Consolidation in Discount Online Travel Space

In news that was supposed to be announced today but broke late last night, discount travel site Kayak has raised $196 million and acquired competitor SideStep. Techcrunch reports that deal is worth $200 million.

The funding came from existing investors Sequoia Capital, General Catalyst Partners and Accel Partners, as well as new investors Oak Investment Partners and Lehman Brothers. The combined company will have about 60 employees and will be profitable on combined revenues.

Both companies represented the market share leaders in the discount online travel space, having revenues of $50 million (Kayak) and $35 million (Sidestep). In terms of unique users, the combined company will have a commanding lead over competitors Farecast and Mobissmo (see chart below from TechCrunch).

Benefits of combining the two models can also be seen from the fact that the companies claim less than a 10 percent overlap in their audiences, and from SideStep’s strength in display advertising, which Kayak currently lacks.

SideStep CEO and former Yahoo! SVP Rob Solomon is responsible for much of the company’s growth, and has turned it around in lots of ways since he took over two years ago. This culminates in today’s deal.

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