Travelzoo Scales New Heights

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About 8.1 million subscribers nationwide have signed on to receive Travelzoo's most popular product, the weekly Top 20 e-mail newsletter listing what the company considers to be the 20 best travel deals that week on the Internet.


This milestone, representing 31 percent growth from 2003 to 2004, is buttressed by two more. More than 175,000 deals from 300-plus companies were published as of January across the Travelzoo brand. And traffic at www.travelzoo.com that month jumped 176 percent versus the year-ago period to surpass 21 million page views.


"We're different from the online agencies in that we don't sell travel, but rather act as an aggregated source of travel offer information," said Kelly Ford, vice president of marketing at Travelzoo, New York. "In fact, many of the large online agencies are our clients, which speaks to the fact that we're a complementary media outlet for them rather than a direct competitor."


Travelzoo makes money in two ways. One is paid placement on its site and e-mail products. The other is a fee charged to clients on a per-click basis for inclusion in the SuperSearch search engine, a tool that incorporates user feedback, flight schedules and other criteria to recommend relevant sites.


The company ended the fourth quarter of 2004 with more than 340 advertisers, a 42 percent increase from 240 in the year-ago period. Among the new advertisers are Frontier Airlines, Independence Airlines, Song Airlines, Rock Resorts, Millennium Hotels & Resorts, Aloha Airlines, cruisedeals.com and Cruise Value Center.


Travelzoo's revenue in 2004 was up 87 percent to $34 million, and net income grew 194 percent to $6 million. The company has a roughly 10 percent share of the total online travel advertising market, which is estimated at $350 million to $400 million.


Unusual for an Internet-only company, Travelzoo has had 26 consecutive quarters of revenue growth and no losses since its founding in mid-1998. It never used venture capital and eschewed long-term debt. It has 50 employees, and none of them are in customer service, which is a major cost center for travel agencies. The company is listed on the Nasdaq.


"We're an advertising-supported Internet media company, and all our publications are free to consumers," Ford said. "We have zero commerce, revenue share or commission revenue. We direct all bookings to the travel companies providing or selling the advertised offer."


Consider Travelzoo's products. The site has aggregated, prescreened and test-booked offers sorted by travel type and destination. The Top 20 weekly newsletter is a leader in its category. Newsflash is an e-mail alert with a single offer. It is sent within hours of its announcement to up to 3.7 million subscribers in 18 U.S. regions.


SuperSearch offers qualified traffic directly to advertisers' sites. It launched in July. It fills a need for consumers who know exactly when and where they want to go, but are unsure of all the relevant sites that serve their itinerary.


Ford said suppliers have taken to SuperSearch because it drives qualified traffic to them rather than plucking or repurposing content.


"Search will be very interesting to watch throughout 2005," Ford said. "On the one hand, we're seeing increasing competition and rising bids for top words on the largest pay-per-click engines.


"On the other hand, there are huge initiatives by some heavy hitters like Microsoft and an increasing number of industry-specific alternatives, which are giving companies more choices. I think we'll see some consolidation in this arena by the end of the year and perhaps a stabilizing of rates."


Melissa Campanelli covers postal news, CRM and database marketing for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters


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