Are Amazon's travel ties heading south?
Last year, the e-tailer said it would open a travel store with Expedia and Hotwire. Now, executives at the travel sites fear they're not getting what they paid for.
"It's not what we expected," Expedia spokeswoman Suzi LeVine told CNET News.com. "It's something that we are trying to resolve" with Amazon.
In September, Amazon announced a deal in which the three companies would open a jointly run travel store on Amazon's site. A source familiar with that deal said Expedia and Hotwire agreed to pay fees to Amazon and to share a cut of the profits with the Web superstore.
Hotwire executives said the goal in cutting a deal with Amazon was to introduce its name to the mass-market retailer's 29 million customers, who "respect and trust Amazon," said John Hommeyer, chief marketing officer for Hotwire.
"But we would have thought that Amazon would have more aggressively promoted their travel tab," he said. "Especially since online travel is the most profitable e-commerce space."
Amazon representatives did not return phone calls seeking comment Wednesday. Neither LeVine nor Hommeyer would discuss specific traffic or sales numbers.
Partnerships have become vital to Amazon's business. To boost its income, Amazon has campaigned heavily to sell its e-commerce expertise and large customer base to other retailers. Amazon is operating the Web stores of Toysrus.com, Borders Books and a host of smaller retail companies. The Net retailer has also forged an e-commerce partnership with Target. As it posted its first net profit during the fourth quarter last year, Amazon took in $225 million in revenue from its partnerships.
Wall Street looks on the deals favorably because of the low costs and high margins the "service deals" offer. These partnerships also allow Amazon to sell itself as a technology company as opposed to just a retail store. So nurturing a reputation of being a good partner has been important.
A source who requested anonymity said Seattle-based Amazon has done little to promote the travel store. After posting an advertisement on its home page the week the store launched, Amazon lumped the travel store in with a listing of all its stores. There was little on the home page to indicate a travel store even existed.
In recent weeks, however, Amazon has sporadically brought the ad back to its home page.
Still, Expedia and Hotwire are not the first retailers to voice disappointment over deals with Amazon.
Online liquidation company Overstock.com broke off its relationship with Amazon last September after Overstock Chief Executive Patrick Byrne expressed disappointment with PC and electronics sales.
Traditional auction house Sotheby's, which signed a 10-year partnership agreement with Amazon in 1999 and opened a co-branded site the same year, jumped to Amazon rival eBay last year.
Other top Internet companies that have charged huge sums for companies to post links on their sites have been the target of criticism. Former executives of now dead dot-coms have often lamented how in the hope of piggybacking on the major Web destinations, they paid millions to post their links on a company's home page.
Unfortunately for many of them, they often found the traffic they received in exchange could only cover a fraction of the cost to do it.
"Often it didn't work," said Lorraine Sileo, an analyst with research company PhoCusWright. "Travel has worked for most of the large portals, but often, unless the host site can integrate the other company into everything they do and really promote it, then there's going to be problems."