Appearances can be deceptive – as a few days of mulling over the new Google Flights tool has indicated.
As I was reflecting, and wondering if my previous prognosis from a few months back was going to prove true or not (clearly verdict is still out, although the best analysis yet is unsurprisingly from Henry Harteveldt and published on Cranky Flier), it occurred to me that what weâ€™re seeing is NOT Google Flights.
What weâ€™re seeing is ITA Flights on Google, and yes, that is a big difference.
The first subtle clue was the response to press questions, which were handled by Cara Kretz of ITA. Since Google is a company famous for its secrecy and control, that struck me as odd. I would think that if any of the departments had consolidated already, clearly PR would be one of the first.
Why would Google allow an ITA spokesperson to be the public voice of such a major product release on Google, its core search functionality? I would have expected Cara to comment on ITA-specific products, but this is far more than that.
Then I was thinking critically about Googleâ€™s comment in the press release:
“Like any other partner, Google needs to honor the airlinesâ€™ distribution decisions. It has long been known in the industry that the control of pricing data and distribution of the same by airlines is tightly held. That means that we can only show airlines in the booking links.”
Why does Google care? It isn’t a partner with the airlines. In fact, it has major incentives not to care since the online travel agencies and metasearch engines are major customers. Why the sudden shift?
Is it just to throw some salt in the wounds of the FairSearch group, particularly the GDS that tried to disrupt the sale? Is it a bargaining chip since FairSearch is going to continue to pressure the DOJ to make Googleâ€™s life difficult during the five-year period when it is under some sort of supervision?
Actually, itâ€™s far more simple than that. Itâ€™s ITA thatâ€™s running the product and it has airlines as very valued partners. Of course ITA has OTAs as customers also, but remember airlines both supply data to ITA as well as use it for search on their websites.
With the Google acquisition, ITA cares less about the revenue stream from its search customers (that money, rumored to be in the $100 million to $200 million range, is not meaningful to Google in the grand scheme of things).
However ITA does care about maintaining strong relationships with airlines so it can continue to provide its core search functionality, perhaps even in a world where the GDS are pushed aside and the feeds of inventory and bookings become direct.
Thereâ€™s some irony in how this is unfolding. If Google had just purchased a license from ITA, like the tech firms other customers, it would have no incentive to limit the linking to airlines â€“ it would just go to the highest bidder, exactly as it does in search today for all verticals (including Google’s Hotel Finder).
That would allow Google to be profit-maximizing and clearly extract more value from the product. However, since it bought the whole company, it now has to respect the delicate ecosystem in which it plays, which has made the product more disruptive by encouraging it (at least in the early going) to only link to airlines.
Google would likely argue it would not be able to build the desired product without the full acquisition, and that the revenue from a more capable flight search engine will more than make-up for the customer risk that goes along with it.
That might be true, but it certainly gives us pause and suggests that airlines have far more leverage here than originally thought. Google isnâ€™t doing this out of niceness, it is “honor[ing] the airlinesâ€™ distribution decisions” because it feels it has to.
This represents a significant statement about the relative power of the players as it stands today. Yes, Google could shift course and add OTA/meta-search linkages tomorrow, and I personally believe it will eventually succumb and do just that at some point down the road, but by launching this way we are certainly getting an insight into just how tenuous ITAâ€™s relationships are with the airlines.
The irony is that it appears so far that the disruption caused by Google flights is not due to any feature set or implementation novelty, but because of the complex web of relationships and uncertainty about the future of air distribution, an issue that Google inherited with the acquisition.
Here we have a company that has built a reputation and a workforce aimed only at one thing: building great products for consumers. And suddenly it is faced with the same shenanigans that OTAs, GDS, and airlines are dealing with everyday, fighting on all fronts for the rights to revenue and inventory, and dealing with huge uncertainty.
In the end, itâ€™s not yet clear whether ITAâ€™s amazing search capability with significant industry baggage will be a net positive or a liability to Google.