In 2009, the New York City-based company spent $1.76 million to buy the domain Fly.com, which seemed worth the price. It was short, self-evident, and hard to misspell.
Travelzoo launched a metasearch site on Fly.com for flights (and later hotels). The business model was to upsell buyers of flights on some of the hotel and holiday bargains listed on its platform and in its weekly email newsletter offers to millions of subscribers. The goal was to challenge Kayak in the U.S. and Skyscanner in Europe.
But the plans didn’t fly. The company never established the brand successfully with its users or via customer acquisition.
In recent weeks, Travelzoo reassigned Fly.com’s small staff and contractors for its search business, which consisted of Fly.com and SuperSearch, a pay-per-click search tool that recommends travel sites.
CORRECTION: This article originally said there were some layoffs as well as reassignments. Instead, some voluntarily left the company, some were reassigned, and some contractors were not renewed in a gradual process. Sorry.
The company’s chief financial officer declined to elaborate on the decision.
Not so fly
Outsiders suspect that the problem was that executives were distracted. From late 2010, Travelzoo executives paid attention instead to their Local Deals and Getaways products. They were aiming to compete with Groupon’s then flaring success with vouchers.
Fly.com’s job got harder with time. After the Priceline Group acquired Kayak in 2012, the cost of competing in user acquisition and supply acquisition rose steeply.
Travelzoo was then hurt by consumer adoption of mobile, which, thanks in part to ad blocking software and other factors, commands lower advertising rates.
Since 2013, the company has tried to shift its revenue model to commissions on hotel bookings, as we noted at the time. But the expense of investing in a hotel booking platform was high.
To free up cash, Travelzoo had to wind down its digital marketing support for Fly.com. Between 2013 and 2016, monthly searches dropped in half. That drop brought down the search unit’s (Fly.com’s and SuperSearch’s) consolidated annual revenue from $23 million in 2013 to $14 million in 2016.
Sadly, the Local Deals product also was a flash in the flash sales pan. As global economies recovered, interest in vouchers declined. The Local Deals unit’s annual revenues went from $35 million in 2013 to $20 million a year in 2016.
In 2016, Travelzoo booked $128 million in revenue, a drop of 9 percent year-over-year.
The declines have spooked investors. Since summer 2013, investors have knocked two-thirds off of Travelzoo’s valuation, to today’s $130 million — about the same as its annualized revenue.
That said, Travelzoo recently relaunched its website and, overall, it continues to hire for dozens of positions worldwide for its core deals-publishing business. Its email newsletter claims 28 million addresses.