googlebooking
1097 days ago
 

Google wanted simple flight search, but it got all the industry baggage as well

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 we’re seeing is NOT Google Flights.

What we’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 Google’s comment in the press release:

“Like any other partner, Google needs to honor the airlines’ 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 Google’s life difficult during the five-year period when it is under some sort of supervision?

Actually, it’s far more simple than that. It’s ITA that’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.

There’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 – 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 isn’t doing this out of niceness, it is “honor[ing] the airlines’ 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 ITA’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, it’s not yet clear whether ITA’s amazing search capability with significant industry baggage will be a net positive or a liability to Google.

 
 
Evan Konwiser

About the Writer :: Evan Konwiser

Evan Konwiser is a contributing Node to Tnooz and was co-founder of FlightCaster, which was acquired by Next Jump in December 2010.

Currently, he works with travel start-ups and consults on new technology and trends in the travel industry. He started FlightCaster in 2009 to provide better tools for travelers using advanced technology.

After the acquisition, he managed Next Jump's travel distribution business, which includes employee discount programs for Fortune 500 companies.

Prior to FlightCaster, Evan was a consultant at Bain & Company and he also spent time at Kayak. He's an industry blogger and speaker on both consumer and corporate travel topics, a recipient of PhoCusWright's first ever Young Leadership Award and a member of the critics circle for the Travel Innovation Summit.

 

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  1. Dan G.

    Timothy, I think the answer to Pat’s question is more about restricting access to availability and pricing data, not ticketing rights. In Google Flights it is the airline which issues the ticket.

    Nevertheless, Pat, the answer is more or less the same. Airlines have the ability to restrict access to their availability data. Just take a look at Southwest – their schedules show (presumably that info comes from OAG) but no pricing information. Southwest, who uses QPX, by the way.

    The other part of the answer is, commercially, can airlines say no to such a huge source of traffic or is it an offer they just can’t refuse? That depends on the airline and how much they depend on Google for their traffic. Again, see Southwest for an example of an airline which apparently thinks Google is making an offer it can refuse.

     
  2. Pat C.

    Google / ITA relationship is on a roll. I wished ITA would have been there without Google’s help but anyways the future of internet or I should say is in Google’s hand. Well, I am may be wrong but feels Google.com/Flights is here to compete with major meta search engines for now. Followed by Google CheckOut integration for ticketing (along with GDS).

    Is it possible for the GDS / Airlines to block Google.com/Flights for not displaying their airlines in the list?

    ” It will be difficult for airlines to say no to Google”

     
    • Timothy O'Neil-Dunne

      Pat… can you explain your logic for why Google Checkout would have to be integrated with GDS for ticketing?

      I dont think that the ticketing piece will be a requirement and would create an issue of Google becoming a merchant. (See other comments on this topic above).

      To answer your question, each airline has the right to determine who can issue their tickets. Automatic full content is a subject of litigation, but according to the basic rules – an airline can choose to prevent an agency from issuing their tickets if the airline so chooses. This can be handled through the processes in ARC.

      Cheers

      Timothy

       
  3. Dan G.

    Great piece Evan. I think you’re right about this being more an ITA in Google’s clothing than vice versa. Also pointing in this direction is the business model, which looks like a clear departure from the standard Google model of unpaid natural search surrounded by paid-for search ranked according to who bids highest in an auction.

    If Google was going to monetize Flights in the same way that they do the rest of their business, there would be no click-through fee but the search results would be surrounded by paid-for advertising. This first iteration with its “Ads” tab on the click-to-book button looks like an attempt to monetize natural search results. This raises the question of how they work out the click-through price paid by the airline. It can’t be by auction because that would by definition have to influence the order of the flight results. So it must be the result of a common or garden haggle between Google and the airline.

     
  4. Peter Suhayda

    Google Flights is very worrisome for most OTAs, I believe that this will push content publishers and simple comparison sites like BookingBuddy as OTAs will be looking for alternative traffic sources. I am really not sure how Google can risk its relationship with OTAs and why they would trade in high CTRs for low CTRs on air search landing pages.

    I do not believe that Google will push this product anytime soon.

    Here is my take on this:
    http://www.travelblip.com/airlines/will-google-flights-fly/

    Cheers,
    Peter

     
  5. gds geekster

    tenuous? I’d say it’s more an indicator of how strong the airline/ITA relationship is – and how it’s steering. Google still doesn’t know about how travel distribution technology really works.

     
  6. Daniele Beccari

    As all the meta guys know well, airlines don’t have big marketing budgets. OTAs do (thx to cross-sell).
    Nothing better than displaying airlines for free, and having those with the money line up to ask in.
    So far, the monetization strategy is understandable.

    A part from missing a few airlines (this gap can be easily closed as the Skyscanner guys suggested :) ), there are two infancy flaws in what I’ve seen so far.

    1. This sentence is seriously bugging me: “It has long been known in the industry that the control of pricing data and distribution of the same by airlines is tightly held.”.
    (By the way, the argument “that’s how it’s always been” doesn’t sound right from Google???).
    If that sentence mean airlines are the source of pricing data, it’s simply not true. OTAs can perfectly have better rates than airlines on the same flights. Not displaying OTAs means not offering users a full choice.

    2. The nice and fresh Google styled UX is doing nothing more than focusing, once again, on price. Price price price. No wonder airlines are forced to unbundle fares.

    Google Flights will improve.

    But all in all, a product does not need to be perfect to get a lot traffic.
    It just has to show up on the first page on Google.

