Google - ITA: King Maker, Not Category Killer - By Carroll Rheem
It would be difficult, if not impossible, to think of a travel industry topic that has garnered more speculation or prognostication than Google's proposed acquisition of ITA Software. From starched executives to conspiracy-minded bloggers, the prospect of the search giant stepping into the travel sandbox has had imagination, as well as anxiety, running rampant for about a year.
The long-awaited decision by the U.S. Department of Justice (DOJ) addresses the main concerns outlined by the group of travel companies that created FairSearch to oppose the acquisition. While FairSearch praises the outcome of the DOJ decision, the organization clearly failed in its ultimate goal of killing the deal.
The DOJ stipulations for the acquisition are focused on protecting ITA Software's clients – a roster that includes some of the largest U.S. travel brands. The terms essentially prevent Google from snatching a critical technology service from travel companies and hoarding it (and any improvement made to it) for its own use (for five years). It also prevents Google from gaining access to clients’ proprietary technology that resides in ITA Software servers. While these issues are important for current clients of ITA Software, the terms do not address the underlying source of uneasiness many travel companies have about the acquisition – that a hugely powerful player is about to get even more juice.
While a Google travel portal may be an outcome of the acquisition, ITA Software integration will be much farther-reaching than a dedicated page for the website. Certainly, alerts and other travel-flavored versions of the things it does today will be part of the equation – but the true opportunity to create new value lies in Google's sophisticated ability to process text along with price. Jeff Huber, Google's senior vice president, commerce and local, alluded to intentions to integrate ITA Software's capabilities this way in his blog post. This ability would allow them to smash open the rather rigid structure that has governed travel search from its inception. And the initiatives will presumably stretch across all the platforms (such as Android) and touch points (such as Gmail) Google controls, possibly appearing even when consumers are not actively searching for travel.
All of this flexibility has the potential to be powerfully disruptive, at least in theory. Nevertheless, there is a substantial chance that consumers would react to it as if it were a mundane product enhancement versus a game changer. Many travelers are actually quite content with the structured path of today because they already know when and where they want to travel. In fact, according to PhoCusWright's Consumer Travel Report Third Edition (forthcoming), a majority of leisure trips taken by U.S. travelers are not flexible – weddings, holidays, visiting friends and family, etc. If search results return pages of irrelevant options, and/or users end up going to the sites they were going to visit anyway (they will still need to book somewhere else, after all), people will not engage. Who wants to add an extraneous step to the travel planning process?
To be a true game changer, Google's travel offering must systematically lead users to better and easier decisions, which is a very tall order. Therefore, even though the metasearch business model has the highest risk of being trampled by Google's integration of pricing, it is far too early to ring the death knell for companies like Kayak. Much depends on how Google chooses to approach the integration and user experience. Online travel agencies (OTAs) do not carry that same risk because their business model is transactional. OTAs also happen to be huge advertisers with Google, so there is intrinsic incentive for Google to continue to support healthy OTA business. Ultimately, while there is still plenty of room for improvement across the trip planning life cycle, even the world's most powerful search company may not be able to shift mainstream traveler behavior.
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