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Kane Pirie: Why you should care about Google’s latest purchase

Travel Republic managing director Kane PirieGoogle splashed out $700 million cash for ITA, a flight search technology provider, on July 1.

In its own online commentary, Google claimed “the acquisition will benefit passengers, airlines and online travel agents by making it easier for users to comparison shop for flights”.

For the price comparison websites, such as Travel Supermarket and Kayak, this was stark bad news. The Godzilla of the online jungle has figured out price comparison websites are making a quick buck on flipping traffic between Google and travel companies. Google has decided it would like that margin for itself.

Google is synonymous with triumphing through technology. In 2009, it commanded a UK market share of more than 90%. You should assume it will make the most of the ITA software, if the deal is approved by competition regulators.

The price comparison websites, once seen as the darlings of the online arena, could be toast within 12 months.

Google’s mission to expand

But don’t assume Google will stop there. It is a company with a mission to grow profits and shareholder value. It will take every pound of profit it can.

This means price comparison websites in other sectors need to be working through their options. One part of the defence can be seeking to build up a household name brand with enough weight to resist the Google magnet. Simple, but expensive.

Google could also extend within travel, although not so far as to actually take bookings – shops and call centres are too operational. However, I am sure it won’t limit itself to just flights. Time to panic then – Google’s gonna get ya!

Not quite. Google wants to make more money out of the travel sector, not accidentally murder it. Google would do itself serious harm if it wrecked this sector, which accounts for 10% of its income. Moreover, other sectors would then re-double their efforts to reduce their own Google spend, further impacting on revenues.

We can work it out – quickly Google will want to work with industry players and develop new and exciting search and advertising opportunities. Companies reacting to the new regime quickly could benefit, at least in terms of volume.

As for commission on flights, this will prove to be another nail in the coffin. There is no point bemoaning this. Airlines once depended on distribution partners so they paid them well for their services. The game has changed in the internet age.

Google itself is seeking to play down the ITA deal. Its real ambitions in moving down from pure search to price comparison are not transparent. However, one thing is certain: Google wants a big fat return on its $700 million outlay. Whose profits will it take to get it?

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