The acquisition of ITA by Google was controversial right from the day the deal closed. Google may now face an antitrust lawsuit by the Department of Justice over the $700 MN acquisition. Amidst all the controversy, we thought it worthwhile to take a step back and analyze the situation from the viewpoints of Google and Bing, the OTAs and the consumer.
What is ITA ?
ITA is a software company that builds travel search and pricing products. Its flagship product, QPX is a global distribution system (GDS) that enables suppliers of air inventory (the airlines) connect with the OTAs (like Hotwire) and other meta search engines (like Kayak). When a consumer searches for an itinerary on these websites, the GDS is used to come up with the best matches for the search.
The Search Engines
Google and Bing are in the midst of a feature war. While Google still has the biggest market share of the search engines, Bing has constantly been innovating and been pushing Google for the past year and a half. In fact, Bing’s new travel features such as flight tracker and fare forecasting enabled them to go from 3.5-4% market share to 9% market share in the travel vertical in the span of 18 months.
Google’s acquisition of ITA would enable it to integrate with the ITA system and show itineraries on the SERP itself or on a landing page akin to Bing Travel. From Google’s viewpoint this is a better user experience as it cuts one step in a consumer’s search. This would enable Google to compete feature to feature with Bing.
Bing’s concern and opposition is understandable. Bing, which uses the ITA system, fears that Google could cut them off the system in the future or reduce traffic going to Bing. A loss of travel traffic means a loss of search share, the very thing Microsoft has been trying to gain for the past two years.
OTAs and MetaSearch Engines
Consumers are notoriously agnostic to brands in the travel space. AN OTA’s primary brand building vehicle is by making a consumer purchasing experience simple and efficient. By using GDSs (like ITA) they obviate the need for a consumer to search for a travel product at multiple sites. The enhanced experience brings the consumer in again and builds both the brand and website traffic over time.
Google’s ability to show searchers itineraries and redirect them to other travel sites would both reduce the time spent by users on meta search engines as well as OTAs. They risk being perceived as adding less value to the consumer and becoming a mere “conduit at the end of a Google search”.
The feature wars between Bing and Google has been a big plus to the consumer. Searches have become faster and more efficient enabling us to find what we want when we want. The added functionality that the Google-ITA merger promises can only be considered as a big plus in the short run.
However, if Google starts to prefer certain partners the marketplace would become inefficient. Google would control a substantial part of the sales funnel and could drive up traffic acquisition costs for the travel sites. These costs would be passed down, making for an unhappy consumer who has to pay higher fares.
While Google’s intentions appear to be a better search experience and in turn greater market share, the increased control they have on the traffic is what many fear. After all, it was Milton Friedman who said that “concentrated power is not rendered harmless by the good intentions of those who create it.”
As things stand many travel players are the mercy of Google’s algorithms for much of their inbound traffic. The Google-ITA merger would only increase this dependence. Consumers who will benefit in the short run, will be at a disadvantage if the market place becomes less transparent.
Still, if Google can adequately demonstrate that they can set up a transparent system of checks and balances preventing monopolistic behavior in the future, this should be a win-win for everyone.
Dr. Siddharth Shah
Director, Business Analytics