November 23, 2012

Why Priceline was so eager to snatch up Kayak


What really seems to be attractive to Priceline is the growth of Kayak’s direct booking option. Kayak’s Book Path business represented 11 percent of its overall revenue for Q3, up from 5 percent the year prior. Kayak has really started to look more and more like an OTA, and possible main competitor for Priceline.

Last week, Priceline.com acquired Kayak for $1.8 billion. That’s more than twice what Google paid for ITA back in 2010. Why did Priceline make this move? And why now?

On November 15th, Kayak announced that it had reached one billion queries in the first ten months of this year. This was significant for the company, because it first reached the billion-queries milestone in 2008 - after four years. It then took the company another three years to compile two billion more. In 2012, it took 10 months. As you can see, the time is telescoping significantly.

Additionally, as part of reaching this milestone, Kayak said that, as of October, its mobile apps had been downloaded over 20 million times. In Q3, Kayak saw 302 million queries across its web and mobile properties, a 31 percent increase from 231 million in Q3 2011 and saw a 95 percent increase over the year prior in its mobile downloads to 3.1 million.

Yet, what really seems to be attractive to Priceline is the growth of Kayak’s direct booking option. The company first launched it as a white label service in May 2011 to improve its user experience, working with Travelocity and then Air Canada. Later this summer, it expanded that to include Expedia, Getaroom, Hertz/Advantage and Avis/Budget, etc.

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