[NB: Adding to article as comments come in]
I don’t know about you, but this sounds more like an interesting acquisition for Google then flight metasearch technology. Needle can be used for aggregating a mix of structured and unstructured data, normalizing it, filtering, deduplicating, cleasing, and displaying results in a consumable fashion. Hmmm…
Being in the travel industry, it is sometimes easy to think that the world revolves around our one vertical. With the announcement of the Google ITA acquisition, the travel industry is abuzz with speculation about whether Google is planning on entering the flight metasearch game.
I think we’ve collectively missed the boat on this one.
No one seems to be at all interested in the fact that ITA has recently developed and is in preview release of their Needlebase product which is described as “a revolutionary platform for acquiring, integrating, cleansing, analyzing and publishing data on the web”.
I don’t know about you, but this sounds more like an interesting acquisition for Google then flight metasearch technology. Needle can be used for aggregating a mix of structured and unstructured data, normalizing it, filtering, deduplicating, cleasing, and displaying results in a consumable fashion.
I think the whole world is somewhat missing a lot of the points. The issue is that ITA fills in a whole lot of holes in Googleâ€™s Shop window. The scary part of all of this is that now Google controls the game. In this case 2+2 equals about 16.
So let’s dismiss the easy parts:
- “Google is not an operational business” – it is, but it doesnâ€™t know how to handle it. This will be a long term challenge.
- “Google is eating its own lunch” – too bad, but that is the way traditional travel people think. The suppliers are so 1970s.
- “Google will lose a lot of players because of the collective of the unwilling” – the unwilling are powerless and donâ€™t have an alternative so they wont defect. The OTAs are so 1990s.
Now let’s deal with some of the harder questionsâ€¦
- “It doesnâ€™t matter as Expedia only gets about 15% of its revenue from search – the 60% that goes direct will stay that way” – that is patently going to fall. No one buys from just a single source these days and the customer loyalty is a non-event in online travel. There is no such thing as a loyal web travel user.
- “Since OTAs do not make money from air, this will not affect them” – oh yes it will. OTAs do make money. Remember, there is a big fat cow in the value chain known as GDS.
So where do we go from here:
- Interesting that Google would mention Everbread. Clearly shows that they acknowledge them as a player.
- In the long term value chain for travel, Google can now get trusted content from the airlines directly â€“ probably more reliably than any other player.
- Googles’s ability to jump into the deep link and sell more CPA to different players also lets them set the prices on CPC and CPA. If you donâ€™t bid enough for the unaligned content then they will ignore your bid and deprive you the business. The power is just awesome.
The Google-ITA deal is a response to two challenges Google is facing in search generally and travel search in particular:
- Search is no longer the number one activity online. Social networking is. Part of this is the rise of networking but part of it is that search continues to operate in an environment where one site has the answer – where you type in a search term and Google points you to the one site with the answer. Search queries are becoming more complex and more open ended. The answer to an open ended search query is unlikely to be found on one site. Google knows this is especially true for travel. Â It knows that it risks losing travel open ended travel search queries to social networks and meta-search. China is a great example of this trend with social networking planning a greater and greater role in travel search and discovery activity. Google knows it needs a means for showing multi-site answers to search queries.
- Metasearch is building loyalty. In the early days of metasearch, the business model was almost pure traffic arbitrage (I discussed this back in 2007). Meta companies bought traffic off Google for one price and sold it to suppliers and OTAs for another. Metasearch profitability was determined by their ability to buy clicks from Google cheaper than they could be sold back to OTAs and suppliers. But in the last year or so metasearch has started to built loyalty and alternative marketing channels.
To generate direct brand traffic and affiliate partner referrals in particular. I have heard reports from a number of meta’s of dramatic increases in customer loyalty and direct traffic. Kayak themselves spoke of this phenomenon to me as early as 2008 just after the Sidestep deal. To combat meta’s growing loyalty Google clearly felt the pressure to bring pricing and the details of offers one step closer in search results
While the deal may help Google solve these two challenges – it presents Google with two new challenges:
- Competing with customers: Meta and other travel search companies spend a lot of money with Google. So, too, the suppliers and OTAs. There will be a fear and concern here from all of these Google cheque writers the Google might be planning to go direct and cut out more and more of the intermediary market.
- Execution and retention: Travel search technology is very very complicated. Â This is proved by Google’s decision to buy rather than build. Â But each time a company makes a buy vs build decision they open themselves to the challenge of retention and execution within the acquired company. Â Once you have made very rich people at the core of the asset that you have bought – you need to work very hard to either keep them engaged or train up your old organisation to know everything there is to know about the new one.
After many fits and starts the deal is done. The question is what is coming. Googleâ€™s ITA acquisition micro-site says all the right things, but whatâ€™s not completely clear is what the â€śenhancedâ€ť search tools will be.
