Will Google's Acquisition Of ITA Damage The Online Travel Industry?

To those who are not in the travel industry, the July 1 announcement that Google has agreed to acquire flight information software company ITA Software Inc. for $700 million was just one more routine purchase for the ad search giant which vaguely said it would "create new ways for users to more easily find flight information online, and we're looking forward to welcoming them to Google."

If you are an Online Travel Agency such as Expedia or Travelocity and a Meta Search site like Kayak, the announcement gave you that armrest-gripping, stomach-churning jolt that you get when your plane drops a few hundred feet in turbulence.

Most of the press coverage of the announcement took the easy way out and copied from the media release the shorthand that ITA is simply a "flight information software company." But the fact is, ITA is the primary transaction component for major OTAs and Meta Search sites, allowing them to sell seats directly to site visitors. With only minor tinkering, Google could create a landing page with dynamically updated flight prices and availability that would dominate the natural search rankings and suck a good deal of the traffic away from the established travel sites.

Perhaps that is why Dow Jones said in its story that "... the acquisition could come under regulatory scrutiny because it would pair the largest search site on the Web with the dominant travel-search software company. Antitrust issues have been part of the negotiations, according to people familiar with the matter."

Google now seems to be trying to keep more of the travel audience within its own empire/domain. Does the industry understand what Google is asking it to accept? Not only does Google want to be the initial pipes but now it wants to create its own reservoir to exploit this known intent further for itself. If this trend continues, in both travel and other verticals, how will the mid- and longer-tail sites survive? We all need water to live.

The travel business is often driven by search queries. If you want to fly from New York to Los Angeles, you might enter something like "NY-LA Flights" into Google search or if you are off to Paris you might enter "Moderately price hotels in Paris." Up until now, this has been the OTAs' bread and butter in terms of generating traffic that they could convert into sales. But they have paid Google significant sums to have their results for those kinds of searches appear on the first results page.

If Google creates a direct landing page for flights based on ITA data, the online travel-selling sites will have to outbid Google itself to stay high enough up in the paid listings to keep their audiences. I suspect some will find other, less expensive ways to make up for the audience lost from Google.

Everyone in the travel business admires the simple genius behind Google's search success. But the fact that it is essentially the only game in town and has moved aggressively into display advertising and now directly into the travel business makes everyone else in the travel business a little air sick.

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3 comments about "Will Google's Acquisition Of ITA Damage The Online Travel Industry?".
  1. Paula Lynn from Who Else Unlimited , July 20, 2010 at 1:35 p.m.

    The growing government of Google and no one's been elected does not seem to bother its subjects enough to dethrone the capital companies.

  2. David Burdon from Simply Clicks , July 21, 2010 at 4:09 a.m.

    The key issue here is the threat that Google represents to both intermediaries and principals in the travel industry. No other distribution channel has previously had anything like this power.

    Firstly the downstream end of the travel industry value chain is dominated by thousands of intermediary businesses - travel agents, tour operators, flight consolidators, accommodation only specialists etc. Google can cut across all of these.

    Secondly, for principals the owners of the travel components, that is hoteliers, airlines, cruise lines, car rental companies, Google will be able to exclude them from their walled garden except on their terms.

    Its starting to look like a monopoly to me.

  3. Cezanne Huq from Bluekettle , July 21, 2010 at 5:33 p.m.

    OTAs or intermediaries stand to lose more than the supply-side. The Supply-side becomes the data source since Google is in the business of connecting folks to what they are looking for not fullfilling them which isn't in Google's best interest nor is it feasible.