Kayak Is Shopping for a Metasearch Acquisition in Europe

In the wake of of Ctrip acquiring Skyscanner and Trivago executing an initial public offering and modestly increasing its bankroll, Kayak, which is part of the Priceline Group, is shopping for a metasearch acquisition in Europe and is talking to the Momondo Group about a potential acquisition, Skift has learned.

The depth of the discussions with Momondo Group, which owns metasearch sites Momondo and Cheapflights, isn’t certain and Kayak officials likely are talking to other potential targets, as well. Companies on the prowl such as Kayak talk to a lot of companies about deals from time to time. For example, the Priceline Group and Kayak undoubtedly considered acquiring Skyscanner at various times before China’s Ctrip swooped in.

Momondo Group CEO Hugo Burge declined to comment on any merger and acquisition issues.

When asked if Kayak was in the process of acquiring Momondo or (less likely) Liligo/eDreams, Kayak co-founder and CEO Steve Hafner told Skift: “We don’t have a deal to buy anyone but we’re all ears to anyone who wants to sell at a reasonable price. Unfortunately, Ctrip/Skyscanner and Trivago seem to have inflated expectations. Obviously I can’t speak for any of the potential sellers that you mention. Maybe someone else is on the hunt?”

Notice how Hafner parses his words: That wasn’t an outright denial of engagement with, and interest in, Momondo. It could also be seen as a not-so-veiled attempt to get the seller to lower its price.

Momondo Group’s Benefits

If Kayak and its Priceline Group parent are looking to counter Skyscanner and Trivago’s moves in Europe then Momondo Group, including Cheapflights, would be one of the most likely answers, observers say. Although there are certainly lots of other smaller companies that could be targets, too.

Cheapflights, which transitioned from deal-publishing to metasearch price comparisons a couple of years ago, has a presence in 20 markets and Momondo touches 35 international markets. But the prime benefits of Kayak potentially acquiring Momondo is that Cheapflights would help Kayak in Skyscanner’s home UK market and Momondo is the metasearch leader in the Nordics.

Kayak has had a tough time getting traction in some European markets even though it acquired Swoodoo in Germany in 2010 and has strength in France, for example.

By adding Momondo Group, Kayak would get additional scale in Europe and a good brand in the form of Momondo, an important factor when considering that Google’s preferencing of its own flights and hotel products in search makes organic search, or search engine optimization, all the more challenging. Momondo is a strong lifestyle brand, and the Momondo Group stated earlier this year that around 40 percent of its traffic is direct.

Martin Lumbye, who was among the four people who launched Momondo in 2006 and is a former partner and board member, says “Momondo would create a strong presence in northern Europe – where cost-per-click earnings are higher than in the U.S. – for Kayak. Kayak needs to be better-represented in Europe since Skyscanner and Ctrip have come together and are very strong presence in Asia (China) and Europe (the UK). Kayak owns Swoodoo in Germany, but it has not managed to create the same success with the brand as the Kayak brand has done in the U.S.”

Do Kayak and Momondo Have Similar Problems?

On the other hand, Lumbye, who currently is CEO of the Denmark-based fund North East Venture, thinks Momondo has lost some of its tech-development acumen in a way – somewhat ironically – that Kayak has.

“The overriding weakness is that Momondo developmentally has not been leading after the company’s great developer brain, founding CEO Thorvald Stigsen left in 2014, in the same way that Kayak lost Paul English as CTO. It is not easy to replace the great personalities that drive technological development.”

Boston-based Great Hill Partners, a private equity firm, took a majority stake in the Momondo Group in 2014 with a $130 million investment that valued the company at $210 million.

There is talk that Kayak needs to grow through acquisition because it has had some trouble over the years in Europe and the pace of its organic growth is slowing.

Skift Research Director Luke Bujarski points out that a Kayak acquisition of Momondo could be seen as a defensive move, as well, because Kayak’s European efforts would be set back if a rival acquired Momondo on the heels of Ctrip acquiring Scotland-based Skyscanner.

For example, Airbnb has been talking about adding flight services to its short-term rental offerings, and we speculated that acquiring Momondo might be an option – especially since there is a lot of synergy in the brand propositions.

“Momondo, the darling of metasearch, likely has the best consumer brand positioning in Europe at the moment,” Bujarski says. “They’ve succeeded in the Nordic markets, and carry a certain brand heft as a result. On the other hand, Kayak has struggled to gain traction in Europe. Interest in Momondo could preempt a move from the likes of an Airbnb or the Chinese, for instance.”

For the Priceline Group, with its $76 billion market cap, an acquisition of Momondo Group for Kayak would probably cost somewhere in the $550 to $1 billion range, depending on the multiple. That’s based on Momondo Group’s estimated $102 million in 2016 net revenue, and growth for 2017 at 30 to 40 percent.

Even if the price tag hit $1 billion that would be considered a smallish, or tuck-in, acquisition for a company the size of the Priceline Group.

It wouldn’t be a game-changer for Kayak but could add some momentum in Europe and ensure that it wouldn’t face further setbacks if a rival acquired Momondo instead.

Liligo, which is part of Spain-based eDreams, could be another option for Kayak but Liligo’s reach is smaller than Momondo’s and Liligo doesn’t have a particularly strong brand. Additionally, one of Liligo’s strengths is France, where Kayak already has a decent presence.

Of course, then there’s TripAdvisor, which could solve some problems for Kayak in European metasearch. But that would be a relatively enormous acquisition. Even though an acquisition of TripAdvisor would be relatively cheap at the moment, given its struggles trying to turn itself into a hotel-booking site, there isn’t much chatter about that right now.

There’s certainly more consolidation in the offing in Europe. “What we are seeing now is that big companies like Google, Airbnb, Facebook are engaged in both trips, experiences and events, which is a natural evolution of their businesses now they have tons of users, and they are connecting people in general,” Lumbye says.

“My prediction is that many of the smaller search engines, including Momondo, will be consolidated since Google now has clearly launched in the U.S. and is investing heavily in travel both with Google Flights and with Google Trips, and not in the least by taking care of the travelers when they arrive at the destination.”

Ctrip’s acquisition of Skyscanner points to further consolidation in Europe and the Priceline Group/Kayak looks to be an active player – if the price is right.