How Kayak Makes Money: Distribution and Advertising Revenue

Vacationers who make the most of journey search engines like google and yahoo and fare aggregators corresponding to Kayak could nicely marvel, since Kayak’s companies are free to customers, how such corporations become profitable. Corporations like Reserving Holdings (BKNG)—previously often known as Priceline, which acquired Kayak in 2013—usher in billions of {dollars} in annual income. Kayak earns cash by commercials, when it refers prospects to on-line journey corporations and different associate suppliers, and thru further commissions.

Kayak was based in 2004 by Steve Hafner, who stays the corporate’s CEO, and Paul M. English. By 2007, Kayak had raised near $200 million in investor funding. The corporate launched an IPO in 2012 and was bought by Priceline (now Reserving) in 2013 for a reported $1.8 billion. Since that point, Priceline has modified its title to Reserving Holdings. At this time, Kayak operates seven worldwide manufacturers (KAYAK, SWOODOO, checkfelix, momondo, Cheapflights, Mundi, and HotelsCombined) and provides its web site in additional than 20 languages worldwide.

The important thing to understanding Kayak’s income stream is knowing who the corporate’s prospects really are. Kayak’s prospects aren’t vacationers looking out their web site, they’re the businesses that vacationers discover on Kayak.

Kayak’s Enterprise Mannequin

Kayak offers customers with journey info and charges on trip packages, flights, motels, rental vehicles, and different journey companies by providing info collected from journey suppliers and journey businesses. The corporate dealt with roughly two billion inquiries on journey by greater than 60 web sites, as of 2019.

Co-founder and CEO Steve Hafner had already helped launch one other related journey service web site, Orbitz, in 2001, earlier than happening to create Kayak in 2004. The first enterprise mannequin shift that Hafner made when organising Kayak was to stop offering info and precise ticket gross sales. Kayak was arrange extra like a search engine for one of the best costs, because it does not straight deal with gross sales transactions of journey companies. As an alternative, it refers Kayak customers to different web sites to finish transactions. On the similar time, Kayak did away with transaction charges, which had been widespread to different journey service websites; successfully, Kayak turned free-to-use for the client.

The streamlined information-only enterprise mannequin made Kayak’s web site customers much less possible than these of Orbitz to look elsewhere for decrease charges. It additionally decreased Kayak’s working prices, making it extra financially environment friendly. Not dealing with transactions requires much less work and fewer staff, and it has nearly eradicated the necessity to present customer support to Kayak web site customers. Total, the location’s success is mirrored in Kayak’s capability to draw massive quantities of enterprise from advertisers.

Distribution Income

Kayak’s true prospects aren’t the customers who go to its web site to seek for offers on journey, however the journey corporations, corresponding to Delta Airways (DAL) or Hertz International Holdings Inc. (HRI), to whom Kayak refers its customers to buy tickets or different journey companies. Kayak receives distribution income from the journey suppliers or journey businesses that web site customers click on on to finish journey transactions. Websites like Kayak are thought-about a part of the distribution channel for journey companies suppliers. Basically, these websites pay Kayak when Kayak sends prospects to them. Due to Kayak’s huge reputation, journey service suppliers are incentivized to incorporate their choices in Kayak’s search or else run the danger of being ignored by vacationers.

Kayak derives roughly a 3rd of its income from airline firm referrals, whereas one other 15% stems from lodge and rental automotive firm referrals.

Promoting Income

One of many largest normal income sources for Kayak is internet marketing. The corporate provides advert placements on its web site to journey businesses, journey suppliers, and different associated companies. Income is generated by charging advertisers both a cost-per-click (CPC) or cost-per-impression price, just like the income generated by many different web sites that promote promoting. Promoting income is a key revenue supply for the corporate and one of many options that units Kayak aside from a number of the different Reserving Holdings subsidiaries.

Kayak can cost advertisers premium charges due to the variety of potential leads it offers. The corporate’s acquisition by Reserving Holdings has helped develop Kayak’s publicity and visibility globally, thus growing revenues for each corporations. Kayak works to enhance its backside line and the general value effectivity of Reserving Holdings. Kayak can appeal to the identical variety of web site guests as many competing meta search engines like google and yahoo within the journey business utilizing a decrease degree of promoting bills.

Future Plans

Lately, Kayak has been increasing its choices and geographic illustration in an aggressive method. As an illustration, by buying Momondo Group in 2017 and HotelsCombined in 2018, the corporate made vital inroads into the European and Asian markets. It is possible that Kayak will proceed to develop its service choices by related expansions into the longer term.

In 2021, Kayak launched its company journey reserving platform, Kayak for Enterprise, which serves corporations and huge organizations who’ve staff expense enterprise journey, which is accessible in 60 markets and 28 languages.

Kayak’s enterprise mannequin is such that it maintains vital leverage with each customers and journey service suppliers. Shoppers have come to belief Kayak to offer an easy-to-use and free service, which provides complete details about journey pricing. In flip, Kayak has been capable of show to journey service suppliers that it’s able to providing vital entry to its buyer base. Going ahead, Kayak is prone to work to guard and develop relationships on either side of this mannequin.

Key Challenges

As a result of Kayak’s relationships with customers and journey service suppliers are important to its success, in addition they symbolize necessary challenges going ahead. As an illustration, if journey service suppliers resolve to permit contracts with Kayak to lapse, it may erode buyer belief within the Kayak search engine, thereby weakening the corporate’s enchantment to different journey service suppliers. The corporate should attempt to keep up a steadiness between these two units of relationships.

competing meta-search corporations that purpose to offer an identical service may draw customers away, thereby weakening Kayak’s enchantment to advertisers. Moreover, if world social, political, or financial occasions trigger widespread modifications in journey practices, Kayak may face a critical risk to its enterprise mannequin.