There are some juicy details in its S-1 filing about Kayak's financial obligations to and dependence on ITA Software.
It's always been known that ITA's QPX airfare shopping and pricing solution doesn't come cheap. However, Kayak discloses some specifics in a statement about its proposed IPO.
Kayak is on the hook to ITA for a minimum of $21 million from Jan. 1, 2010, to Dec. 31, 2012.
That's an average of $7 million per year at a minimum for use of QPX on the websites of Kayak and sister brand SideStep.
Here's how Kayak describes its services agreements with ITA, which date to March 2005.
We paid ITA an initial payment of $166,666 followed by a monthly service fee based on the number of queries performed, subject to a minimum of $83,333 per month, a software maintenance and operation fee of $225 per hour and a hardware fee per month of $1,450 per dual processor server used.
On March 11, 2008, in addition to our arrangement with ITA, we agreed to assume payment obligations of SideStep to ITA following our acquisition of SideStep. On January 1, 2009, we agreed to amend the fee schedule as follows: to increase the monthly service fee to a minimum of $500,000 for the period until January 1, 2010, and a minimum of $583,333 per month thereafter until our aggregate payments for 2012 equal certain agreed-upon amounts, following which we would cease such monthly minimum payments until January 1, 2013, whereupon we have agreed to pay a minimum monthly fee to be calculated based upon the number of queries performed in 2012. For the period from January 1, 2010 through December 31, 2012, we have an estimated minimum commitment of approximately $21 million related to this agreement. We are unable to estimate our calendar year 2013 minimum commitment at this time.
As the Dept. of Justice reviews Google's intend acquisition of ITA Software, continued access to QPX remains a key concern for Kayak, which got 42% of its airfare queries from QPX for the nine months ended Sept. 30, 2010, Kayak states.
Kayak took in some $128.3 million in revenue in the first three quarters of 2010, and about 26% of that, or about $33.4 million, came as distribution revenue from airline queries, Kayak states.
If you wonder why Kayak is so involved in FairSearch.org, the anti-Google-ITA acquisition coalition, then consider that Kayak processes the majority of its domestic flight query results through ITA and uses its QPX product to bolster international flight query results, as well.
In the S-1 form which Kayak filed with the Securities and Exchange Commission about its proposed IPO, the company states:
We anticipate domestic queries will continue to represent a significant portion of our overall queries for the foreseeable future. Thus, a loss of access to ITA’s software or an adverse change in our costs associated with use of the ITA software, could have a significant negative effect on the comprehensiveness of our query results and on our revenues and operating results.
Of course, Google states that it would honor all of ITA's contracts with customers, including Kayak.