Yahoo expanding in travel?

Yahoo! is hiring, this time for Yahoo! Travel. Positions? Director of Product Management, engineers in content management and travel search, and posts in business intelligence and business operations. (You can view the job descriptions here.)

Travel search? Yes.

Yahoo! acquired travel search company FareChase in mid-2004, despite the fact that Yahoo! Travel has an exclusive agent partnership with Travelocity (owned by TSG). Looks like Yahoo! is now trying to strengthen its travel search.

Question: does this suggest that Yahoo! sees no future for travel intermediaries like Expedia, Travelocity, Orbitz, Priceline, and Travelzoo?

Posted by David Jackson on January 12, 2005 at 12:09 AM in ticker: CD, ticker: IACI, ticker: PCLN, ticker: TSG, ticker: TZOO, ticker: YHOO | Permalink | Comments (0) | TrackBack

PriceGrabber adds travel

Comparison shopping engine PriceGrabber has expanded into travel. It's travel category, still in beta, offers search for flights; no hotels or rental cars yet. Other comparison shopping sites don't yet offer travel. Shopping.com, for example, carries ads for Expedia, Travelocity, Hotwire and Travelzoo on its travel page. But presumably it's only a matter of time before all the leading comparison shopping sites (Shopping.com, Nextag, Yahoo! Shopping and Froogle) offer travel.

Other recent entrants into the travel market include Overstock.com and eCost. And travel-specific search engine SIdeStep recently announced that it is stepping up its marketing.

Increased competition and the roll-out of category specific search (one of five Internet danger signs to watch for in 2005) can't be good for the online travel agents owned by IACI (Expedia and Hotwire), TSG (Travelocity), CD (Orbitz) and TZOO (Travelzoo).

Full disclosure: at the time of writing I'm long SHOP.

Posted by David Jackson on January 10, 2005 at 12:37 AM in ticker: CD, ticker: CTRP, ticker: IACI, ticker: OSTK, ticker: PCLN, ticker: SHOP, ticker: TSG, ticker: TZOO, ticker: YHOO | Permalink | Comments (0) | TrackBack

New SideStep web site threatens online travel companies

Travel search engine company SideStep released a web-based version of its travel search covering flights, rental cars and hotels, at SideStep.com. (Story via ClickZ here.) SideStep plans to make money by selling ads next to search results. It has a pay-per-click (PPC) deal with Overture (owned by Yahoo!) and also plans to sell its own PPC and graphical cost-per-page-impression (CPM) ads.

SideStep is the oldest of the travel search companies, which include Kayak.com, Mobissimo, and Yahoo!'s FareChase. According to the ClickZ story, over 7.5 million people have downloaded SideStep's desktop search software, and 3 to 3.5 million people use it every month.

The travel search companies pose two threats to the established online travel companies:

  • Potentially better functionality. Travel search includes results from companies that refuse to pay commissions to appear on Expedia, Travelocity and Orbitz. Search for a flight on SideStep, for example, and the results will include flights from Jet Blue that don't appear on the other sites.
  • Disintermediation. Online travel sites are fee taking middle-men that sit between the travel providers (hotel chains, airlines and car rental companies) and their customers. The travel search companies, in contrast, don't take commissions for helping users find travel products, but instead generate revenue in other ways. The travel search engines could therefore lower the cost of buying travel by disintermediating the online travel sites.

Thoughts on stock impact. Improved category-specific search is one of the five Internet danger signs to watch for in 2005. The most likely victims: intermediaries in industries in which the suppliers have a relatively concentrated market structure. The number of airlines, large hotel chains and car rental companies, for example, is limited, and the companies tend to have strong brand names. So category-specific search engines should find it relatively easy to disintermediate the travel market over time. Investors in CD, CTRP, IACI, PCLN and TZOO therefore need to monitor the growth of the travel-specific search engines, and to watch also for the entry of the mainstream search engines into travel-specific search.

Posted by David Jackson on January 05, 2005 at 01:49 PM in ticker: CD, ticker: CTRP, ticker: GOOG, ticker: IACI, ticker: PCLN, ticker: TZOO, ticker: YHOO | Permalink | Comments (0) | TrackBack

PPC marketing costs to rise for online travel companies?

ClickZ reports that travel search engine Kayak.com is planning a large advertising campaign for early next year, in which it will purchase pay-per-click ads from Google and Overture. According to the article, Kayak will bid for 1,000 keywords by January, 3,000 by February and 20,000 by the end of the first quarter. Kayak won't disclose its advertising budget, but says it's "a considerable amount more than other meta-search companies".

This is negative for the established online travel players for two reasons. First, Kayak is competing more aggressively and will probably gain market share. Second, it's advertising campaign will contribute to upward price pressue for travel-related keywords. Good for Google and Overture, bad for the travel Web sites.

Posted by David Jackson on December 29, 2004 at 07:01 AM in ticker: CD, ticker: GOOG, ticker: IACI, ticker: PCLN, ticker: TZOO, ticker: YHOO | Permalink | Comments (0) | TrackBack

IACI spin-off is an admission of failure

The WSJ reports this morning (paid subscription required) that Barry Diller is planning to break up IACI. He'll spin-off the travel businesses, Expedia, Hotels.com, and Hotwire, into a separate company to be known as Expedia. The other businesses, including TicketMaster, HSN, Citisearch and LendingTree, will be left as IAC.

The motivation for the spin-off is the poor performance of IAC's stock. Institutional owners of IACI, most notably Bill Miller of Legg Mason, have been arguing for a while that IACI stock is strongly under-valued and that the company needs to take steps to lift its share price, through buy-backs or some other method. Diller believes that a break-up will uncover value that is currently unappreciated due to the complexity of IACI's business.

But this spin-off will face criticism on two grounds. First, the WSJ already cites concerns that the spin-off is an admission that the synergies between the businesses are fewer than Diller claims. Arguably the synergies are there for the taking, but Diller has failed to execute.

One example: there's lots of buzz in the online travel business about "destination services", namely the cross-selling of local services at travelers' destinations. Once you know where someone is traveling, you can sell them not just a hotel room, but entertainment too, such as sports, concert or show tickets. IACI's smaller competitors have already worked this out. Look at Broadway.com, for example (owned by Hollywood Media), and you'll see that it pushes hotel and theater ticket packages. Cendant seems to be pushing in this direction too, with its accumulation of car rental and other destination services and its recent purchase of Orbitz.

Second, IACI is a strongly cash-flow generative business. Why didn't Diller simply use IACI's cash flow to buy back stock instead of creating a new company? This suggests that Diller's addiction to using cash for deal-making rather than dividends or buy-backs is still in full force. And this spin-off demonstrates, if nothing else, that Diller's deals don't add to shareholder value. One-year chart of IACI stock is below.

Iaci_1_year
Full disclosure: At the time of writing I'm long HOLL.

Posted by David Jackson on December 21, 2004 at 08:40 AM in ticker: CD, ticker: HOLL, ticker: IACI | Permalink | Comments (1) | TrackBack