Google entering travel could be nothing to worry about after all

NB: This is a guest article by Evan Konwiser, co-founder of FlightCaster.

Over the last several weeks we’ve seen continued hype on the output of the Google acquisition of ITA Software.

There are leaks apparently suggesting that Google is close to launching an airfare search tool with ITA data for the first time. We’ve also seen Kayak continue to be hesitant about an IPO until its relationship with ITA is worked out.

Many think that Kayak’s valuation is heavily tied to Google’s next move. Overall, there has been lots of speculation that big changes are coming as a result of this acquisition.

I disagree. Prediction: Google acquisition of ITA turns out to be nothing.

bored

Okay, maybe not nothing in the sense that they won’t release a flight search product and it won’t be useful, maybe even cool. But nothing in the sense that it won’t fundamentally change the industry nor will it be better or more useful than the current best in class tools out there.

Someone had to say it.

For those of you who disagree, let me outline my evidence below. In full disclosure, I spent some time working at Kayak back in 2007 and know some of the team.

But that doesn’t figure into this since it was so long ago and I own no equity. Additionally, most of this discussion applies to other meta-search sites as well. Kayak is just a good case study as the largest and has an impending IPO.

So why Google and ITA Software is overhype:

1) The advantage of having ITA Software in-house is unclear

Put simply, ITA doesn’t really give Google anything that Kayak doesn’t already have. I say that with no knowledge of what new-fangled technology they have had under development, true.

But I feel confident in this since many of the forward looking challenges in air travel are NOT solved by what ITA does, rather they rely on direct connects with airlines and GDS (which will eventually make ITA’s flight search tool obsolete or at least far less important).

I believe much of Google’s acquisition of ITA was to apply their technology to other applications, either non-travel or non-air. For example, Needlebase.

Think of the applications of ITA technology for Google’s primary business: Searching the web, and putting structure behind data in other industries where the data sources are far more disparate and unstructured.

Additionally, Kayak has been one of ITA’s marquis partners for many years before Google came sniffing. As such, I believe they were uniquely suited to know about the future of ITA’s flight search initiatives and at least as of early 2010, probably knew any major project underway.

2) In talent, Google versus Kayak is a fair fight

Kayak obviously only has a fraction of the number of engineers as Google, and it’s unclear how many Google has put on it’s travel product. But Kayak has an exceptionally talented engineering team led by guru Paul English, one of the most respected technology leaders anywhere.

Google has great leaders as well, but not necessarily in travel (in fact, some are leaving). Google has already peaked as an employer and faces immense competition for talent in Silicon Valley (and Seattle), whereas Kayak is still a pre-IPO darling of the Boston area (and believe it or not, lots of top talent engineers like the east coast also!) Google has always had problems venturing into new things (e.g. Health, Social, etc.).

One might point to ITA’s extensive travel experience, but I’d discount that as they have very limited experience in consumer technology. When it comes to product innovation, speed, and engineering horsepower — Google doesn’t have an obvious advantage, perhaps even a disadvantage.

3) ITA is not the only game in town

The competitors are not as mature, no doubt about that, but look for Everbread‘s Haystack product to emerge as a leader in Europe (and, hopefully, eventually the US).

Amadeus and Expedia also have competing technology that powers their tools. But even more importantly, “Direct Connect” and APIs are going to make a lot of these tools less important over the next few years, just as scraping worked pretty well in the early days of meta-search.

Also, ITA’s competitive advantage is vey heavily US domestic. Sure, that is a big market, but travel is a global industry and ITA gives Google very little competitive edge outside the US, where Kayak has been expanding aggressively in recent years.

Conclusions

At the end of the day, this business simmers down to a few fundamentals:

  • People want low fares. That’s still the problem, silly. (The problem is NOT: Where can I fly for $176.40 on a Wed in August that’s more than 1,467 miles from JFK, and has free wifi but no PTVs)
  • Fare integrity in meta-search remains the biggest issue (and Kayak has spent the last 7 years working on that problem. ITA doesn’t help Google since it doesn’t transcend from search to booking paths)
  • Direct Distribution (and more open APIs) is coming, and it favors meta-search over OTAs (All boats float up for Kayak, and potentially Google. And the headroom is MASSIVE).

One could argue that Google feeds a lot of traffic to Kayak and regardless of product quality, they could simply funnel people elsewhere.

I think this is unlikely, since their business model doesn’t support this. If Kayak (and OTAs) want traffic from Google, they must pay as they are today. If Google wants their money, they must send traffic. Google is already on anti-trust thin ice, so between that and protecting their revenue, I don’ t expect them to try anything drastic here.

