Skyscanner has been generating decelerating revenue growth over the last three years, its 2015 earnings show, so will the trend hamper what one of its investors says are hopes for a 2017 initial public offering (IPO)?

Skyscanner’s revenue grew 28 percent to $183 million in 2015, compared with a 42 percent increase in 2014 and a 96 percent jump in 2013. Skyscanner’s profits (normalized EBITDA before statutory adjustments) rose 5 percent to $34 million. [See Skyscanner’s financials in the chart below.]

Skyscanner’s business is predominantly in flight search and it began taking flight bookings in the last year or so. The company’s slowing revenue growth took place despite its acquisition of Chinese metasearch site Youbibi midway through 2014, and entering into a joint venture with Yahoo Japan in July 2015.

Asked about the slowing revenue growth, spokesperson Randi Wolfson says: “We made the decision in late 2014 to dedicate the first half of 2015 to focus on product improvements and developments, including a new facilitated booking feature and a new flights app. As such, we were able to accelerate our revenue growth in the second half of 2015, where we saw a 36% increase in constant currency.”

That 36 percent revenue growth, without accounting for the impact of currency exchange rates, was only a slight uptick from 34 percent revenue growth on a constant currency basis for full-year 2015. When including currency exchange rates, the full-year revenue growth was 28 percent.

“We’re continuing to see the fruits of this strategy in the first few weeks of 2016,” Wolfson says. “We continue to see growth in visitors across markets, and an increase in mobile visitors.”

What the Analysts Say

Skift asked three financial analysts about the significance of a 15-year-old company such as Skyscanner producing slowing revenue growth. They didn’t view it as catastrophic.

“My take would be, at this stage in the game, it would be better to see less deceleration and growth that’s still in the 30s to 40s percent,” said one analyst. “Some level of deceleration is fine, however, because you are fighting the law of large numbers as you grow.”

Another analyst, who hadn’t looked at Skyscanner’s financials, said: “I would largely expect the deceleration as those are impressive growth rates, but I would try to tease out the marketing leverage a bit more to see if they are gaining or losing leverage.” As a private company, Skyscanner does not disclose its advertising spend.

A third analyst didn’t think the slowdown in Skyscanner’s revenue was especially problematic. “In general, deceleration would impact valuation,” this analyst said. “Growth is strong, but would not likely garner a dramatic valuation. Growth at that level is only modestly better than Expedia or Priceline. It doesn’t mean there is anything wrong; it’s just the natural maturation process.”

Skyscanner Financials 2013 To 2015

2013% Growth2014% Growth2015% Growth
Revenue$108.6M96%$135M42%$183M28%
Gross BookingsNANA$7.51BNA$11.2B49%
EBITDANANA$32.4MNA$34M5%

Source: Skyscanner

Priceline Took A Look-See

Skift exclusively reported in January that Skyscanner’s recent raising of $192 million in venture funding, its first venture funding since 2007, took place sometime after the Priceline Group considered acquiring Skyscanner but walked away. Skyscanner has raised nearly $200 million in funding to date, with current investors including Scottish Equity Partners and Sequoia Capital, which bought out other investors in 2013.

Skyscanner’s valuation at its latest funding round in 2016 was said to be around $1.6 billion.

It was in conjunction with the latest funding round in January that Stuart Paterson, a partner at Scottish Equity Partners, told Business Insider, referring to Skyscanner’s strategy: “I think the aim now is an IPO in 2017. That’s what the company is planning for.”

Among publicly traded companies, Kayak, which like Skyscanner is skewed toward flight search, undoubtedly has a much larger business than Skyscanner’s, although it its difficult to ascertain how fast Kayak is growing within the profit-conscious Priceline Group.

The Priceline Group’s advertising and other revenue in 2015 amounted to $613.1 million, a 49.5 percent jump. Kayak is believed to have generated the vast majority of that revenue, although it also includes reservation and subscription revenue from OpenTable, which joined the Priceline Group in June 2014.

IPO-Bound?

While Skyscanner’s revenue growth slowed in 2015, it could be pumped up this year with increased marketing if it’s true, as the company says, that it slowed things down in the first half of 2015 to focus on product investments, such as doing bookings on Skyscanner for British Airways.

From a small base, Skyscanner’s mobile Web bookings increased 24 percent year over year in 2015, and they were 42 percent of all converted bookings.

Mobile visitors to Skyscanner sites increased 7 percentage points in 2015 to 59 percent of the company’s 50 million monthly visitors. Much of Skyscanner’s mobile growth likely occurred in China because of its Youbibi acquisition and in Japan, as well, because of the Yahoo Japan deal. In Asia Pacific, Skyscanner’s mobile visitors jumped 62 percent in 2015 compared with 2014.

Still, Skyscanner faces the challenge that many second-tier players face when competing against the likes of Kayak, Google, airline websites and, to a much lesser extent, TripAdvisor and Trivago, for example.

How does a company get brand awareness and grow when the larger players have scale and much larger marketing budgets and resources?

Skyscanner’s growth story may have to get more compelling if it is indeed to go public, depending on market conditions, in 2017 or beyond.

Photo Credit: Skyscanner is slowly evolving into a flight booking site. Pictured is its homepage. Skyscanner