Google buys travel software company ITA & enters the travel business

[andy_boyd]

Today, almost half of all airline tickets are sold online. But for many people, finding the right flight at the best price is a frustrating experience; pricing and availability change constantly, and even a simple two city itinerary involves literally thousands of different options. We’d like to make that search much easier, which is why I’m pleased to announce that today we have signed an agreement to acquire ITA, a Boston-based software company specializing in organizing airline data, including flight times, availability and prices.Official Google blog: [googleblog.blogspot.com...]
Facts about Google's acquisition of ITA Software: [google.com ]

Time to think again if you don't consider Google a potential competitor.

Google said on Thursday that it had agreed to buy privately-owned ITA Software, in a move that Google said would allow it to improve the way consumers find flight and fare information online.

"What we're going to do is build new flight search tools that focus on end-users," Google Chief Executive Officer Eric Schmidt said in a conference call with analysts and members of the press on Thursday.

He said that Google had no plans to sell airline tickets to consumers and that Google planned to honor all existing agreements that ITA has with its partners.

The deal should allow Google to match innovations made by Microsoft Corp, whose recently re-launched Bing search engine has gained share by focusing on a handful of specific search categories like travel and shopping. [reuters.com...]

[edited by: Brett_Tabke at 1:36 am (utc) on Jul 2, 2010]
[edit reason] added link [/edit]

[Brett_Tabke]

I knew it was only a matter of time before Google got into the travel market. Bing had been doing such great stuff with Farecast. (not too mention Expedia and Hotels.com).

...may you live in interesting times.

[Whitey]

So are meta search travel companies most at risk ? Indeed , are meta search sites at risk overall ?

[austtr]

Over the past month I have written several posts about the likelyhood of Google looking to dominate the travel marketplace. I decided the posts were little more than speculative rants and never sent them. Little was I to know ....

Anyone who operates in the online travel sector, from the small mom & pop operator getting a few bucks as an affiliate, through to the million dollar operators, needs to understand that Google can, and it seems likely now that they probably will, drive online travel to their own door for their own commercial gain.

Google is driven by the need to grow their stock value in the interests of their stock holders. Period. They use our intellectual property to do that and while Google provided an opportunity for our sites to reach the target audience, with an Adsense sweetener thrown in, it was generally accepted as an equitable win-win arrangement.

However, "Dont be evil" morphed into "Greed is good" a long time ago and once companies get on that share price treadmill they can't get off.

We are now seeing how Adwords on SERP's have slowly but surely neutered organic search results to the verge of making them irrelevant. Win-win scenarios can't co-exist with share holder profit.

Their cash cow is Adwords, but that presumably has to reach market saturation, and despite its huge success, it is essentially a one trick pony. So what other aspect of online ecommerce can Google dominate to their own end? Travel is a multi-billion dollar industry and Google have the resources and the money to control it. That was always going to be just too inviting to resist. Look for horrendous collateral damage in the next year or so.... but hey, that share price is going to look good!

On a side note... any bets on how long it will be before Local Search Listings become pay for inclusion? Once that happens the whole display area of the first ranking page will be completly monetised.

[walkman]

With travel being automated and worth trillions of dollars it was just a matter of time. Bye bye travel websites.

[dertyfern]

Google will have to walk a fine line with the ITA acquisition since travel websites are heavy Adwords advertisers.

I think more likely than not Google sees an opportunity to enter an under served travel niche with minimal negative impact on its advertiser base (remember Google's a one trick pony)--losers will probably be organic listings, no surprise.

Good news to those who could potentially hurt from this is that just about every thing Google touches turns to ash.

[kaz]

The concerns are so real that Kayak offered to buy ITA to keep the company out of Google's hands, a travel industry source close to the situation said.

Kayak was being backed by Expedia Inc, which would have injected under $200 million into Kayak to make a deal happen, the source said.

But the talks went nowhere as Google was in exclusive talks with ITA

source: [us.mobile.reuters.com...]

[Mark_A]

What are Gs earning potential from this?

I wonder how much for example G is making from Gmail?

Also streetview, how much are they making?

YouTube

etc

[dertyfern]

Possible road block: [news.cnet.com...]

[Whitey]

Here's some factors on the landscape in play :

Search is no longer the No1 activity connected to the web. Social media is. Social media is a danger to Google and it may play an important role for OTA's and travel companies. Google needs the tools to try and combat this.

Meta Search has been used successfully to build loyalty.

Brands that have established themselves through an online presence do not depend on search for their business. For example Expedia receives no more than 15% of its overall revenue from the SERP's , with 60% plus direct and through closed partnerships that avoid search.

At some point close in the future , mobile technology will become more important.

So, OTA's that simply receive a series of airline feeds and publish it are at risk , like Kayak and Orbitz unless they morph their technology and deals into something far more complicated and appealing to consumers . There's little they do that Google can't do with a few modifications and great resources.