While seemingly promising to honor commitments to existing QPX customers and pledging to stay out of the online travel agency business, it does seem as if the door is open to become a metasearch provider. The statement that they â€śâ€¦will drive potential customers to airline and online travel agency websitesâ€ť is slightly less than code for we will sell advertising to airlines and OTAs. Sounds like meta to me.
Most telling to me is the bullet point where they promise not to â€ślock outâ€ť competitors. That doesnâ€™t mean they wonâ€™t compete with the current clients, just not shut them down. So while the folks at Kayak and Orbitz donâ€™t need to switch technology immediately, itâ€™s probably prudent for them to evaluate alternatives post-haste.
And itâ€™s not out of the realm that some of the â€śadvanced toolsâ€ť that Google speaks of will resemble a Siri-esque â€śdo-engineâ€ť as part of the continuing and escalating feud between Google and Apple (which bought Siriâ€¦a company that Google seemed to be evaluatingâ€¦at the end of April). Although that would seem to contradict the “we wonâ€™t sell tickets” pledge.
Small tour operators shouldn’t panic. Initially there will be concern as many are direct sell businesses and are heavily reliant on Google to source their bookings. They don’t have distribution systems to fall back on if the direct channel changes radically.
Ultimately this move from Google speeds up the evolution towards the supplier centric web where Google will send traffic to airlines, hotels and tour operators rather than OTAs, metasearch or guide websites.
While the travel world has gone berserk over the announcement and speculating what this means for travel search in general, players in Asia seem to be taking it in their stride.
Perhaps itâ€™s the knowledge that ITA Softwareâ€™s strength is in the US and Google, while a dominant player in Asia, is facing problems of its own in China but thus far, the news has only created a small ripple of interest.
One metasearch player said, â€śMy personal view at this stage is that ITA’s relevance for flight searches originating within Asia is not as extensive as the US, so a lot more work will need to be done to make ITA relevant for Asia.
â€śThere are still a lot of unpublished fares being sold in markets like Hong Kong which are not captured by ITA.â€ť
In China, Fritz Demopoulous, CEO of travel search Qunar.com, says it is no surprise to see Google making its move into travel given it is its bigger revenue vertical.
He asks: â€śThe most prominent alternatives â€“ Kayak, Bing, TripAdvisor â€“subscribe to ITA’s services. Could that be a problem for those companies?Â Google/ITA could preclude selling to those sites, but this seems unlikely given the potential for anti-trust backlash.â€ť
He adds that a more likely outcome might be that â€śGoogle slows down Kayak-Bing-TripAdvisor’s speed of innovation, which would naturally benefit Google’s relatively slower product development team. By the way, this is from Microsoft’s playbook in the 90′s”.
â€śOf course, anyone could replicate ITA by directly searching sites and/or securing data feeds directly from airlines. Companies like Everbread have a good model, and more may become prominent as Google alternatives seek neutral data sources.â€ť
Carrying bigger headlines here is the news that Google is still awaiting Beijingâ€™s decision on whether its operating licence would be renewed. One of its Web search features was blocked in China yesterday, Google says.
Googe closed its China-based search engine March 22 and began routing users to its unfiltered Hong Kong site. However it stopped the practice this week because the Chinese government threatened to revoke its operating licence.
While there are loads of implications here for various aspects of the online travel business, the most interesting to me is the potential impact on travel segments other than air.
ITA has built a robust air faring, scheduling and availability shopping engine for what is arguably the most complex of all the travel segments.
While accommodations have more moving parts from a content standpoint (multiple room types, restaurants, spas, pools, meeting space, etc.), the segment has less complicated pricing and availability practices.
Don’t forget that Google is testing adding hotel rates on its Google Maps product using a very basic XML feed; just think what it could be using more sophisticated technology.
Car rental inventory availability and pricing is less complicated than accommodations, and rail, just now coming into its own from an online distribution standpoint, has similar faring and scheduling structures to air. Easy pickings for ITA, it seems to me.
And ITA has built Needle, an aggregation platform for structured data. ITA proved the concept by building a database of 60,000 US festivals and events; it’s live and frankly way more useful than the various websites I use to figure out what’s going on in my town.
While I have no visibility into how difficult the tool is to use, the impact on travel supply like teetimes, vacation rentals, tours and activities is obvious.
Accurate electronic aggregation of supply in these incredibly fragmented markets with owners and operators that control minute amounts of inventory (18- or 36-hole golf courses, two vacation rental properties in Maine, eight different walking tours in Manhattan, etc) is the number one hurdle to affordable online distribution.
Needle could turn out to be the ‘killer app’ for distribution of long-tail inventory.