Kayak Touts Mobile Growth In IPO

Kayak-App-BWith Kayak’s long-delayed IPO finally moving forward, the travel search site’s updated S-1 filing highlights the growing importance of mobile to its business, along with the challenges it brings.
 
On the plus side is the increased use of Kayak’s mobile properties, supporting overall revenue growth. The company says its mobile applications were downloaded 2.3 million times in the second quarter, up 40% from the year-earlier period. Its apps for smartphones and tablets on major platforms like iOS and Android have been downloaded a total of 15 million times since 2009.
 
Kayak also attributes its 31.5% revenue growth in the last year to $224.5 million largely to increased travel-related queries on its Web sites and mobile apps, which increased 44.9% in the first quarter of 2012, and 41.7% for full-year 2011. Searches conducted on mobile apps accounted for almost 17% of total queries in the first quarter, up from 11.6% a year ago. But here’s the problem: Revenue from apps made up just 2% of total revenue in the first quarter and in 2011.
 
Kayak notes in its IPO filing that the increase in query volume was partially offset by a reduction in RPM (revenue per thousand travel searches) “due to an increase in mobile queries, for which we earn revenue at a lower rate.” The RPM dropped 7.1% in 2011, and 4% in the first quarter.

In a similar vein, Google saw its overall cost-per-click rate fall 12% in the first quarter, in part because of cheaper mobile ad rates.
 
Kayak is facing the same issues as other companies, including Facebook, Pandora and LinkedIn; their ability to monetize mobile properties lags the increase in usage. The problem was highlighted in the recent Internet trends report by Kleiner Perkins partner Mary Meeker showing that mobile eCPMs are about five times lower than those on the desktop ($3.50 versus 75 cents).
 
Still, Kayak is counting on mobile apps -- and improved monetization -- to fuel revenue growth.
 
The company cited data showing that the percentage of leisure travelers using or likely to use a mobile phone to research travel products, such as hotel rooms or flights, increased from 39% in 2010 to 55% in 2011. Likewise, the percentage of travelers using or likely to use a mobile phone to book such travel products increased from 35% in 2010 to 38% last year. Kayak expects those trends will only grow.
 
How well the company can manage the transition to a more mobile-centric travel world will end up playing a big part in how Kayak fares as a public company. Considering the company first filed to go public in November 2010, making a market debut would be a good start. Its aim is to sell 3.5 million shares at $22 to $25 apiece.

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