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1484 days ago
 

Google-ITA Software deal: expert analysis

Some of the Tnooz Nodes are weighing in with reaction and analysis on the Google-ITA Software deal announced on Thursday this week.

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[NB: Adding to article as comments come in]

Stephen Joyce (Rezgo)

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.

Timothy O’Neil-Dunne (T2Impact)

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 Google’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 doesn’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 don’t have an alternative so they wont defect. The OTAs are so 1990s.

Now let’s deal with some of the harder questions…

  • “It doesn’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 – 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 don’t bid enough for the unaligned content then they will ignore your bid and deprive you the business. The power is just awesome.

Tim Hughes (The BOOT)

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.  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.  This is proved by Google’s decision to buy rather than build.  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.  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.

Glenn Gruber (Ness Technologies)

After many fits and starts the deal is done. The question is what is coming. Google’s ITA acquisition micro-site says all the right things, but what’s not completely clear is what the “enhanced” 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 “…will drive potential customers to airline and online travel agency websites” 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 “lock out” competitors. That doesn’t mean they won’t compete with the current clients, just not shut them down. So while the folks at Kayak and Orbitz don’t need to switch technology immediately, it’s probably prudent for them to evaluate alternatives post-haste.

And it’s not out of the realm that some of the “advanced tools” that Google speaks of will resemble a Siri-esque “do-engine” as part of the continuing and escalating feud between Google and Apple (which bought Siri…a company that Google seemed to be evaluating…at the end of April). Although that would seem to contradict the “we won’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.

Siew Hoon Yeow (WebInTravel)

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 it’s the knowledge that ITA Software’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, “My 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.
“There are still a lot of unpublished fares being sold in markets like Hong Kong which are not captured by ITA.”
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: “The most prominent alternatives – Kayak, Bing, TripAdvisor –subscribe to ITA’s services. Could that be a problem for those companies?
“Google/ITA could preclude selling to those sites, but this seems unlikely given the potential for anti-trust backlash.”
He adds that a more likely outcome might be that “Google 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.
“Of 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.”
Carrying bigger headlines here is the news that Google is still awaiting Beijing’s decision on whether its operating licence would be renewed. One of its Web search features was blocked in China yesterday, Google said.
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 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 it’s the knowledge that ITA Software’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, “My 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.

“There are still a lot of unpublished fares being sold in markets like Hong Kong which are not captured by ITA.”

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: “The most prominent alternatives – Kayak, Bing, TripAdvisor –subscribe to ITA’s services. Could that be a problem for those companies? Google/ITA could preclude selling to those sites, but this seems unlikely given the potential for anti-trust backlash.”

He adds that a more likely outcome might be that “Google 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”.

“Of 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.”

Carrying bigger headlines here is the news that Google is still awaiting Beijing’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.

Valyn Perini (OpenTravel Alliance)

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.

 
 
Kevin May

About the Writer :: Kevin May

Kevin May is editor and a co-founder of Tnooz. He was previously editor of UK-based magazine Travolution for nearly four years and web editor of Media Week UK from 2003 to 2005.

He has also worked in regional newspapers (Essex Enquirer) and started his career in journalism at the Police Gazette at New Scotland Yard in London. He has a degree in criminology and a postgraduate diploma in magazine journalism.

 

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  7. Pedro Colaco

    Even if any of the predictions on this page are not true, one thing will happen for sure: all players are going to put their business models in play and will be looking to innovation and differentiation as the way to counter-attack whatever Google plans to do next, or in 18 months time.

    I think OTAs and meta-players have two significant assets: a tremendous volume of search on their sites, and knowledge about which inventory sells when at what price into what market. This is fabulous data that will enable them to think about how to monetize their constituents, both customers (through better engagement, e.g. altering the “search box”, price alerts, flash selling, etc.) and suppliers (by providing them better tools to compete in the e-commerce jungle).

    I think we will be seeing (finally) large OTAs thinking about what they want to be when they grow up, because one way or another, there is no room for so many commodity/undifferentiated OTAs when Google threatens to become #1 of the commodity play.

     
  8. Rick Seaney

    Wow! such a ripe field for comments:

    1) Needle

    Pulling in web pages and figuring out things about and organizing them is what Google eats as a snack every nanosecond of every day, Needle might have some interesting “learning” algorithms for scraping that could be useful but I would take that with a grain of salt as techies worldwide have a favorite phrase “not invented here”.

