We get plenty of Private Equity calls relating to meta-search companies. Most want to know if these companies would work in Europe and who would be interested in buying them. Do you think that an online travel agency could/would buy a meta-search engine?The main difference between a meta-search company (Sidestep, Kayak, Bezurk etc) and an online travel agency (Orbitz, Expedia, Travelocity etc) is that the first group are media companies and the second are retailers. The common element is that each is after the traveller - wants to attract travellers to the site to commit to a revenue generating activity. However the meta-search media business requires very different approaches to marketing, customer retention and business development than the OTA. This is because the activity the consumer is engaged in is different, the tools for retaining customers are different and the revenue model is different. Will quickly touch on each and then look at whether or not an OTA should buy one.
Customer Activity - You would think that since the activity on both meta-search and OTA is search that there would be little difference in customer activity. However the difference here is what is going on in the customer's mind. A consumer on an OTA is experience hunting. Is looking for advice, support, connection - all of the things a consumer desires from a retailer. In meta-search the consumer is singular in their focus - give me the cheapest price on the exact thing I want. This is why OTAs invest so much in brand and customer care. Meta-searchers are traffic arbitragers - they survive by buying traffic at a cheaper rate than advertisers will pay for referrals.
Customer Retention - Retailers can work to keep customers by offering discounts, exclusive deals and targeted promotions - ie product. Meta-search retention comes through bringing consumers into the search experience through reviews, social networking and new inventory connections - ie content.
Revenue Model - commission vs pay per click; cash from consumers vs bucks from media buyers; selling travel vs selling eyeballs.
OTAs therefore have the advantage in customer retention and breadth of marketing tools. But meta-search has the advantage in ease of access to supply and significantly reduced operational costs (no need for customer care and reduced supplier relations costs).
It is because meta-search is media rather than retailer that the biggest meta-search deal around was Farechase being bought by a media company - Yahoo!. However this does not cancel out an OTA as a potential buyer of meta-search. We have a very power example of success in an OTA buying, owning and running a media company through Expedia's ownership of TripAdvisor. Any acquiring OTA just has to embrace being a media company.
I am a fan of the meta-model but (as with all web companies) it is all about good product and execution. There is lots of success in travel so far for meta-search but comparison experts like Pricegrabber have already failed in moving to travel. The fit with a media company is stronger than that of an OTA. Of course - haunting the whole sector is whether or not the general untargeted search people (ie Google) develop the more targeted tools of meta-search.