Expedia plans to acquire a 61.6% equity position in Trivago, a German metasearch company for a total consideration of Euro 477 million ($632 million).
The deal includes Euro 43 million in common Expedia stock.
The remaining interest (about 40%) is held by Trivago management, with an opportunity for Expedia to acquire half of that within three years and the remainder within five years.
The move comes less than two months after Priceline splashed out $1.8 billion of its own on US metasearch giant Kayak. In terms of profile, Trivago is a far bigger brand than Kayak in Europe, with Trivago growing steadily in Central and Western Europe for years as its US competitor has pretty much sat quietly on the sidelines.
It is also a sizeable indication that the so-called traditional online travel agencies are willing to take the battle for customers further up the purchase funnel by investing in sites already with sizeable positions in the sector.
Expedia says in an investors call that Trivago has nearly 20 million unique visitors monthly.
In 2012, Trivago projects net revenue of Euro 100 million, primarily on the strength of its cost-per-click revenue model. The company claims four consecutive years of doubling revenue.
Trivago got funding April 2011, with Insight Venture Partners taking a reported 25%. This came three years after Howzat Media, a fund created by Cheapflights execs Hugo Burge and David Soskin (now ex-exec), made an undisclosed investment in the company.
The company was formed in 2005 and now includes 600,000 hotels across its range of booking sites. It has a presence in 30 countries and in 23 languages.
Trivago has a pretty decent level of recognition in social media with users, attracting some 1.2 million likes on Facebook - six times as many as its new majority owner. It stands out from Kayak and other metasearch sites because of some of its exclusive partnerships, such as content from Volayo, a Brazilian hotel booking website.
What the analysts asked:
- In terms of protection against Google, Trivago is seen as a 'strong asset that adds more fuel to the fire' in Europe with two-thirds of consumers recognising the brand which is not overly dependent on the search giant
- Proposed acquisition also 'diversifies' Expedia's traffic sources but it will continue to invest in all marketing channels including Google and Kayak (post Priceline acquisition).
- Trivago provides more exposure in Europe, is already one of the 'fastest growing and large variable channels' for Expedia
- Building relationships with hotels directly has been part of Trivago strategy for a while and 'hotel direct' business has increased in 'relevance'
- No plans to display Expedia more prominently within Trivago meta results and no immediate plans for a direct booking path as lines between OTA and metasearch increasingly blur
- On potential synergies or benefits of the proposed acquisition, Expedia describes it as more of a sharing of best practises similar to strategy with TripAdvisor. Trivago analytics seen as first rate while Expedia can help on search engine marketing and optimisation
- No plans to add car rental or air products.
Expedia president and CEO Dara Khosrowshahi says:
"The Trivago team built one of the largest, fastest growing and most well known travel sites in Europe conducting more than 100 million hotel searches annually through a culture focused on developing great products, building a strong brand and promoting partners' businesses.
"These attributes closely align with our Expedia, Inc. strategy and values and we are thrilled to have them join our portfolio."
Rolf Schromgens, Trivago co-founder and managing director, adds:
"Our passion and focus will remain on independently evolving our comprehensive and individualized hotel search. We will stay committed to our mission: To empower consumers to find their ideal hotel at the lowest possible rate."
The deal is slated to close in the first half of 2013, subject to relevant approval from regulatory authorities.