Remember, Expedia, Orbitz et al are on Kayak’s side in this issue, so I expect Google to remain a source of traffic for everyone even if they’re doing it from some sort of pre-search results in Google search.

Let’s stop fretting about Google’s impending entry into travel. Yes, they will launch new features and products, and I’m sure some of them will even be pretty darn cool.

But the fundamentals don’t change because the industry is shifting from the supplier side (airline distribution), not the demand side (consumer). The hype of the consumer search space, especially around Google, is misplaced.

Travel is about flying, after all, not buying tickets. Let’s put the sexy back where sexy belongs: On the tarmac, and not in the browser. (After all, if you want sexy in the browser just stare at Hipmunk).

NB: This is a guest article by Evan Konwiser, co-founder of FlightCaster.

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Viewpoints

About the Writer :: Viewpoints

A founding principle of tnooz was a diversity of viewpoints from across the spectrum. Viewpoints are articles by guest contributors from around the travel and hospitality industries. The views expressed are those of the author. and do not necessarily reflect those of the author's employer, or tnooz and its partners.

 

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  1. Phil Butler

    Nice conversation, and an interesting take on the ITA deal. The author make a nice point in suggesting Google only got something Kayak has already, but this misses the mark obviously.

    This is a bit like saying John Wayne just got bullets for his Colt Peacemaker, the same kinds of bullets Jerry Don Knotts has in “The Shakiest Gun in the West.” Okay maybe not quite that bad but.

    Google has 80 percent of the search market, a bit like owning all the bullets actually. Engineers, are one thing, being able to turn the lights on and off in the stadium any time you want though, this can have a profound effect on the outcome of the game too.

    Just a couple of thoughts.

    Always,
    Phil

     
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    […] here to read the rest: Google entering travel could be nothing to worry about after all … Author: vietnamhotel Time: Tuesday, July 19th, 2011 at 12:41 pm Category: wiki travel […]

     
  4. Professor Sabena

    Dear All

    I think we have to bear in mind some basic understanding.

    Travel is complicated. Air is not a simple product. It looks straightforward but the complexity is mind boggling. “What is the lowest available applicable fare for me bought for travel some time in the future” just analyze that statement. Its NOT EASY!!! Travel Agents used to be pretty good at answering that question when they were the only ones with access to the supply chain. A lot of them still are now even when access is pretty open.

    The assumption that there is a universal and ubiquitous solution for air supply chain is clearly erroneous. One of the elephants in the room is that not all supply chain players behave as certain intermediaries want them to. Certain players want us all to drink the cool aid and believe that they have universal access. Politely I will call BS on that. So anyone relying on that form of universal supply access deserves what they get (that includes the incentive/bribery element).

    Should these companies who are attempting to control the marketplace be allowed to retain their oligopoly power? Well the US Dept of Justice and several US courts now have that question to decide.

    There is no god given right for any intermediary to have access to all content owners for product universally. There are some closed markets such as Stock Markets but there is no universal right to command and control. By extension of this false logic would all intermediaries be allowed access all hotels and then be required to display them equally? Or all supermarkets to provide access to all products? Or even all restaurants to be allowed to serve all people based on some universal access criteria? No, of course not that is a ridiculous concept.

    By now we should be applauding the fact that we have a universal search capability to all products on the web. And thank you Google (oh yes and MANY others) for doing that.

    Google is not the world’s best technology. It is a service and it somewhat does its job. Good or bad – it is the market leader because they do the most comprehensive job. Along with that comes a responsibility not to dominate and control markets. Hmmm in my view it seems that Google fails that litmus test – again the US Government is looking at that question now. The question of whether Google is fair or not and whether the chaps in Fair Search are also fair could fill volumes.

    ITA’s software does a pretty good job in covering most of the bases. Kudos to the team in Cambridge MA. BUT the product owners have the last word. Does ITA guarantee that the fare seen is one that can be bought? Will Google do that? Will they be allowed to? Again questions that are unanswered. (For a small fee I can address the question for you!) Kudos to Kayak and others such as Skyscanner for making air search better for the consumer. Good smart technology and thinking is powering innovation and long may that happen.

    I disagree that Google entering the air marketplace is nothing to worry about. If you are a big fat dumb and lazy intermediary even with a large legal staff – you should be worried. If you are a small company who could get washed away under the hefty weight of the Googleplex – you should be worried. If you are a supply owner worried about your search costs, you should be worried. If you are a consumer who is worried about freedom of choice, you should be worried. That’s about everyone isn’t it?

