How Does Kayak Make Money? The Kayak Business Model In A Nutshell

Kayak is an online travel agency and search engine founded in 2004 by Steve Hafner and Paul M. English as a Travel Search Company and acquired by Booking Holdings in 2013 for $2.1 billion. The company makes money via an advertising model based on cost per click, cost per acquisition, and advertising placements.

Table of Contents

Origin Story

Kayak is an American online travel agency and search engine. The platform was founded in 2004 by Steve Hafner and Paul M. English as Travel Search Company, Inc. Through a mobile app and website, users can search Kayak to compare rates between car rentals, flights, and hotels.

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Key numbersAs stated in this article

$2.1 billionEnglish as a Travel Search Company and acquired by Booking Holdings in 2013 for $2.1 billion.This article

$196 millionAfter changing its name to Kayak in 2005, the company received $196 million in financing and went on to…This article

76%Over 76% of the company revenues in 2017 came primarily via travel reservations commisions and travel…This article

17%Almost 17% came from merchant fees, and the remaining revenues came from advertising earned via KAYAK.This article

In one lineKayak is an online travel agency and search engine founded in 2004 by Steve Hafner and Paul M.

After changing its name to Kayak in 2005, the company received $196 million in financing and went on to make a series of acquisitions. These included German travel search platform Swoodoo and online travel agency SideStep.

In 2013, Kayak was acquired by Booking Holdings – which at the time was known as Priceline.com – for $2.1 billion.

booking-business-model — Booking Holdings is the company the controls six main brands that comprise Booking.com, priceline.com, KAYAK, agoda.com, Rentalcars.com, and OpenTable. Over 76% of the company revenues in 2017 came primarily via travel reservations commisions and travel insurance fees. Almost 17% came from merchant fees, and the remaining revenues came from advertising earned via KAYAK. As distribution strategy, the company spent over $4.5 billion in performance-based and brand advertising.

Through a mobile app and website, users can search Kayak to compare rates between car rentals, flights, and hotels. The company also recently launched a corporate travel management platform, allowing business travelers to plan trips more efficiently.

Value Proposition:

Comprehensive Search: Kayak provides users with a comprehensive search platform that aggregates travel information and deals from various sources, allowing travelers to compare prices, routes, and options across multiple airlines, hotels, and car rental companies in one place, simplifying the travel planning process.
Price Comparison: Kayak enables users to compare prices and options for flights, hotels, rental cars, and vacation packages from hundreds of travel websites and providers, helping travelers find the best deals and save money on their bookings by displaying competitive prices and offering real-time updates on fare fluctuations and discounts.
Flexible Filters and Sorting: Kayak offers flexible search filters and sorting options that allow users to refine their search results based on preferences such as price range, airline, departure time, duration, layovers, hotel amenities, location, and more, enabling travelers to find options that match their specific criteria and preferences.
Travel Planning Tools: Kayak provides users with a range of travel planning tools and resources, including price alerts, fare forecasts, flight trackers, destination guides, travel tips, and packing checklists, to help travelers make informed decisions, plan their trips effectively, and navigate the travel process with ease.
User-Friendly Interface: Kayak features a user-friendly interface that is intuitive, easy to navigate, and visually appealing, allowing users to search, compare, and book travel arrangements seamlessly across desktop computers, tablets, and mobile devices, ensuring a hassle-free and enjoyable user experience.

FourWeekMBABusiness EngineerTimeline, as stated in the article

2004

Kayak is an online travel agency and search engine founded in 2004 by Steve Hafner and Paul M.

2005

After changing its name to Kayak in 2005, the company received $196 million in financing and went on to make a series of acquisitions.

2013

In 2013, Kayak was acquired by Booking Holdings – which at the time was known as Priceline.com – for $2.1 billion.

Kayak revenue generation

Kayak operates on a CPC model. Let’s expand on this model below.

