When we reported on the game-changing 700 million Google -ITA software deal last summer, we quoted Kayak’s Director of Marketing, Robert Birge, as saying he wasn’t especially worried by the deal that would, in effect, give Google dominance in the 80 billion-dollar market for online travel services.
Cambridge-based ITA Software controls all the critical data that make airfare searches possible, processing and publishing airfare-related and travel search data.
Birge did go on to say that there “was some reason to be concerned,” and right he was.
Kayak just announced plans for an Initial Public Offering yesterday (IPO), and observers are watching very carefully.
On the one hand says PhoCusWright, the travel industry’s research and intelligence think tank, Kayak’s financials are solid.
In 2009, Kayak generated some $US113 million in revenue and are already reporting revenue of $US128 million so far this year, a significant jump for any company.
Where’s the money coming from?
Query volume was up 37% in the first nine months, lifting profits, with earnings, (before taxes, interest and depreciation) from 16 million in 2009 to 25 million for the first nine months of 2010.
The revenues come from Expedia, Orbitz and Google brands.
On the other hand, industry observers are pointing out that regardless of the strong revenue showing and growth, the IPO is not a “slam dunk”.
Google’s purchase of ITA, which powers Kayak’s air search, puts Kayak in harm’s way.
If, as seems likely, Google launches an airfare search product, Kayak will be competing directly with Google. and that’s not a reassuring scenario.
What also gives investors pause, as IT World reports, is the sobering reality that ITA software provides 42% of Kayak’s overall airfare query.
Kayak’s Initial Public Offering is for 50 million in capital. Although the ITA-Google deal has not yet been approved (the online travel industry opposes it), IT World sees a “genuine danger to Kayak.”
The company is growing fast and is strong, but the question is, can it really go public in the face of so much uncertainty generated by the Google-ITA deal?
Kayak’s ITA contract expires in 2013. Will the IPO go forward, be delayed or dropped?