    Does that mean that I believe that this is game over? Absolutely not. I firmly believe that the supply chain is broken and will be reconstituted in an much more fragmented and open way. I definitely do believe that Google COULD act as the re-aggregating entity but do not believe the supply owners will allow that, at least the smart ones wont ;-). And there is plenty of room for innovation to address these issues if the marketplace is able to operate openly and fairly. (Cue images of Lady Liberty)

    And as an aside – Searchville – isn’t that a new game from Zynga? Probably worth as much as all the players in FairSearch.org combined. But I digress….

    Cheers

     
  5. Jonathan Meiri

    Great discussion above. A couple of points.

    Kayak offers a great service, which is quickly becoming a commodity. New entrants like Hipmunk and Superfly (I work for Superfly) are leveraging the same ITA technology in new ways, with better economics, and gaining mindshare in the space.

    Had Kayak not lobbied the Justice Department, the cost of ITA license would have most likely dropped precipitously under Google’s control and fueled this new, badly needed, wave of innovation.

    While Google would have saved some key features for its own search/ad business, most likely much of it would have been accessible for developers. Unfortunately, Kayak was somewhat successful and now a Chinese Wall has been set up between ITA and Google proper, keeping ITA prices unreasonably high.

    This move may have saved Kayak’s IPO, but was a poor move for the industry, did not support innovation, and did the end-user a disservice.

     
    • Kevin May

      Kevin May

      @jonathan – what is the “better economics” that you speak of with regards to Hipmunk and Superfly?

      Metasearch is still metasearch, after all.

       
      • Jonathan Meiri

        Hi Kevin,

        I cannot comment about the specifics of ITA pricing, but let’s assume that all companies pay ITA the same fee per flight search query, for a given volume of queries.

        Hipmunk’s User Interface, with it’s ‘agony index’ organizes the data more efficiently than Kayak and users run less searches before they find their desired flight.

        Hipmunk, leveraging one of ITA features, is simply more efficient in finding the right flight, and therefore getting better economics.

        Superfly, still in private beta, does the same thing with your reward programs. We help users figure out which ticket offers the best value.

        Does that make sense?

         
        • Kevin May

          Kevin May

          @jonathan – sure, makes sense.

          I’ve asked Hipmunk and Kayak to provide some data to prove your point (re number of searches per user) – interesting area of discussion.

           
        • Daniele Beccari

          Of course Hipmunk has “less searches”.

          Just display less results, and it suddenly becomes much easier to find the best option.

          We “experts” are able to see if an engine is getting us all options or not, but not the larger public. They just want simpler solutions.

           
  6. Michal

    Nadav, thnx for this post, these are precisely my observations too, as you can can see further up.

     
  7. Nadav Gur

    Hi Evan,

    With some personal insight into Google’s team and planned moves in travel, I have to say that focusing Google’s travels move on ITA and then looking at this in the Kayak perspective alone, misses the mark.

    Google is out to get more money from the travel “vertical”. To do so it needs to (a) be involved in more travel transactions and / or (b) be a more effective go-between, and take more of the margin between the supplier (airline OR hotel etc.) and the customer.

    The ITA acquisition is just ONE part of such a strategy. ITA enables Google to have a better flight search capability. The reason to have better flight search is not to go after Kayak ($130M Rev per year – out of which some $20-40 are paid to Google anyway) but to go after the other people who are doing the same thing – Expedia, Priceline etc (many $B in revenue per year). OTAs describe flight booking as a Loss Leader, a way to draw real business (essentially hotel bookings) to the site. Google will do exactly this – plug itself into more consumers’ flight searches, in order to later help them with all the other travel searches – and send them to the highest bidder, who’s ultimately likely to be the service provider.

    Kayak may just be “collateral damage”, or maybe it will find a way to remain better and protect its business. But it’s not the big picture for Google, nor is it the reason to acquire ITA.

    The bottom line is that any player who’s essentially a mediator in travel (e.g. in the form of a “search assistance tool”) should note that Google wants more of that pie too. Everyone will have to do things significantly better or differently than Google will, otherwise Google will eat into their market.

     
    • Evan

      Thanks for the reply Nadav. I agree with you, mostly. I do think Google can and will do more in travel than just compete with Kayak. I didn’t talk at all about other non-air-search related innovations Google can do — but few of those have anything to do with ITA acquisition. They could likely do all of that with an ITA contract on their own.

