Hipmunk on the Make: The First-Birthday Interview

8/22/11Follow @wroush

I first covered Hipmunk on August 18, 2010, the day after the online travel startup debuted its innovative time-based flight search interface. One year later, how’s the Y Combinator-backed company faring? Spectacularly well, actually.

In an announcement marking its first birthday last week, the startup said that users are conducting a million combined flight and hotel searches every month, and that the number of searches is growing at 15 percent per month. About 30 percent of flight searches now happen on Hipmunk’s iPhone, iPad, and iPod touch apps, which it introduced in February.

The company now has 10 employees and a groovy office in the old Hamm’s Brewery in San Francisco’s Mission District, and has rounded up $4.2 million in venture funding from Seattle’s Ignition Partners and a long list of other investors, including SV Angel, Real Networks’ Rob Glaser, former Expedia CEO Rich Barton, Gmail inventor Paul Buchheit, WordPress creator Matt Mullenweg, and actor Ashton Kutcher.

Hipmunk’s growth has “wildly exceeded our expectations,” says CEO Adam Goldstein, 23, who co-founded the startup with Reddit founder Steve Huffman. One key to that growth was the addition of a hotel search capability this spring, again drawing on clever visualization techniques to show hotel choices in the context of other important data, such as location.

The actual data and prices Hipmunk displays are pretty much the same as those you’ll find at any other travel search site; the startup’s main pitch is that it can simplify the trip planning process by sorting the results using intuitive measures such as “agony” in the case of flights (the length of the flight, the number of connections, etc.) and “ecstasy” in the case of hotels (proximity to good food, nightlife, convention centers, and other attractions) and providing easy search customization options.

I caught up with Goldstein last week; an edited summary of our conversation follows. Three especially interesting themes: the difficulty of building a business around flight search alone; the growing importance of Hipmunk’s mobile apps; and how the startup is acquiring users without spending a lot of money to do so.

Xconomy: What are you most excited about right now?

Adam Goldstein: Hotels are really big for us. They are interesting for a bunch of reasons. The fact that we didn’t have hotels before meant that we were sending customers to other services not just for hotels but for flights, because people like to shop for both at the same time. The other side of it is that hotels are just a wildly lucrative business. There is a big multiple [in the commission] per hotel book versus flight booking.

X: Why is that?

AG: There are a bunch of reasons you can point to, but they’re all theories. Only a few airlines control most of the market in the U.S., so the airlines have a fair bit of negotiating power by virtue of scale. Whereas if you are searching a website for a hotel and a particular chain is missing, you might not even notice. The big guys know they are going to be losing tons of money if they aren’t showing up in the search results. They’re willing to pay a whole order of magnitude more, as a percentage of the booking price. So the name of the game in online travel, for better or worse, is … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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