Kayak Buys Sidestep!

Alright so this not new news but it did happen just before Christmas when most of us have "turned off" for the holidays. Quick summary: Kayak raised $196 million from a bunch of vulture caps then used the money to buy Sidestep for something like $180 million. See here on TechCrunch.

What's interesting to me is this:

Kayak's revenues is supposed to be around $50million a year and that of Sidestep is $35million. They are the two largest metasearch engines and are followed distantly by Mobissimo and Yahoo's Farecast. What does this tell you?

1) The meta search engine market is not that large. Right now it must be around $120million a year. Compare this to other OTAs like Expedia and Orbitz with billions of dollars in revenue each, this industry is but a small sliver of the pie.

2) And this sliver of a pie is actually consolidating with the two LARGEST players merging. So what is going to happen to the smaller players?

3) Get acquired or die is what it means. The smaller guys want to get bought. The larger guys also want to get bought. So Kayak-Sidestep's new investors are hoping that they can sell their $100million revenue beast to the likes of Expedia, Orbitz or InteractiveCorp for something like $1.5billion (15 times earnings). Or perhaps Google might decide to get in the game.

4) But these guys are google's clients as they buy a lot of PPC keyword ads. Google may not want to be seen as a monopoly if they own both the advertiser and the medium.

Anyhow, good luck to all the smaller travel meta search engines out there like bezurk.com and sprice.com and qunar.com....