      However, I dispute the split between meta-search and OTAs. Remember that Kayak’s $130M in revenue is all affiliate income, whereas Priceline, Expedia, etc. revenue includes at least part cost of sales (e.g. Kayak’s gross margin is 90%, Priceline’s is 50%). So Kayak’s $130M in revenue is far more in value of booked tickets.

      That aside: I agree that direct connect is coming and will put that whole model into jeopardy. Google as a source of traffic stands to benefit greatly from this — but again, I’m not sure ITA is the missing link here. And I think Kayak might be just as well positioned to benefit since they can send traffic directly to suppliers also.

      Great discussion!

       
  8. Kevin May

    Kevin May

    Still think you’re all looking at this, unfortunately, through the prism of the US.

    Google and travel is unlikely to be solely a North American play – there’s plenty of life outside, you know.

     
    • Evan

      We know there’s life outside the US. I don’t have as much knowledge to comment on other markets, but from what I know about ITA, it’s a very US-heavy technology. It’s not clear to me what advantage it has for Google outside the US.

      So while I agree that Google will likely make a Global play, I don’t know how much of that has to do with ITA vs. it’s general travel strategy.

      If anyone has ideas specific to Europe or Asia, please share!

       
    • Aaron Ritoper

      While ITA technology doesn’t immediately help much outside of North America, Google (with its international position) could help ITA over time grow into an organization that is capable of developing more sophisticated solutions with and for suppliers. This, in my opinion, will force continued scrutiny. I agree with the comments that no business can ignore the influence of Google today, even outside of North America.

       
  9. RobertCole

    Evan,

    For consumers, significant benefits are derived from access to deep-web data. For example, searching for a family trip and getting a great fare on a convenient flight with four economy-plus seats together, a bag checked free for each person and double mileage credit based on frequent flyer status and the credit card used for payment – all while shopping across multiple carriers. Then getting an upgrade to an ocean-view room based on the combination of your airline status and hotel status. And that’s the easy stuff.

    Kayak’s development team is VERY talented, but they don’t have full control over their air search technology – that risk has been clearly understood since their inception. It’s just that Google has a lot more people who are very, very good at a much broader range of things and now, Google controls its own air search technology. Lots of developers that can produce high quality is not to be underestimated – especially when they control the platform. That said, The key is how those resources are managed.

    Google doesn’t want to stifle the industry, they want to leverage their strengths is search and advertising to monetize enhancements to present travel promotional and commercial processes.

    Travel suppliers do not perceive that equilibrium currently exists when it comes to traditional distribution business models. Google will be supportive of changing that model and stands to have much to gain.

     
  10. Chris

    Evan,

    Normally you and I see eye to eye on these things, however this time I’m going to have to respectfully disagree. The 3 items you listed have no bearing on Google’s travel success, true, false or otherwise. Only one things matters: people start a search with Google.

    When you Google “flights to New York” all you basically see now is a bunch of ads. If you click an ad, you’ll probably be sent to an airline or OTA website, and Google makes money. Once Google launches their travel product, that same query will show some kind of meta search results. Those results, like other metas, will be a combination of airline and OTA website results. Then the user clicks on a flight from the list. The result is a) Google still makes their money via a “click” of some kind and b) the need to go to any other meta search site is removed. (I’m sure they’ll add hotel and car soon enough.)

    So I believe it’s not an issue of technology or team or ITA vs Everbread vs Vayant. All that is irrelevant because the user will go directly from Google to booking website, bypassing all other metas altogether. So then it would be up to the Kayak’s to a) out innovate Google and give users better features (hard to do since they all have access to the same data now) and b) get people to still want to use a flight search meta that isn’t Google (try getting people to use Yahoo after doing a Google search, same thing). Both are no small tasks, hence, in the short term at the very least, the impact will be huge.

     
  11. Peggy Lee

    If an animal is caught in a trap, he may decide to chew his leg off to get out, which may make him survive. Or it could kill him if it got an infection, etc. Who is the animal, Kayak? Perhaps they will just get out of the trap and survive. They’re the top of the species in Meta Search I think. Don’t count them out just because Google is going after the space. Google could get caught in a travel trap too if they can’t displace the brands like Kayak (people are actually starting to know the name). My comments are just for thought. I sure hope Kayak is a winner here. I like Steve Hafner’s honest style and I love the product personally.

     
  12. Dennis Schaal

    Sean O'

    More insightful pieces by Evan Konwiser, please!!!

