In September, Oktogo, one of the larger hotel-booking sites in Russia, acquired Travel.ru, Russia’s equivalent of Rough Guides, for around $2 million. Today, Oktogo has announced that it will rebrand the entire company as Travel.ru, as it pivots into a new role as an integrated, one-stop travel shop that pairs travel commerce with travel information. The new Travel.ru is also announcing another $5 million in funding led by VEB Innovations, to build out its branding and new business strategy.
The latest funding takes the total raised by the new Travel.ru to $31 million. Other backers of the company include Mangrove, Ventech and VTB.
Russia is one of the biggest markets for internet services in Europe by user numbers, now with some 66 million users. Observers believe that this — and wider macroeconomic trends seeing a growing middle class in the country — will eventually make Russia one of the biggest internet markets in terms of value as well. In travel, analysts like PhoCusWright have estimated that the Russian online travel market will be valued at $10 billion in 2013 and is growing. Still, and even with a likely expansion into other russophonic markets (and possibly other adjacent countries like Turkey), this is but a sliver of the overall pie. As a point of comparison, the U.S. travel market was worth $300 billion in 2012 (also via PhoCusWright).
The new Travel.ru not only gives users the ability to search for and purchase airfare, hotels and tours, but to provide pre- and post-booking assistance in the form of tourist information about destinations and travel practicalities (Visa information features prominently on the home page). The new Travel.ru offers in-house and user-generated travel content as well as the option to book across some 5,500 hotels in Russia and 350,000 hotels worldwide, and currently has some 3 million monthly unique visitors.
The thinking here is that the content side of Travel.ru will help attract more users to the site, and hopefully keep them there longer to convert into paying customers. But there is another reason that Oktogo acquired Travel.ru and has chosen to refocus itself as a full portal: competition.
“There are too many e-commerce travel sites now in Russia, and so we have to do something to differentiate,” Marina Kolesnik, CEO of Travel.ru, told me. Rivals in Russia include Booking.com, owned by Priceline, and local player Ostrovok. In June 2013, the latter of these, not long after raising a $25 million round led by Yuri Milner, laid off one-third of its staff to cut costs — a sign of how competition is driving some to perhaps be too overaggressive in how they tackle the opportunities, and the challenges, of Russia.
There is a bit of an interesting backstory to Travel.ru and Oktogo as well that’s worth passing on here.
Travel.ru was first founded in 1998, around the same time as Mail.ru — where Kolesnik was one of four co-founders. Interestingly, the Mail.ru domain name was acquired by her and her-founders for only $500 from the same team that started Travel.ru.
By 2000, Mail.ru was growing fast (and today it’s Russia’s biggest online company in terms of traffic). As part of a desired move into travel, it acquired a majority stake in Travel.ru. (Kolesnik left Mail.ru in 2001 after the merger with Yuri Milner’s Netbridge.)
Fast forward a few years, and it seems that Mail.ru’s travel business wasn’t bearing fruit, so Mail.ru sold its stake in Travel.ru as a non-core asset. Since then, Travel.ru has been developing as a stand-alone business — until September, when it was acquired by Kolesnik and her team.
So, a homecoming, of sorts, for Kolesnik to bring Travel.ru under Okotogo’s wing. The question now is whether the bigger bird will fly.