Vertical search is already a big focus in the search
market, and Google has its sights set on the skies. And we’re not talking about the infamous Google party plane.
Yesterday, Google announced that it is buying flight information
software company ITA Software for $700m in cash. ITA Software’s technology is widely used by airlines and online travel
destinations, and “effortlessly searches – at a billion combinations
per query – fares, schedules, and availability.” That’s why Google was
willing to pay big bucks for ITA’s technology, which it hopes will
enable it to help passengers, airlines and online travel agencies find
flights and fares more efficiently.
As to be expected with almost every major deal Google makes, the ITA buyout will be in a holding pattern until it is approved by regulators. ITA’s customers include a notable Google competitor (Microsoft/Bing), as well as online travel destinations that advertise with Google, such as Hotwire, Kayak and Orbitz. So regulators aren’t likely to give the green light to the acquisition until they’ve taken a closer look.
Certainly, they’ll hear a lot of concerns from players in the online travel space. As rumors swirled about a Google-ITA deal, Kayak CEO Robert Birge stated, “They [Google] have dominance on the general search side. When you couple that with ITA’s airline relationships there is reason to be concerned. We have definitely heard from other folks, including on the agency side and on the supplier side. They are concerned.“
For its part, Google says that nothing will change for ITA customers like Kayak. Google isn’t interested in thwarting competition or getting into the business of selling tickets, at least for the time being. It simply “plans to offer new flight search tools that makes it easier for users to comparison shop for flight options, availability and airfares“, and will honor ITA’s existing agreements.
That’s fair enough, but Google’s words can only provide so much comfort. Regulatory objections aside, acquisitions always come with risk for customers of the acquired company. In my opinion, the greatest risk is that the ITA customers will see a decrease in the quality of service they receive under Google. That may not be the result of an intentional plan to harm them, but rather the result of a simple fact: Google is acquiring ITA so it can build a better travel products of its own, and it didn’t think a license from ITA would allow it to create the “significant innovations and bigger breakthroughs” it is seeking. If Google is successful in making it easier for consumers to find flights and shop around for airfares through its own properties, the motivation to acquire new partners, and service existing ones, will probably be less important.
Google’s track record gives credence to this possibility. Google bought JotSpot, for instance, but left JotSpot customers hanging when it shuttered the service. And recently, Google discontinued a number of products that were sold by Flix. In both of these cases, Google had interests, goals and business models that weren’t precisely aligned with those of the acquired companies’. In the end, former customers got the short end of the stick.
From this perspective, there is reason to be concerned about Google’s acquisition of ITA. But assuming antitrust experts don’t ground this flight, so the online travel industry will have to make room in first class for a new passenger.
Photo credit: asrusch via Flickr.