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Kayak CEO : Plans for the Next Twelve Months&Expansion

06/08/2009| 10:46:17 AM| 中文

Steve Hafner says that Kayak is exclusively focused on core search,driving awareness,making Travelpost a viable competitor to TripAdvisor and Travelzoo.

Enjoyed a chance to catch up with Kayak CEO Steve Hafner last week. I had planned the call to be about the challenges of a traffic arbitrage business model. I had hoped to draw out of Hafner that there was pressure in the Kayak model fuelled by rising paid search costs, being late to the review game with the Travelpost revamp and tremendous marketing and product pressure from the drop/elimination of booking fees by the big online travel agents (OTAs). Instead Hafner was relaxed, confident and ready to push ahead with millions of dollars in offline (yes offline) advertising planned.

We touched on two main areas. His focus and plans for the next twelve months (including plans for Travelpost and why the OTA fee cuts don´t phase him) and his thoughts on expansion outside America (not in Asia and measured in Europe). On the former there is a lot to be worked on for Travelpost to catch TripAdvisor but there are plenty of flaws with the TripAdvisor product and an accompanying disquiet amongst users. On the latter, the potential risk I can see is that they may be under estimating the challenges of growing in Europe where they have more competitors and less compliant suppliers.

Here is our exchange in detail.

On plans for the next twelve months

Steve Hafner says that Kayak is exclusively focused on three things:

1. More focus on core search: The measures here are speed, accuracy and simplicity. Hafner is measuring his world in terms of milliseconds in response time. I asked if we was worried about price accuracy, database loads, hotel and switch look to book issues but none of these concerned him. For Kayak the true cost per query is falling to near zero through caching and the costs of bandwidth. This allows him to focus on the speed of search and the comprehensiveness of the results. His goals are big but simple - that the submit button results in a search in 15 milliseconds, that the results contain every bookable option and that the filtering and customer profiling gives the client the results they want. While this sounds obvious it was the simplicity and aggression in his focus that impressed me;

2.Driving awareness: Hafner believes it is the perfect time to get back into offline marketing to take brand awareness to the next level and compete with the OTAs. He believes that Kayak is "fully penetrated online" and that the costs of offline has "come down by about a third". Critically he does not want to leave the offline channel as the exclusive domain of the big spending OTAs, especially because (as he puts it) "the fee cut [by the big OTAs] takes margin away from their P&L and out of their marketing budgets". New CMO Robert Birge has a $100mm to spend on marketing and a CEO keen to see the brand in lights on TV (example below of their "trip idea" commercials from back in 2006). Right now Hafner is claiming that 8% of online shoppers have heard of Kayak (cf he claims Orbtiz number is 60%). In two years he wants the number to be 20%. ; and

3. Making Travelpost a viable competitor to TripAdvisor and Travelzoo: Kayak has followed the much smaller Uptake into the review meta-search model through a revamp of Travelpost. Prior to the revamp Travelpost (acquired by Sidestep) was a user generated hotel review site much like TripAdvisor. Now post revamp it aggregates reviews from around the web as well as allowing direct posting and commentating. He plans to go after both TripAdvisor and Travelzoo with this new product. He hopes within two years for Travelpost to be generating about half the revenue that Travelzoo is making from deals and to be 15% of the size of TripAdvisor´s media revenue (up from 1% now).

On Expansion plans

An interview with Hafner is famously free from PR generated answer obfuscation. I asked a detailed question about the Asian market that started with a lead in on the challenges in the market, the earlier successes of Qunar in China and Wego in Singapore and Australia. Even made a reference to Sprice and Cheapflights. "So Steve," I concluded, "do you have your eyes on Asia too?". Two word answer - "absolutely not". In short he thinks the market is too small (in terms of search volume) and not mature enough (in terms of online advertising).

Europe is another matter. He admits that the change in MD "reflects a disconnect in aggressiveness" which I read to mean that the outgoing MD had a more aggressive plan than Hafner did (see the Travolution post on this for more details). This does not mean they are pulling out of Europe and he rejected any suggestion that Kayak had made a "false start" there. Instead they will keep on with the general three strategies above run by the two people in the London office. He conceded that there are product gaps in Europe (no Rayanair and some other low cost carriers) as well as higher costs from online marketing as Google is so much stronger but he is there for the long term even with no plans to replace the Managing Director role.

The competitors are coming fast at Kayak with big marketing budgets and constant model changes. Kayak´s response is keep doing what we are doing only better and now on TV. What do you think. Good plan?

TAGS: Kayak
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