Cost-per-click

Popularized by Google, the cost-per-click (CPC) model (invented by goto.com later became Overture) is one of the most widespread online.

how-does-google-make-money — Google (now Alphabet) primarily makes money through advertising. The Google search engine, while free, is monetized with paid advertising. In 2023, Alphabet generated over $175B from Google search, $31.51B billion from the Network members (Adsense and AdMob), $31.31B billion from YouTube Ads, $33B from Google Cloud, and $34.69B billion from other sources (Google Play, Hardware devices, and other services). And $1.53B from its other bets.

Kayak makes money whenever a searcher clicks on an offer on its platform. Here, the advertiser in question pays Kayak a small fee. The exact fee is dependent upon the agreement between each party.

Cost-per-acquisition

When a user both clicks on an advertisement and then makes a purchase, the advertiser must also pay a cost-per-acquisition (CPA) fee. CPA fees typically fall in the range of 10-20%.

This so-called distribution revenue is paid by travel companies, including airlines such as JetBlue and car rental agencies such as Hertz. The airline industry is particularly profitable for Kayak, with estimates suggesting it derives a third of its total revenue from the source.

Advertising placements

Kayak also generates revenue from banner advertisements on its platform. It can charge a premium rate for ad placement because of its proven ability to generate high numbers of leads.

The company receives a fee from the advertiser for every impression its ads receive. Note that an impression is simply an advertisement a searcher views while using the interface — as explored in the interface layer wars reshaping consumer tech — . There is no requirement for the user to click on the ad or make a purchase.

Expansion

Kayak now operates in dozens of countries and continues to acquire hotel aggregation businesses in significant European and Asian markets.

This allows it to increase revenue by maintaining its status as a trusted and comprehensive travel service. With more consumers flocking to the platform, travel companies become incentivized to use the platform to remain competitive.

Marketing Strategy:

Search Engine Marketing (SEM): Kayak invests in search engine marketing campaigns to drive traffic to its website and increase visibility in search engine results pages (SERPs), bidding on relevant keywords, phrases, and ad placements to target users searching for travel-related information and services.
Display Advertising: Kayak engages in display advertising campaigns across various online platforms, including social media networks, travel websites, and display ad networks, to promote its brand, products, and special offers, reaching potential customers with targeted display ads and visual content.
Content Marketing: Kayak produces and distributes content marketing materials, including blog posts, articles, guides, and videos, that provide travel tips, destination recommendations, industry insights, and product information to engage and educate users, driving traffic and brand awareness through valuable content.
Affiliate Marketing: Kayak partners with affiliate marketers, travel bloggers, influencers, and online publishers to promote its platform and services to a wider audience, offering affiliate commissions, referral incentives, and co-branded marketing opportunities to affiliates who drive traffic and referrals to Kayak’s website.
Email Marketing: Kayak utilizes email marketing campaigns to communicate with users, deliver personalized recommendations, and promote special deals, discounts, and exclusive offers to subscribers, sending targeted email newsletters, alerts, and notifications to engage users and encourage bookings.

Distribution Channels:

Website and Mobile App: Kayak distributes its travel search engine and booking platform through its official website (www.kayak.com) and mobile applications for iOS and Android devices, allowing users to access and use the platform’s features and functionalities directly through web browsers and mobile apps.
Online Travel Agencies (OTAs): Kayak partners with online travel agencies, booking platforms, and travel intermediaries to distribute its travel search results, deals, and bookings through third-party websites, affiliate networks, and distribution channels, reaching a wider audience and expanding its reach and visibility.
API Integration: Kayak provides application programming interfaces (APIs) and software development kits (SDKs) to third-party developers, travel companies, and travel technology providers, allowing them to integrate Kayak’s travel search and booking capabilities into their own websites, apps, and platforms, leveraging Kayak’s technology and data for enhanced functionality and user experience.
Metasearch Partnerships: Kayak forms partnerships and collaborations with other metasearch engines, travel aggregators, and travel search platforms to distribute its travel search results and listings across partner websites and platforms, sharing traffic, leads, and revenue through reciprocal agreements and syndication partnerships.
Direct Partnerships: Kayak establishes direct partnerships and relationships with airlines, hotels, rental car companies, tour operators, and travel providers to access and display their inventory, availability, and pricing information on its platform, offering users a wide selection of options and choices for their travel bookings.