Although the number of booking transactions handled by the company actually saw a small uptick, gross bookings decreased 5%. As a result, revenues went down 3% (from $795 million in 2008 to $770 million) and operating income decreased a staggering 33%.

On the upside, Expedia’s flight and hotel bookings rose 10% in the second quarter compared to the first quarter following some expense-cutting measures and airline fare cuts. The company’s second-quarter profit was $41 million, or 14 cents per share.

And while earnings fell 57%, Expedia’s results beat Wall Street expectations, sending shares up 13% at $20.73 in recent trading on Nasdaq. The stock has more than doubled this year, up about 37% in the past month.

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Expedia, next to online travel agency Expedia.com, owns a number of properties in the field, including Hotels.com, TripAdvisor and Hotwire.

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DealBase.com, an online database devoted to aggregating hotel deals and packages, has secured $1 million in Series A funding from angel investors including Russ Siegelman, a partner at Kleiner Perkins Caufield & Byers; Bob Zipp, managing director of Amicus Capital; and Josh Hannah, general partner at Matrix Partners and former CEO of eHow.com.

Launched in November 2008, DealBase crawls the web to create a database of hotel deals, special offers and packages, which currently number more than 22,000 deals, from over 3,500 sources, adding up to $4,660,093 in total savings on the site. The online travel industry is a competitive market chock full of sites that find consumer deals for travel, which makes the popularity contest incredibly tough. Expedia, Kayak, Travelzoo and others all offer packages and deals through their platforms and have a dedicated user base.

What makes DealBase’s site slightly more unique is its “Deal Analyzer” functionality that compares deal prices to regular prices, and then rates the deal for travelers so they can determine if they’re getting a good deal or not. Sam Shank, founder of DealBase, says that 15 percent of deals on the site have negative savings. But Microsoft-owned Farecast, a travel site focused in finding deals for hotels and air travel, also has a feature that measures how well-priced the hotel is compared to its original pricing and other hotels. The main difference is that Farecast doesn’t limit its search to just deals and packages while DealBase only lists deals and special promotions for hotels.

Shank also maintains that since DealBase lets any hotels post advertisements for free, with no advertising deals, the process is transparent and hotels have more of an incentive in the current economy to post a deal for free. Currently, DealBase features over 500 deals for New York City Hotels while Travelzoo lists only 7 deals. Expedia also features nearly 500 deals for hotels in New York. If DealBase’s database has the same reach and information of more established sites like Expedia, that could be a good sign.

Shank’s previous startup, TravelPost, was one of the larger hotel review sites in the US and was acquired by SideStep, a comprehensive travel deal search engine. SideStep was then acquired by competitor Kayak in December 2007 for $180 million.

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Michael wrote about rumors of a Google/ Skype hookup April 1, a deal that would make a lot of sense. One that doesn’t are rumors that Google may be getting ready to bid for travel giant Expedia.

Expedia shares were up over 9% Tuesday and a further 1% Wednesday based on the rumors (chart above) for a market cap of $7.18 billion. Expedia stock is still down approx. 30% from its October 2007 peak.

Rick Aristotle Munarriz at Motley Fool makes a lot of sense:

I don’t put a lot of weight behind the pursuit of Expedia. I may have suggested last month that Expedia would look good on the arm of another search engine star, but that is mostly because of the attraction of Expedia’s Web 2.0 properties like TripAdvisor.com….As the paid-search leader, Google relies on travel portals like Priceline, Travelocity, and Orbitz Worldwide, to bid for placement on its travel-related search results. Things could get hairy if Google snaps up Expedia. Sleeping with the enemy is one thing. Paying for its fare and making a rival stronger in the process, is another…

Now that Google has the DoubleClick acquisition out of the way, welcome back to Google takeover silly season. Expect to see lots of left field speculation in the coming months as the market tries to work out where Google will next park some of its bulging cash reserves.

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—Noting that, in 2007, Internet stocks delivered a 14 percent return versus 5 percent for the S&P 500, JPMorgan expects 34 percent earnings growth in 2008 for the Internet stocks it covers versus 8 percent earnings growth for the S&P 500.

—In general, as broadband penetration continues to rise, so do e-commerce revenues:

—But advertising revenues actually outpace the adoption of broadband:

—Free cash flow at large Internet companies will keep going up, fueling M&A and share buybacks. JPMorgan estimates that free cash flow among just five of the top Internet companies (Google, Yahoo, Amazon, eBay, and Expedia) will rise from $8.8 billion last year to $12.5 billion in 2008. That is a lot of money for Web 2.0 acquisitions. Top acquirers Yahoo and Google, for instance, each spend about a third of their free cash flow on acquisitions.

—Search advertising will continue to dominate, rising from $22 billion globally last year to $50 billion in 2010. Here is JPMorgan’s forecast for the U.S. search advertising market (it expects global search revenues to rise 38 percent in 2008 to $30.5 billion):

—And here is its forecast for the U.S. graphical advertising market. Average CPMs for online ads, which bottomed in 2007 at $3.31, will start to rise again (see table below):

—As global GDP continues to grow faster than U.S. GDP (3.9 percent versus 2.2 percent in 2007), Internet companies with global reach will benefit. Amazon, eBay, and Google all get about half their revenues from international markets. Yahoo gets only a quarter of its revenues from abroad.

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