     
    • Michal

      Daniele. are you really sure that airlines have smaller marketing budgets than OTAs? I seriosuly doubt that, not even in the US. I think ailines have multiples of the budgest of OTAs. The reason why metas were not succesful tapping into the airline marketing dollars is that they deliver relatively little leads to the airlines, co,pared to what OTAs bring them in business. Look how much money airlines are spending in offline channels! And I think Google sees that and wants to channel more of those funds directly to Google’s pocket. They hope Google flights will increase the conversion rares for airline.com’s and encourage them to spend more. This is the Google scheme.

      Of course, it may also be that Google just need to suck up to airlines to preseve the quality of their data and very likely is interested in all the travleler data that they will now have (as Evan and Timothy note above). But all that is aimed at getting more money out of airlines, redule the role of the OTAs, and thus, get even more money from the airlines. If they will be succesful at that, remains to be seen.

       
  7. Dennis Schaal

    Dennis Schaal

    Bob: Airlines struggling with fuel costs, or online travel agencies and metasearch engines? Hmmm.

     
  8. Dennis Schaal

    Dennis Schaal

    It’s interesting to recall when Google launched a flight search widget in 2005 http://www.travelweekly.com/Travel-News/Online-Travel/On-meta-search-matters,-Google-airs-a-test/ it linked to online travel agency sites only. Expedia, Hotwire, Orbitz and Priceline.

    It linked to no airline sites.

    How the times have changed.

    I feel pretty sure that Google will eventually get the OTAs and metasearch companies into Google Flight Search, but wouldn’t it be interesting if the Google version of metasearch turned into what the OTAs feared five years ago — that metasearch would disintermediate them and become basically a supplier-direct (via Google, of course) channel?

     
  9. Dennis Schaal

    Dennis Schaal

    Tom Smith: Google Flight Search shows some Southwest schedules. None of the metas are linking off to Southwest for booking. If they are, it is usually unauthorized and they will get slapped.

     
  10. Timothy O'Neil-Dunne

    While I like the conspiracy theory of the post – may I put forward a slightly modified hypothesis.

    The chaps at ITA lost the battle to wait until the product was better and more acceptable. So the pressure presumably from the airlines was more in terms of the need to put something out. And besides no one seems to care that Google puts out incomplete products.

    So I think – pure speculation on my part – the ITA team didn’t want it out there yet and were overruled by Mountain View. Thus Ms Kretz would take the more defensive view IE “here is what it is and we had nothing to do with it – but we are clean because the main Googleplex is just like any other client”.

    The wonder of ITA’s engine is just that – a suitable compromise on many sides that works PROVIDED that the data is fed in correctly. And Evan is totally correct – its only as good as the airlines allow it to be,

    However anyone expecting Google to provide a better search tool at the moment is disappointed. Will it get better? Will we see truly an amazingly different product?

    I have to remain skeptical and echo Henry’s comments. The poor support of non-ITA airline clients (DL and WN) shows that this is a problem that wont go away. As Expedia et al found out to their cost the lack of ubiquity of product (IE all airlines) hurts the functionality.

    At the moment all that can be said is that Google has added to the noise.

    But wait if they do that then the usual result is that there are more clicks, and who benefits from more clicks?

    Answers on a post card (no emails, or tweets) please to ITA C/o Googleplex Mountain View CA.

    Cheers

     
    • Evan

      Great points — But one counter-argument:

      If I were Google or ITA and all I wanted was the fastest to market product, I’d likely choose Expedia or Orbitz as my 1 OTA partner and link all flights to them. Deep-linking with them is well-established, revenue stream is already established, relationship is already established, inventory is by far the most complete if you had only one partner to pick.

      Doesn’t make any sense to link to a handful of selective airlines — more work, less coverage — unless you really needed to.

       
      • John Pope

        @Evan

        Or, more simply, strategic analysis tells Google that medium to long term it is more profitable to go the direct connect route.

        Ultimately, their only priorities are to grow revenues and profits. They probably concluded that a contrary tactic to go direct to airlines would be the most expedient route to that ultimate outcome.

        Google’s strategic process as follows (my speculation):

        Take advantage of their existing search audience monopoly > weaken their competitors (OTAs, metas) and gain significant market share > gather all the data on where people are traveling to and from (where the real value is) > and leverage that data to sell higher value products with greater distribution margins – hotels, tours & activities, insurance, restaurants (remember Zagat), etc., etc.

        If you know when Mr & Mrs Jones are going to Vegas, and you know who Mr & Mrs Jones are (demographics, interests, preferences, tastes, etc.), then Mr & Mrs Jones become very valuable to targeted local Vegas businesses – and Google intends to be THE source to refer Mr & Mrs Jones to those businesses.

        The value is all in the data, not selling flight tickets or becoming an OTA or some other speculations here. After all, the marginal cost of selling your data is as close to the likelihood that they’ll become an OTA… ZERO.

        They’re an advertising platform and their product is you and me. Simples.

         
  11. Tom Smith

    It’s very clear that Google Flights is one more example of Google dropping the ball and leaving it’s clients wondering WTF?? Please explain the absence of Southwest Airlines on your pages. It really makes you wonder if there is a new definition of “search engine???”.

     
  12. Liz

    Hmm.. what about the possibility that Google builds out the booking functionality to become an OTA itself? We shall see.

     
    • Kevin May

      Kevin May

      @liz – it would be a remarkable leap for Google to become an OTA. Would involve messy things like payments, insurance, protection, etc, etc.

       
  13. John Pope

    Wow, ex-B&C analysts as Tnooz special nodes. Kudos.

    Great insight into complexities and dynamics of airline distribution industry relationships.

    Nice piece Evan.

     
  14. Bob Mann

    Confirms that while ITA are a great custom report writing shop, they have little understanding of airline res… as Air Canada belatedly found out.

     
 
 

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