These OTA's are simply buying inventory and reselling it ( effectively AD clicks , not seats , less and less through Google ... so Google has to position itself at a point where it can replace this , if necessary at a time of it's choosing or leverage it's position more strongly.

Although Google will not likely dominate the travel space ( no strongly branded supplier would permit this to occur ), and travel organisation and marketing is complex ... they will likely occupy critical positioning in the more unsophisticated A to B airline / travel distribution market. The North American market is more vulnerable here.

But high level data management is as high as it goes and Google has to watch it doesn't devour a hand that feeds it - but the OTA's can easily be taken out at this level with direct sell propositions via Google.

Google will not enter the market below this level because travel is complex and travel organisations are smart at disguising direct comparisons of product with "deals" , "packages" , " rules " , spawning competing channels and distribution alliances + loyalty incentives.

... but let's see .

[edited by: Whitey at 11:30 am (utc) on Jul 2, 2010]

[Mark_A]

Search is no longer the No1 activity connected to the web. Social media is.

hmmph.. I remember years ago, companies like Yahoo producing things like "groups" for this market, they were trying to be all things to all people, something I think google might be at risk of..

[TinkyWinky]

Unless they nail this (like they did Buzz, Froogle et al. ;)) this could come back and bite them in the bum big time.

They are going to seriously alienate a lot of Adwords spenders not too mention further diluting organic SERPS and all in one swoop.... so this could dent their earnings from Adwords as well as Adsense publishing as quite a few sites I use do both around the travel arena - Go Google spend some more cash and get it wrong.

Of course for a change they could get it right... I hope not as this could ultimately then be rolled out to every single affiliate area slow but sure.

TW

[idolw]

Google will never get into direct cooperation with consumers.
This is simply not scalable. Instead they'll simply make even better price comparison site and charge OTAs even more for clicks. So instead of taking money from meta search who take money from OTAs they will establish direct deals.

[walkman]

[reuters.com...]
"The concerns are so real that Kayak offered to buy ITA to keep the company out of Google's hands, a travel industry source close to the situation said.

Kayak was being backed by Expedia Inc, which would have injected under $200 million into Kayak to make a deal happen, the source said."

[Sgt_Kickaxe]

Google is officially in competition with non search businesses. It's only a matter of time before they expand into every corner of the content arena. When they GET to every corner of the content arena it's best they don't ALSo have the top search engine. Best for everyone.

[jimbeetle]

So, OTA's that simply receive a series of airline feeds and publish it are at risk , like Kayak and Orbitz...

Just to clarify here, the company Google is buying, ITA, *is* the feed used by the major OTAs, as well as Bing and even some airlines.

From the CNET article detryfern linked to above:

Google took great pains in its public statements and during its conference call Thursday to say that it would honor ITA's existing agreements and that it had no plans to sell flights itself, although Schmidt wouldn't rule that out entirely either during a question-and-answer period with reporters.

Methinks Google has ruffled feathers all through the industry and that there's a heck of a lot of strategizing going on.

Interesting times, indeed.

[Whitey]

I think the lesson here is not just in travel. Google would have it's eye on other verticals where the data is already a lot easier to manage.

Those that survive on SEO should know that Google understands the search volumes and customer leads it generates across the entire travel sector and they want their slice of the pie. Rationalisation of those results is now highly likely.

OTA's are going to have to get a lot more smart in how they manage the data that differentiates the deals they offer consumers, rather than sit at the bottom of the pond having a free lunch on Google's account.

[wheel]

Any travel folks out there using Google analytics on their websites?

Sorry, I meant to say, any travel folks STILL using Google analytics on their websites?

[Swanny007]

Wow, is there anything Goofle won't buy? They're getting their hands into everything and not in a good way.

[Whitey]

Analysts at JP Morgan estimate that around 10% of Google's search revenue comes from the travel revenue.
[sfgate.com...]

No wonder they have a focus on the travel market.

[Whitey]

Kayak.com is filing for an IPO . This is what it had to say about Google's purchase of ITA Software :

“If completed, Google could pursue the creation of new flight search tools which will enable people to find comparable flight information on the Internet without using a service like ours. According to Experian Hitwise, in September 2010, approximately 30% of travel searches began with Google. Upon completion of its acquisition of ITA, this number could substantially increase, as Google may choose to offer services that directly compete with the services we offer. Google may also cause ITA not to renew any agreements with us, or to renew agreements with us on less favorable terms. If ITA or Google limit our access to the ITA software or any improvements to the software, increase the price we pay for it or refuse to renew our contract and we are unable to replace ITA with a comparable technology, we may be unable to operate our business effectively and our financial performance may suffer.” [techcrunch.com...]

And if you think Kayak's nervous , you can be sure that other aggregators of data are too. It's not just the travel industry. The similarity in other verticals seems awry.

Goodbye affiliates and directories or at the very least those good folks are going to find it much harder to stay ahead of the game.