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 Con­sumer

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.

Con­clu­sion

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

0 comments