     
  13. Michal

    Evan, couldn’t disagree with you more. Putting Kayak in the the centre of dicussion around ITA/Google impact is like totally missing the point. Kayak’s share in the distribution of travel is minimal, comparing with major legacy OTAs. The biggest threat out there is Google’s aspiration to replace major legacy OTAs as the intermeidary of choice for consumers. Google will want to channel people directly to airlines, bypassing OTAs. Did you see the toys Google is bring to organic search? They all take you to airline.com, never the OTA. This will increase conversion rates for airlines and tempt them to leave more $$$ with Google. If you take the combined marketing budgets of all airlines and the combined budgets of all OTAs, you will see that airlines have multiple of the money of OTAs. And Google just wants more of that money, the bulk of which airlines still spend offline. Keep in mind that OTAs rely on Google to get customers, particularly the ones out of US, where consumer brands such as Expedia have not yet been created (thus ensuring enough direct traffic). So, yes, the threat to OTAs is great and it might have a great impact on the industry. 2 things where I agree is: 1) Yes, Google is under pressure on anti-trust 2) Yes, ITA is no good for Europe. Not sure, though, if this is enough to stop Google. Most people seem to misunderstand where the big threat is (even the Economist missed the point on that in their recent piece). And Google could buy more to get going in Europe, perhaps even Everbread. Anyway, thanks for the article, I enjoyed the read.

     
  14. Aaron Ritoper

    Hi Evan,
    In a sense, you’re right to say the world will not end for all online travel companies. Google must take care to not damage its general search business as users expect Google to offer “choice”. The travel sector is already big business for Google and I doubt they would like that to end tomorrow. With that said, it doesn’t mean that all online travel sites will continue with business as usual. Google will spend an incredible amount of money (thanks Kevin for citing). Whatever new services Google deploys, we should expect their results to be more selective. Any travel company that expects to have a bright future most offer compelling and competitive services. Also, travel decisions are market specific, so I agree that ITA doesn’t change the situation much outside of North America.

     
  15. RobertKCole

    Evan,

    I have to disagree on three counts:

    1) The advantage of having ITA Software in-house is clear. ITA Software provides Google with access to deep web content that is not readily available to any other meta-search player. With the increase in direct connects potentially fragmenting access to information, this is an important consideration – particularly when it comes to pricing for ancillary services and premium seat inventory.

    Google repeatedly stated prior to its acquisition of ITA that it was not interested in developing tools to support incremental changes in the travel space. Google was founded with a clear vision: To organize the world’s information and make it universally accessible and useful.

    There is presently considerable opportunity in travel search to accomplish that goal.

    While I too am a big fan of Needlebase, it is essentially a labs project, so I don’t see Google assigning any significant portion of ITA’s valuation value to Needlebase. ITA has 24 other patents that it currently uses in its core commercial activities to a much greater extent. The ITA fare construction, inventory/availability and rules validation patents deserve much higher valuation when compared with the future potential to exploit new methods to interface with disparate information sources.

    2) In talent, Google versus Kayak is not a fair fight.

    With all due respect to Kayak’s development team and Mr. English, the ITA Software development team is exceptionally gifted, with deep travel industry expertise. Google did not just buy ITA’s source code, but its leadership team and development team as well.

    Kayak’s success, as well as Hipmunk’s, were both heavily dependent on the foundational engineering accomplishments of the ITA team. Without ITA, neither product (as well as Orbitz, Bing or many others) would be able to efficiently offer their current levels of functionality.

    You are right – ITA has relatively limited experience in consumer-facing technology, but has unparalleled experience in air travel search. Google has extensive experience in consumer-facing technology, but limited experience in travel search. This was the fundamental reason for the acquisition.

    The key will be integration and innovation. If strategically deployed and properly implemented, ITA’s air search can be leveraged in a wide variety of ways to benefit consumers.

    Google has the resources and talent pool to task more engineers, and arguably, more highly skilled engineers, on the strategic and structural challenges facing travel search than any other organization.

    3) ITA is the only game in town.

    Assuming Google wants to make a big impact, fast.

    Again, I love what Everbread, Vayant and Amadeus are doing in air search – they are working hard and smartly at raising the bar.

    However, from a market penetration perspective, ITA was the only game in town as a strategic acquisition opportunity (Google has no intention of becoming a GDS or an OTA.)

    A strong client portfolio, great technology and a smart management team are hard to build from scratch. Google understands this. That’s why they paid $700 million for ITA.

    Expedia does not currently offer a commercial air search product and it is unlikely they will venture off into that territory. Expedia is already challenged playing catch-up with Priceline from a market cap perspective. Commercializing air search won’t help them.

