Yahoo!'s Still Asleep

Online travel is another vertical into which Yahoo! has made a move, but the segment hasn't been a top performer. Let's take a look at its competition.

Expedia (EXPE - commentary - Cramer's Take) is the largest online travel company, with more than 19 million unique monthly visitors. Expedia earns most of its revenue from commissions from travel services.

Also, consider its Alexa ranking, which measures Web traffic. Sites with heavy visitation have lower Alexa numbers, which range from 1 to about 4 million. Expedia's Alexa ranking is a respectable 426, and the site has a click-through rate of 4.9% for sponsored ads. As a result, Expedia's advertising ranges from $15 to $65 CPM (cost per mille, which essentially means cost per thousand impressions), a very respectable range. However, Yahoo! isn't likely to make a move on Expedia, because IAC/InterActiveCorp (IACI - commentary - Cramer's Take) already has a large ownership stake.

Travelocity, launched in 1996, is owned by Sabre Holdings, which was recently acquired by private-equity firms TPG and SilverLake. Travelocity is ranked No. 2 among the most-visited travel sites in the world, with more than 13 million visitors per month. Travelocity also makes most of its revenue on commissions. Also, with an Alexa traffic rank of 604 and a 6.5% click-through rate, Travelocity's advertising rates vary from $25 to $55 CPM.

Orbitz (OWW - commentary - Cramer's Take), founded in 2001, is ranked third among the online travel sites, with 15.2 million visitors every month. About 70% of its revenue is from airline ticket sales. Also, with an Alexa ranking of 620, the advertising rate for Orbitz ranges between $20 and $65 CPM.

In contrast, Yahoo! Travel does not earn much in commission revenue, and its advertising rates are below $1 CPM. To become No. 1 or 2 in the category, it will need to acquire Orbitz or Travelocity.

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At the time of publication, Mitra had no position in the stocks mentioned, although positions may change at any time. Sramana Mitra is an entrepreneur and a strategy consultant and authors a popular blog on those topics and more, Sramana Mitra on Strategy. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Mitra appreciates your feedback; click here to send her an email.