Google-ITA – The Acquisition to End All (Customer) Acquisitions

Here’s one company that dominates search that isn’t named Google: ITA Software. ITA is #1 in air travel search, and its software is a highly regarded program for searching flights and fares. ITA even tests job applicants with complex brain teasers. In many ways, it’s like a small-scale Google. Which is why Google shouldn’t be allowed to eat them for lunch.

 

Most likely you’ve never heard of ITA and its QPX software, but you’ve almost certainly used it. ITA’s software runs behind the scenes and powers 65% of all online travel bookings and 90% of all flight searches on meta-search sites (those sites that aggregate and display results from a number of airlines).

 

ITA’s exclusive access to the complex formula airlines use to calculate fares makes it the provider of choice for airlines (American, United, Southwest) online travel agencies (Orbitz, Hotwire), meta-search engines (Bing Travel, Kayak) and travel information sites (TripAdvisor).

 

In July, Google succeeded in its bid to buy ITA. Despite Google’s claims, NetChoice worries about the potential barriers to travel commerce that a combined Google-ITA could erect. It’s another example of Google’s desire for “deep integration”—the phrase coined by Eric Schmidt—that gives Google incentives to favor its own properties in search results.

 

Google Map Just look at what happened to MapQuest. Once the leading online mapping site, MapQuest began to lose market share after Google bought a company called Where2 and integrated its mapping software directly into its search results.  Users that search on an address, city or venue see Google’s map come up as the first result, and it’s the only map in any of the results.

 

What does this mean for the online travel business? A combined Google-ITA will be a “chokepoint” that will raise costs of customer acquisition across the entire travel industry.  Here’s how:

 

  • A Google search on, say, “Galapagos” will feature results from ITA that include a table of airfare options to Galapagos – just like an address search generates a Google Map as the top result today. Google will know where the user is located (based on IP address, profiling, and mobile phone coordinates), so Google will have a pretty good guess about the traveler’s origin airport.
  • Next to this list of airfares in the Google-ITA search result, envision a “Book It Now” button.
  • Google may decide to enter the booking business itself, in which case they will compete directly with all the travel competitors out there today.
  • If Google does not enter the booking business, it can auction these valuable search referral customers to travel companies that do booking.

 

Because Google-ITA integration will only enhance Google’s 70% share of search, all travel companies will compete in Google’s auction of travel referrals. This will raise auction prices, which raises customer acquisition costs for all travel companies. But increased costs of advertising/customer acquisition will be crushing for small, specialty travel companies (like ecotourism businesses that specialize in the Galapagos).

 

Even if small travel sites such as Kayak can continue to use ITA software at low (or zero) cost, customer acquisition is their most expensive business input, and Google-ITA will drive up costs of advertising referrals for new customers. When costs get too high, it becomes a barrier to entry for new entrants, too.

 

If you want to know more about how the online travel ecosystem has helped consumers with lower, more transparent prices, you can Google it. Or Bing it. Or Yahoo it. We just want to preserve the same search choices for travel bookings.

6 replies
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