AOL, Kayak to Build Travel Search Site

America Online has partnered with and taken a minority investment in travel search player Kayak Software. The two will build an AOL-owned travel search site, to launch in early 2005, which will be powered by Kayak’s technology.

Financial details of the transaction weren’t disclosed.

AOL chose Kayak as a partner partly because of the team of online travel veterans behind its founding. CEO Steve Hafner formerly helped found Orbitz and chair Terry Jones founded Travelocity. The other factor was Kayak’s vision of how consumers want to search for travel.

“We found with our research at AOL that there are essentially two groups of consumers. The first group we already service on AOL Travel, which is powered by Travelocity. These are the consumers that have a lot of brand loyalty,” said Brian Hoyt, a spokesperson for AOL. “There is a second group of consumers which are these travel searchers. They are going to where best price is, where the most convenient option is.”

This second type of traveler, Hoyt said, would be interested in the Kayak-powered site. The new site won’t be connected with or linked from the AOL service, because of the exclusive deal AOL has with Travelocity.

Kayak is part of a new generation of online travel companies that resemble search technology players more than travel agencies, because they crawl a vast number of travel providers’ sites — including those of online travel agencies — and present users with a view of their choices in a matrix. Other players include SideStep and Mobissimo, and Yahoo’s FareChase. Kayak is compensated for referring buyers to the travel agencies’ or travel providers’ sites. It also plans to develop a bid-for-placement ad model in its hotel section.

Launching an independent Web site is in keeping with AOL’s newest strategy of building services not only for its members, but for the Web population at large, thereby allowing it to bring its advertisers a larger audience. The company recently launched InStore, a shopping search engine.

“A long term strategy for AOL is to really look at the commerce space and develop Web properties that aren’t AOL member specific,” said Hoyt. “Autos and real estate are other areas that might make some sense for us as a company.” He added that AOL hadn’t yet made moves or struck partnerships in those areas.

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