VentureBeat

The VentureBeat team is mostly taking a much-needed holiday break this week. In the meantime, here’s some of the latest news:

1. Apple devices to offer payment service?
2. Digg tells BusinessWeek that “no acquisitions are in the works” but we’re sticking by our story
3. Amazon Music Store to sell Warner Bros. music
4. Apple’s iTunes to rent Fox Studios movies
5. Web analytics service Compete examines Kayak-Sidestep travel site merger

Apple devices to offer payment service? — The company has recently filed a patent for “a wireless system that would allow customers to place an order at a store using a wireless device such as a media player, a wireless personal digital assistant or a cellphone,” Brian Caulfield reports. Phones in other countries, most notably Japan, can already be used to make credit card purchases at stores. Here in the US, we are still looking forward to this feature. (Image via Phone Different.)

Digg tells BusinessWeek that “no acquisitions are in the works” but we’re sticking by our story – Earlier this month, a well-placed source told us that social news site Digg has hired a bank to help it sell itself for $300 million or more. However, companies that are looking to sell usually won’t admit it publicly. Instead, they like to talk about how they’re focused on building a big business. True to form, Digg chief executive Jay Adelson only tells BusinessWeek about a number of new Digg features, and the potential for the company’s international expansion. He also says that Digg’s new advertising deal with Microsoft has been “great” since it started a few months ago.

Amazon Music Store to sell Warner Bros. Music — For some time, we’ve been hearing that Amazon’s music service has been growing quickly, as users are able to purchase songs and albums from it that don’t have restrictive digital rights management (DRM) software in place. DRM software technology is unpopular because it prevent you from buying a song then freely copying it to multiple computers and music-playing devices. Now, Warner Bros. will also sell music without DRM (press release here), following similar moves by EMI and Universal Music Group, who already sell large portions of their music catalogs DRM-free on Amazon. Apple’s iTunes has also begun to sell some DRM-free music — it has a DRM-free partnership with EMI, but not Universal. No word, yet, on whether Warner Bros. will offer DRM-free music through iTunes.

Apple’s iTunes to rent Fox Studios movies – Despite the competition from Amazon, Apple has more plans in the works for iTunes, the Financial Times reports. Apple will let iTunes users “rent” the latest DVD releases from Fox Studios — which means you can pay to download a digital DVD copy of the movie from iTunes for a limited time. Apple already lets you purchase Disney movies (Apple chief executive Steve Jobs is Disney’s largest individual shareholder), as well as a few Paramount titles. Aside from these companies, most studios have, like the record labels, balked at Apple’s efforts to cut deals with them. See the Wall Street Journal for more.

Web analytics service Compete examines Kayak-Sidestep travel site merger — Lots of detail on what Compete says is “among the most significant news items of 2007,” here. Our previous coverage of the deal is here.

Updated

Travel search engine Kayak has taken on $196 million in additional funding from a prominent group of investors.

It has separately purchased main rival SideStep for $180 million, as well as $20 million in the company’s bank account for a total of $200, Techcrunch first reported. [Update: We now hear from a source that the total sale was for slightly less: $175 million plus $18 million in cash, for a total of $193 million.]

Together, the companies will aim for a “tremendous” initial public offering next year, said Woody Marshall of Trident Capital, an early investor in SideStep, confirming the news.

[Update: The company itself is demure about the possibility of an IPO, saying instead that it wants to focus on being the number one travel site in the coming year.]

There has already been “strategic interest” in both companies — potential acquirers — Marshall said.

Both provide search-based travel sites where users can find travel information such airline flights, car rentals, hotel reservations, and discount travel deals. Search results may send you to other aggregators, like Orbitz, or online travel agencies. SideStep also offers travel guides, hotel reviews and downloadable toolbar, that will now be accessible by Kayak users.

Norwalk, Connecticut-based Kayak and Santa Clara, Calif.-based Sidestep are the two market leaders in this search vertical (see Hitwise graph below), and have mostly separate user bases, according to Marshall (note: He’s no relation to Matt Marshall, VentureBeat’s editor) .

Smaller travel search competitors include Farecast, Mobissimo, cFares, Tripit, niche travel products, off-the-beaten-path vacation search Tripology, and many others. The larger of these startups may now be acquisition bait, as leading travel sites like Expedia and Orbitz or large internet companies like Yahoo and Google look to expand their travel search services.

Kayak will be the main brand, and Sidestep will use Kayak’s search technology, although Sidestep will keep its brand, Marshall said. Key members of SideStep will join Kayak’s team. The companies say they will combine travel data, such as travel rates and availability, and other services. Affiliate partners of the companies include: About.com, Comcast, LonelyPlanet, Rand McNally and USA Today.

