Travelocity’s success, according to CEO Terrell Jones, stems from its ability to diversify and keep revenues streaming in from different avenues. "Five years ago we were an online travel agency," says Jones, who started his career as a travel agent and went on to become the CIO of Sabre, the Fort Worth, Texas-based software developer and travel reservations company. "Now, we’re a database-driven marketing and transaction company." By that Jones means that Travelocity uses its customer database to sell travel merchandise, such as totes and suitcase sets, and promote travel clubs in which people pay to receive regular travel upgrades and other services.

Travelocity, which faces fierce competition from Microsoft’s Expedia, as well as individual airline sites and the airline consortium Orbitz, reported its first quarterly operating profit of $618,000 in April on sales of $73 million?compared with a loss of $5.6 million on sales of $35.7 million in 2000. Travelocity.com is one of several sites that are benefiting from courting diverse sources of revenue. Homestore.com in Thousand Oaks, Calif., offers lists of 1.5 million homes and 6 million rental apartments for free and has been profitable for the past three quarters. Much of Homestore’s revenue comes from advertising and listing fees charged to real estate agents, but the company also sells software that helps realtors keep track of clients.

"Most online businesses should consider migration from advertising to diverse models," says John Marshall, senior vice president and head of digital strategy at Digitas, a Boston-based consultancy. "The truth is that most sites haven’t paid off. The focus now should be on ROI and profitability."

Making a profit online in the travel sector is easier than in many others because an airline ticket doesn’t need to be shipped in boxes across the country and around the world. "We’re selling a virtual product. We don’t have the same problems a clothing retailer has," Jones says. Indeed, Travelocity competitor Expedia recently reported an operating profit, and Southwest Airlines sold 30 percent of its tickets online last year.

Today Travelocity gets 25 percent of its revenue from advertising, with another 25 percent coming from airline commissions and the rest from reservation system fees and non-air travel, such as vacation packages and cruises. Travelocity uses targeted e-mail campaigns to promote the newer sources of revenue such as the vacation and travel packages, Jones says. The travel site is also branching out by selling travel gear and publishing Travelocity Magazine.