Kayak’s Case Study
Question 1
Explain and critically evaluate KAYAK’s multi-sided market
Broadly speaking, Kayak engages in online marketing. In this line of business, it helps companies in the travel and hospitality industries to reach their customers by providing platforms through which companies and potential customers can interact. With the help of these platforms, Kayak may either provide the link between potential customers and the companies or provide a platform for the two to interact. In both cases, the company earns revenue when the transaction is successful. This means that Kayak earns revenue in form of commission when travelers book hotels, flights or rent cars among other things. In order for this to happen, Kayak has developed websites and mobile applications for this business. The websites on their part provides travel information to potential customers. They also provide mechanisms in form of links and/or advertisement banners through which potential customers can link to travel suppliers and online travel agencies (OTAs). Once Kayak provides the link between the two, the transaction is considered to be complete when potential customers take action as it might be defined by OTAs or travel suppliers. For example, the transaction might be considered to be successful when a potential customer books a flight or a hotel. It may as well be considered to be successful when a customer fills a form or does something of the sort.
Besides engaging in online marketing, the company also engages in online advertising. In this line of business, the Kayak places advertisement banners on its websites for individuals to either view them or click them for more information. For the case of viewing and simply not doing anything on the banners, Kayak earns revenue through cost per impression. In this case, the company earns revenue based on the number of views its websites enjoy. If the number of the views is high, the company earns more revenue. Conversely, if the number of the views is low, the company earns little.
On the other hand, for the case of clicking the banners, Kayak earns revenue based on the number of clicks its banners and sponsored links receive from potential customers. In this case, the number of the views does not matter because the views can be many, but with few clicks. At the same time, the views can be few, but with many clicks. Whichever the case, the revenue is determined by the number of the clicks and the revenue set for each click. With this type of business, it does not matter whether potential customers book flights, hotels or even rent cars. All that matters is whether potential customers click the banners or not. If they click the banners, Kayak earns revenue for that. Conversely, if potential customers do not click the banners, the company does not earn revenue.
The three types of businesses supplement each other in the following manner. When potential customers do not click advertisement banners, but they land on the company’s website, the company makes revenue through CPM (Sheehan 2010, p. 75). However, this depends on whether the company has advertisement banners for this business on the websites that potential customers land. On the other hand, when potential customers click advertisement banners, but they do not take action once they land on OTA’s and travel suppliers’ websites; the company earns revenue through cost per click (CPC). Once again, this depends on the type of the banner the company displays on its websites. Lastly, the company earns revenue when customers book flights, hotels or rent cars every time it refers them to OTA’s and travel suppliers’ websites.
The company also engages in the search engine business, but with a specialty in the travel industry. In this market, the company indexes travel sites for the companies it has contract with to potential travelers to help them find information relating to hotels, cruise lines, rental cars and even flights. If potential customers find the information they want or consider important to them, they can click on the links provided to them by Kayak’s search engine. When customers click on the links, they are directed to the websites for OTAs or travel suppliers. On these websites, potential customers can either book hotels, flights or even rent cars among other things. As this process takes place, Kayak’s servers collect data relating to the clicks that emanate from its websites and mobile applications to OTA’s and travel suppliers’ websites. The servers keep records that are used to determine Kayak’s revenue.
Question 2
Which types of intellectual property are important to KAYAK and why?
The term intellectual property refers to inventions and works that result from creativity. In order to promote creativity, governments all over the world have developed laws to protect original ideas. Based on this fact, companies and individuals can protect their original works and ideas through trademarks, copyright or even patent. Kayak on its part can develop computer software or make other inventions in its line of business. If this is to happen, Kayak might want to safeguard its interests in online business by protecting its inventions so that it can retain its competitiveness in the industry. Based on this fact, the following intellectual properties are important to Kayak. The first one is the trademark. This refers to the marks, symbols or words used to indicate the source, ownership and quality of a service or product (Bouchoux 2009, p. 4). With regard to this intellectual property, Kayak is involved in interacting and communicating with travelers online. In particular, it is involved in exchanging information with travelers. Because there are many individuals and companies in this business today, Kayak would want to make sure that its operations are not interfered with by these individuals and companies. For this to happens, Kayak would be interested in registering a symbol or a brand name to identify its information. If the company has already done this, it would want to restrict imposters from using such symbols and brand names in their business practices so that it can retain its market share. At the same time, the company might be interested in doing so to authenticate its information. In both cases, trademark would be important to Kayak as it conducts its online business.
The second intellectual property that would be important to Kayak would be the trade secret. This refers to the formula, devices, processes and any other business information that Kayak utilizes in its daily operations to gain advantage over its competitors (Bouchoux 2001, p. 6). Literally, it is possible that the company has any of these secrets. However, the secrets might be known to a few people in the company or a few or all of the employees working in the company. In contrast to other intellectual properties that can be protected legally, trade secrets remain confidential so long as the company takes the necessary steps to safeguard those secrets. In this case, it would be important for Kayak to ensure that its employees do not share its secrets with strangers or anybody else that is not an employee of the company so that it can retain its competitiveness in online industry. To do this Kayak can either enter into non-disclosure agreements with its employees or even treat its secrets as confidential. Kayak can also enter into agreements with its employees before they retire or leave the company. Such agreements would hinder retirees and employees that leave the company on other grounds from sharing the secrets of the company.
The third intellectual property that would be important to Kayak would be the patent. This intellectual property refers to the rights that Kayak would enjoy over its competitors for the inventions it would make in the online business (Elmslie & Portman 2006, p. 6). Although the company might not have the rights over online advertisement business, the company might make some discoveries in this field and it might want to protect such discoveries. In order for this to happen, the company would want to patent its inventions so that they cannot be used by its competitors unfairly. In this case, Kayak would want to have rights over its inventions for some time so that it can retain its competitiveness in the industry and take advantage of those inventions.
The fourth intellectual property that would be important to Kayak would be the copyright. In this case, the company might develop computer software for its business practices (Elmslie & Portman 2006, p. 8). In order to restrict its competitors from adapting and reproducing this software without its permission, Kayak would require a copyright for its software. As in other cases, Kayak would do this to take advantage of this property and retain its competitiveness in online marketing industry.
References
Bouchoux, D., 2001. Protecting your company’s intellectual property: a practical guide to trademarks, copyrights, patents & trade secrets. New York: AMACOM Learning.
Bouchoux, D., 2009. Intellectual property for paralegals: the law of trademarks, copyrights, patents, and trade secrets. Clifton Park, NY: Delmar Cengage.
Elmslie, M. & Portman, S., 2006. Intellectual property: the lifeblood of your company. Oxford: Chandos Publishing.
Sheehan, B., 2010. Online marketing. Lausanne: AVA Academia.