Both companies are generating large amounts of cash through CPM (where advertisers pay per thousand advertising views), CPA (where advertisers pay when a user actually buys a fare or ticket) and CPC advertising (where advertisers pay when a user clicks through to their site), according to Marshall. The Techcrunch article reports Kayak is doing roughly $50 million in annual revenues, while SideStep does $35 million.

The advantage of an IPO will be to boost the company’s brand awareness. Cash isn’t the paramount consideration, since the merged company already has ample funds for further expansion, Marshall says.

Both companies have racked up venture capital funding. Kayak took funding from General Catalyst, a Boston firm that first looked at Sidestep (see here), as well as Sequoia (Michael Moritz was the lead investor, and will now join Kayak’s board), Accel Partners, and AOL. Our previous coverage here.

Sidestep has taken a total of $27 million in funding from Trident Capital, Leader Ventures, Saints Capital, Norwest Venture Partners. Our previous coverage here.

Sequoia, Accel, General Catalyst, Trident and Norwest put money into this latest round, along with new investors Oak Investment Partners and Lehman Brothers Venture Partners, and debt lenders Silicon Valley Bank and Gold Hill Capital.

Kango, a travel search engine that finds lodging and activities that match your personal preferences, is launching a closed testing version and announcing that it raised $4 million from Shasta Ventures earlier this year.

This area is extremely competitive. Companies like Kayak and Sidestep, which search multiple sites for the best ticket prices, have raised millions from marquee VCs; cFares, which finds wholesale plane tickets at discount rates, recently raised $4.5 million. TripIt makes it easy to manage your travel plans and share them with others and raised $1 million. We recently used and like Farecast, which does much of this, and offers predictions too. The list goes on and on.

But Palo Alto’s Kango is doing something different. Rather than pricing airfare and hotels, it wants to help you plan what to do once you reach your travel destination. You can already do this using tree-based travel guides like Lonely Planet or by scouring thousands of small sites for recommendations from other travelers. But Kango wants to index these small sites and use semantic technology to detect what destinations and activities they cover, so someone looking for a family vacation in, say, Big Sur will see a different set of results than someone seeking romance or adventure.

Kango’s technology extracts the sentiment from the postings it indexes and only shows results for locations that get positive buzz. If you’re looking for activities, you can filter using a number of criteria, including theme parks, playgrounds, wineries and breweries, and spas.

In its current state, Kango only supports California and Hawaii and doesn’t expand beyond “family friendly” and “romantic.” The ability to search for “pet friendly, “historical,” “eco-friendly” and “thrill-seeking” destinations and activities is planned for later releases.

The company’s founder Yen Lee, who was a general manager for Yahoo Travel, has an insider’s perspective on the limitations of the online travel market and has used what he learned at Yahoo Travel to build a technology with a refreshing spin on travel search. With all of the money and brainpower behind online travel sites, it’s surprising something like Kango hasn’t come along sooner.

That said, getting users to visit yet another site as part of their travel planning process will be no mean feat. Once it’s fleshed out, it’d be great to see Kango’s services integrated into a larger platform that handles ticket search, booking, and TripIt’s central organization from one beautiful interface.

See our first mention of Kango here (scroll down).

SideStep, the travel search engine, has raised $15 million in a third round of funding to help it stay competitive and to venture into other areas.

The travel industry is packed. Other players offer search. But they also make money from selling travel tickets, something SideStep doesn’t do. These companies include Expedia, Travelocity. There’s Kayak, which offers a similar search engine. There are niche sites too, such as fare-prediction site Farecast and user-generated site, RealTravel.

Sidestep’s funding comes from Norwest Venture Partners, and continues an incestuous trend among venture firms and the travel companies they support. Besides the Santa Clara, Calif.-based SideStep, Norwest has backed Indian tavel company Yatra, and Sulekha, another Indian company that has travel features among other things.

Sidestep is probably happy to take the money, even if it knows the danger of having a VC with conflicts. It learned its lesson back in 2004, when it held several meetings with venture firm General Catalyst, during which Sidestep spilled its business strategy to the firm, only to see the firm back out and invest in competitor Kayak instead.

And then there’s Accel, which has invested in Kosmix, a search engine that has a travel component, and Kayak.

Other investors in Sidestep include Trident Capital, Leader Ventures and Saints Capital.

In a statement, Sidestep said it wants to use the money build out media and user-generated offerings. Sidestep offers a comparison-shopping Web site, with options from more than 600 airlines, 150,000 hotels and 30,000 car rental locations worldwide. It offers vacation packages and, — via its purchase of TravelPost.com — extensive hotel reviews and travel blogs. It has more than five million users a month.

Also, we shouldn’t forget that Jamis McNiven, owner of the famous VC breakfast hangout, Bucks Restaurant, is launching his own travel company, Landfrog, this quarter.