to screen-scrapers, telling them Expedia will vigorously pursue
companies that conduct unauthorized searches. Expedia also canceled
a beta contract with one unidentified company, he added, because
the company breached its agreement, McArthur said.
McArthurs boss,
Erik Blachford, who heads IAC Travel, is aware of the potential
impact of the meta-searchers and is mulling ways to
react.
They are probably
directly competitive with Expedia, Hotels.com, Travelocity and Orbitz. There have
been lots of people who tried really hard to capture the hearts and
minds of travel consumers, and I think its a pretty tricky
business, Blachford said.
I think we at
least have some sense for how to do it. But I think weve also
proven over the years that we are not scared to change if the times
change around us.
To contact
reporter Dennis Schaal, send e-mail to [email protected].