    Conclusions:

    People don’t want low fares – people want the best value. They want to quickly understand what itinerary best fits their needs at the lowest possible price.

    Together ITA Software & Google can provide a dramatic positive impact on fare integrity. Google clearly understands the importance of the supplier in travel accessing inventory and pricing data – access to deep supplier content is essential.

    The fundamentals of airline distribution are indeed changing, but not from the supplier to the consumer – distribution control is shifting from intermediaries to the suppliers. The traditional model of a supplier paying an intermediary to in turn pay an agent is also changing.

    Direct distribution is coming and ITA’s travel industry expertise (more so in air and comparatively less in hotel, destination services & packaging) combined with Google’s broad platform of products can help suppliers better control their inventory and pricing, while offering consumers, agents, or intermediaries better access to information.

    Finally, travel is not about flying or buying tickets – it is about having the greatest end-to-end travel experience possible at the lowest available price. Flying remains a critically important factor however because that is where the travel search process normally begins. Vacations to Bora Bora don’t get planned if there are no air seats available or if the pricing is unaffordable.

    In summary, for most, Google entering travel should not be a source of worry, it should be cause for celebration – except maybe for Kayak and the other meta-search providers.

    Google won’t control the global travel market and distribution; they will provide technologies that will make it easier for people to search and buy travel, and enhance the processes so travelers can have better destination experiences.

    If Google follows its tradition, the democratization of travel data should also help to spur industry innovation – something that was somewhat slow under GDS and OTA distribution control.

    Could Google blow it and fail in their goal to organize travel information? Yes. By buying ITA Software, which includes some exceptionally smart people, that risk was reduced considerably.

     
    • Evan

      Thanks for the thoughtful rebuttal, Robert.

      Robert:

      Just a few comments in reply:

      1) “The advantage of having ITA Software in-house is clear. ITA Software provides Google with access to deep web content that is not readily available to any other meta-search player.”

      Okay, but what does that really mean in consumer terms? Nobody seems to be able to answer that. Can you give one concrete answer of what that means for the consumer and why ITA in-house is a requirement to do it? (It’s not a rhetorical challenge, I mean that quite literally)

      2) On talent, we can agree to disagree. Both can be argued, I just gave my opinion (as did you as well, quite credibly).

      3) Yes, ITA is the only game in town for US today. But with a 5-year contract on current data, I believe meta-search and OTAs will have the time to replace ITA, or aggregate direct connects in a way that won’t require ITA. It comes down to whether you think Google will use ownership of ITA to stifle OTAs/Kayak, or just build their own products. I think more the latter for at least a while, in which case it this issue matters less.

      Thanks for your comments, I love the dialogue!

      Evan

       
  16. Jim Kovarik

    “Travel is about flying, after all..”

    correction, 15% of travel is about flying..

    Other than that I agree with your comments regarding Kayak engineering talent – top shelf.

    on the impact of Google in travel I’m not so sure. I was at AOL (which owns MapQuest) back when Google decided to get into the mapping business. We all know how that ended up – though I agree the anti-trust issue presents a new obstacle.

     
  17. Evan

    Kevin —

    I agree $700M is a lot. But not when you break ITA down into its parts:
    a) 100+ engineers. Which Google has been known to pay up to $3M per engineer in an acquisition just for talent.
    b) ITA revenue stream, which we know to be a few hundred mil.
    c) Needlebase technology structuring OTHER industries: Could be worth billions

    And that’s just for “rational” pricing. We know things could sell for prices that are way beyond normal impact nowadays (even in 2010).

    So while it’s true that’s a lot of money if they don’t expect to disrupt the industry, there are plenty of reasons why the deal made sense even absent a major play in air search.

    Additionally, one of my points is Google could just be wrong. They might *think* they’ll have an impact, but one of my points is they just don’t understand how the industry is shifting (from the supply side) and won’t realize their dreams.

    Re US vs. Global: Definitely a good point. My thought here is that ITA’s advantage is predominantly US, so if they really were focused on Global, they would be buying ITA to apply their expertise Globally. That will take A LONG TIME unless ITA already has major Global initiatives in the works.

    Evan

     
  18. Kevin May

    Kevin May

    Evan – two points:

    1) $700M is a lot of money to spend on something that will not have much impact…?

    2) Take your US hat off for a moment, what about elsewhere around the world (the link you made in “continued hype” talks specifically about issues outside of the US)…?

     
 
 

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