Farewell Farechase - HE GONE !

The meta-search space was starting to get really really crowded since travel-media heavyweights like TripAdvisor and Travelzoo started to crash the search party. However, it looks like field has been narrowed a bit as Yahoo! decided to scrap Farechase five years after they purchased it in 2004.

As reported by Travel Weekly (which is updated daily):

[The decision] coincides with two other developments. Carol Bartz replaced Jerry Yang as Yahoo CEO in January, and in late February Yahoo signed a new agreement that has Travelocity continuing its role as the primary booking engine for Yahoo Travel. In the past, Travelocity sparred with Yahoo over the prominent role that Yahoo gave FareChase on Yahoo Travel.

OK - this is basically the same old Hollywood story of Man - Wife - Mistress.

- Yahoo was pretty much married to Travelocity, but then met the alluring FareChase

- Five years of drama where Yahoo tried to juggle both

- Finally, Yahoo re-ups with a new Travelocity Agreement and realizes its never going to leave The Gnome so it's time to end it with FareChase.

The field is starting to rationalize itself a bit with Kayak / Sidestep as the heavy, Microsoft / Live Search / FareCast as the contender, Mobissimo as the falling star, and Trip Advisor and Travelzoo as the new guys.

FMV's predictions: 1) Mobissimo is the next to go thru a takeout, 2) Hybrids coming to a website near you as media plays try to go into the travel realm, and travel sites try their hand at media plays, and 3) OTA's have a problem, but Expedia may have the answer...

SideStep - "He Gone"

OK – we’ll interrupt our holiday festivities and comment on the Kayak / SideStep “Merger”. There are a lot of tidbits coming through so we thought we’d throw in a few cents from the FMV point of view:

First of all – Reports say that Kayak will only hire 20 of the company’s 75 employees, not including its chief executive, Rob Solomon.

Wow, nice timing on that one Kayak – right before the holidays. Merry Christmas SideStep – now you guys can include a resume in your holiday cards you’re sending out!! Try this on your next search site: From: Santa, To: Kayak, and you'll get a big lump of coal in all of your results.

Second , Kayak raked in $196 million in VC money to be able to pull this “Merger”.

FMV puts the word “Merger” in quotes (insert air finger motion here) simply because we always thought that the larger company buying out a smaller company was called a “Takeover” or "Buyout" – but it’s obvious we’re not finance guys…

Third, the financing round was led by prior investor Sequoia Capital – and also included General Catalyst Partners, Accel Partners, Norwest Venture Partners, Trident Capital, Oak Investment Partners and Lehman Brothers Venture Partners, Silicon Valley Bank and Gold Hill Capital.

We guess $196 million is a lot of money so you need a lot of players.. FMV thought about joining in as well, but Kayak called saying they were drawing a hard line at $196 million and therefore they didn’t need our extra $250 to pull off the round…

Fourth, Kayak says there is less than 10% overlap among Kayak and SideStep users. (subscription needed)

This one actually caught us a little off-guard. We're told time and time again “There is NO loyalty in the airline search market, people always check multiple sites”. But now we’re told that tens of millions of searchers have a very strong loyalty to their preferred meta-searcher and don’t cross check? Or maybe because people don't know more than one? Whatever the case - seems like a weird fact.

Finally - Kayak co-founder and CTO Paul English added: “As a native Bostonian, I am also personally gratified to finally see an East Coast technology firm purchasing a West Coast counterpart.”

OH YEAH BABY – IT’S ON !! West Coast Sucks !! It's like the rapper wars again - Biggie and Puff can take down Snoop Dog and 2PAC ANY DAY ! Don't bring your weak stuff in our house Silicon Valley !

Man, where did this quote come from?

Overall – interesting stuff. We always thought that a few of these guys would get taken out, we just didn’t look at them “Merging” with each other. If the 10% overlap part is true - nice play for Kayak on simply shortcutting the process and ramping up their scale.

It’ll also be interesting to see what happens now with FareCast and Mobissimo - will others just look at these companies and think that they can get in the market now on the cheap(er)? Although we think Mobissmo has a long long way to go.

"Scrapers" Growing

Duncan Alexander (OAG) held a pretty good discussion on meta-searchers and their growing impact (Note – Meta’s hate the term "screen scraper" since it's usually used by airlines with disdain). One of the random stats he threw out was that meta-searchers now represent more unique users than Travelocity. Granted – it takes 5-6 players to reach that size – but it's still a significant benchmark.

You can gradually see the rise of these meta-searchers even at CASMA as SideStep now sponsors some events and Price Grabber actually has an exhibition booth (If you get a chance, check out The Cranky Flier, which is an award winning travel blog run by Brett Snyder of Pricegrabber).

Why are airlines against this channel? I think arguments basically circle around three main themes:

1. Scrapers have a HUGE look to book ratios (we've heard anywhere from 150:1 – 350:1) and therefore they actually cost a ton as they hit an airlines' host system for every search.

This is somewhat true – and somewhat misleading. Metas DO have much higher LTB ratios than other channels, but it shouldn't be an issue for most airlines (or it can be controlled). Players like Kayak, SideStep, Farecast and others now use third party systems like ITA Software or Amadeus for a majority of their content – and therefore never hit the airlines’ host. If that's the case – the airline shouldn't care.

(Note – FMV has noticed that it's not pronounced "Am-ah-day-Us" but rather "Ah-mah-Day-Oose" – kinda like "Dr Seuss says the moose is loose")

We wonder how much longer it takes for more airlines to build out XML connections for these guys? And why aren’t major host systems’ vaunted “availability processors” gaining traction?

2. Scrapers just perpetuate the commoditization of airfares and will only lead to low-quality revenue.

We love this argument because it simply doesn't make sense. What are meta's doing that is SO different than what Expedia, Orbitz, or even Priceline and Hotwire are already doing?? Heck – "CHEAP" is even in the name of "Cheaptickets"!!

The only argument you can make is that the TYPE of customer that uses a meta is cheaper than other online users. But won't these people still have their characteristics and just be booking somewhere else? If so – wouldn't you want them to book through a meta that is still cheaper than sending an override payment to Expedia?

3. These passengers would have come to airline.com to book anyway?

Maybe. But you won't know that unless you do the study. Many of the passengers that eventually book will have a frequent flier number – and hopefully an airline can track 1) when they last flew, 2) when they last booked through the airline's website. FMV bets the results would be surprising.

CASMA takes a slanted view towards "all things distribution" and therefore looks at Metas through a distribution focus. But we bet if you went to an airline's marketing department, and told them you had an advertiser that had a 20% conversion rate (a commone characteristic for Metas) - they would be amazed.