    Scraping content was done for years in the meta-search space for flights before those “scraped” sites either sued the companies into submission or controlled the issue by providing a contract and an API (I am failing to see how Needle is anything but a blip on the radar of this acquisition). By all means though — keep chatting it up — I am sure they need all the up-sell they can get as they internally pitch Needle to the search tech bods at Google.

    2) Flight Search/Quote a Commodity?

    ITA was instrumental in turning low fare shopping into a commodity (which airlines hate by the way as they would rather sell based on value and not price) by cushioning airline inventory and quoting systems from the onslaught of search queries starting earlier this decade.

    GDS’s didn’t want to provide low fare shopping to meta-searchers because it didn’t fit their business model of booking tickets and caused heartburn with airline relations when they asked why are you hitting my systems so often with no bookings.

    This has changed in recent years with massive caching and inventory simulation strategies and GDS will be hungry to pick up market share from those that decide ITA is either too expensive or Google is now a competitor.

    3) Orbitz Flight Results

    Orbitz has had the same resource Google just bought for nearly a decade and I haven’t seen much change in the matrix display since launch (ITA holds an interesting patent in the matrix display area … and I am sure some innovation probably would have been done if the cost to book ratio wasn’t so high, which gives Google a leg up since the cost is now “sunk”).

    This just means that the acquisition is starting point for future innovation on the matrix theme or a completely different paradigm altogether for air travel shopping. The problem is that consumers are a very segmented and regimented bunch and historically the more steps you give them to provide better “answers” the more drop off you get in conversion at each step.

    Kayak has spent half a decade perfecting a single page on their website (the flight result page) – if you look at meta-search results across the industry they mostly have migrated to the AJAX interfaces (not sure why OTA’s haven’t BTW) with tons of knobs to tweak many of which probably never get touched (I wonder how many people actually click the baggage fee estimator on Kayak and TripAdvisor — my guess is next to no one).

    ITA has a variety of “demo” flight display tools on their matrix site that haven’t been adopted by OTA’s or Meta-searchers as interfaces to the “list of flights problem” and I presume they will trot out some of these as the “new innovation” as they begin to tinker with changing the flight shopping paradigm.

    4) Follow the Money

    It was noted they Google intends to help airlines and OTA’s sell more tickets. More tickets = More Seats.

    My question is will Google be bank rolling airlines so then can buy updated aircraft and expand into unprofitable areas that airlines have bailed out of recently (seeing we have lost over a decade of domestic U.S. capacity). Right now airlines are near 90% load factors – hard to sell more tickets without more seats …

    If you look at where Boeing and Airbus are delivering planes it is to low cost airlines (outside the U.S.) who for the most part don’t participate in ITA search and to carriers like Emirates whose ticket prices don’t show up on the first 3 pages of flight results (ordered by price).

    If Google doesn’t become an agency and truly stays with lead generation and kills off or cripples a hunk of the players that feed the PPC pot in travel, it certainly can only mean they’ll be charging more to the remaining players to make up the difference, presuming that ITA acquisition isn’t a loss leader to hotel where the real money is …

    5) Keeping up with the Jones’s

    You can’t discount the pounding each day Google gets from Bing saying “I have travel and you don’t – nah nah nah nah”. Whether it means much monetarily, market share wise or not (doubtful) it certainly has to be a recurring topic of discussion at the plex.

    6) Google is Scary

    If they throw their entire weight behind travel and slowly but surely figure out the secret travel sauce — their reach is beyond comprehension and that my friend is scary.

     
  9. Vikrant

    Hello Kevin,

    Had couple of question for you, Would appreciate if could could shed some light on it.

    1. Would the volumes of the Online travel Agency go down or has potential of going down with this deal?

    2. Does this deal effect the Corporate travel giants (Amex/CWT/Engencia/TC/HRG in any ways?

    3. What effect this can have on the indian market and indiansearch websites such as cleartrip,makemytrip,yarta ect?

    Thanks
    Vik

     
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  11. Happy Hotelier

    Thank you guys
    Awful myriad chain of thoughts to digest.

     
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