🛶 Kayak: Lessons in Product Tension

+ Serendipity as a PM

How does a company navigate the clashing waves of the travel industry? Adeptly, like a master using a Kayak. The meta-search engine started in 2004 can be a forgotten site in the business coverage of travel. Certainly, at 30M visitors per month, it’s not forgotten in the actual travel side of travel. Kayak is ubiquitous. 

But, as a business, analysts and tech journalists rarely tend to cover it. Perhaps this is because it’s hidden inside Booking Holdings. Booking Holdings itself tends to be a bit of an unheralded company in tech. With a forward P/E ratio of 25x, it is one of the more tamely valued technology behemoths in the world today. 

But that doesn’t mean there aren’t a lot of interesting things going on at Kayak. From its ridiculously interesting founders - Steve Hafner and Paul English - to its constant product iterations, Kayak is a company for technologists and product people to pay attention to. 

In fact, in Steve Hafner, Kayak has an Elon Musk-like multiple-time successful billionaire entrepreneur who still helms the CEO and product development leadership position at his company.

So, today, I am very excited to present a collaboration with Michelle Parsons, the Chief Product Officer at buzzy dating app Hinge. A few tours of duty ago, she worked as a product leader at Kayak. When Michelle and I were chatting about Kayak, the theme that kept coming up over and over was that of tension. 

There’s the tension between what the executives want for the business and what the team can build. There’s the tension between what the product manager wants and what the designers & engineers want. There’s tension in every facet, and in every relationship, of the product development journey.

Because of Kayak’s unique position as a meta-search engine in the travel industry, it has particularly had to navigate tension throughout its life. From its inception to today, it has managed that beautifully. 

Tension is something product practitioners feel day in, day out but is surprisingly not talked about much. So, Michelle and I are really excited to give a window into the life of managing tension adeptly, like a master Kayaker. Let’s start rowing.

Tension 1: People browsing but booking direct

In 2004, successful serial entrepreneur Paul English was looking for his next big project. Despite having a company, Boston Light Software, to Intuit, he had never managed to meet a Venture Capitalist. So, he set out to meet one. 

That person would turn out to be Bill Kaiser at Greylock. Paul told the story on Masters of Scale:

I called Bill, and I said, "I want to start another company. And I want to do something really big." And Bill said, "There's an office at Greylock. Come set up tomorrow.”

Serendipity happens when you put yourself in the right places. One wintery evening as Paul was heading out from a meeting in Harvard Square, a partner told him that a co-founder of Orbitz named Steve Hafner wanted to create a travel company. 

At the time, Orbitz was one of The Big Four travel sites, competing against Expedia, Priceline, and Travelocity for US customers. Clearly, Steve was a strong player in the industry. So, Paul took the meeting.

At Dinner, Paul got the pitch. The two shared a few Gin and Tonics, and Steve explained that the majority of people who used Orbitz did so to find a flight. But, once they did, they would book it directly on the airline and Orbitz would not get paid. It was a dramatic insight.

Indeed, this is the first lesson in tension from the story of Kayak. People browsing but booking directly created the opportunity for a new business. Instead of monetizing the booking, the company could monetize the traffic. 

Paul and Steve began discussing a “pure search engine where we didn’t sell anything.” The idea was to aggregate inventory across The Big 4.

The chemistry was strong enough that Steve offered Paul the CTO position on the spot. It was a $150K, 4% equity job. Paul was interested in starting his own company, so he declined. But he did offer to connect Steve with someone in the group of 20 Boston CTOs that he ran. 

Steve persisted: why didn’t Paul take the job? Paul said he could if it were 50/50. Steve agreed. History was made over dinner, and Kayak was born. The speed of its birth would carry out throughout its life.

Tension 2: Becoming a Thin UI Layer

That night, Paul would log onto Expedia. He knew immediately that a small team at Kayak could compete with the behemoth. The user experience was not up to snuff. It was cluttered and full of information. 

Paul and Steve each put a million into the company. VCs put in an additional 5 million. With the capital in hand, the first calls Paul would make would be to his lifetime engineers. With the four of them on board, Kayak was ready to build its first version.

But, first, it needed to get content. Kayak would begin by just scraping content from the top four websites. It was “ask for forgiveness, not permission.” 

In addition, in March 2005, the company struck up a deal with ITA Software for flight query results. This would also give the company a set of steady flight results to display to its users.

On Cinco de May, 2005, Kayak was released to friends and family. Then, in October 2005, it was released to the public. The site was simple, a contrast to Expedia:

As Paul said on How I Built This:

My friends at ITA used to say Kayak just sits on everyone else’s tech. It’s just a thin layer.

But that’s exactly what the Kayak team wanted. They could stay operationally efficient and have a small headcount, while making a big impact. 

Others may not get the idea, which unveils the second lesson of product tension. User experience and a thin UI layer can be a product. But others may not realize that it is. That is not your problem, but your advantage.

Tension 3: Monetizing 

Of course, the guys at ITA did have a bit of a point. Kayak had launched without any way to earn revenue. It was just a place to find flights, not book them.

The next big deal Kayak had to make was for revenue. 

Steve called his former co-founder and Orbitz CEO, Jeffrey Katz. Steve worked out a deal with Jeffrey and the Orbitz traffic acquisition team to get paid per visitor they sent over to Orbitz. The price started at 50 cents.

This illustrates the power of having founders who are veterans in the industry. Perhaps no other person in the world could have worked out such a deal with one of the big four, when the company was still so nascent. But Steve did it.

Kayak became, “Search with us, book with Orbitz.” Kayak then leveraged the ‘book with Orbitz’ feature on Kayak in its Business Development (BD) calls with the airlines. They want something like this:

Kayak: We are selling American Airlines tickets on Kayak.

American Airlines: How?

Kayak: Through Orbitz. Don’t you want to get those bookings instead?

American Airlines: How much will it cost?

Okay, so it might not have been quite so easy, but the Orbitz booking trump card made it relatively easy for Kayak to get most airlines to pay them directly over the next couple of years.

Another important deal the company would strike was with Google, the leading search platform. This would provide the company with sponsored link advertising inventory to generate revenue.

Between Orbitz, the airlines directly, and Google ads, Kayak created three diverse revenue streams out of a thin UI layer. The only rub was, the same people paying the ads were competing for the same traffic.

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- You ship 100 features. 99 are meh, 1 changes your career.

- You test 100 ideas. 99 don't work, 1 changes the company.

- You work with 100 people. 99 you never see again, 1 gets you your next job.

Being a PM is full of serendipity. Keep chugging.