Bloomberg has scooped everybody this morning with the news that Google is talking to travel-technology power ITA Software about a potential acquisition in the $1B range (article available to Bloomberg subscribers only). This would not only provide a nice juicy exit to ITA, a venture-backed company in Cambridge, Mass., that’s been steadily growing since the late 90s, but it would also represent a potentially violent shakeup of the travel industry data business.
With a purchase of ITA, Google would making a grand entrance into the complicated business of travel data and technology, which ITA supplies to leading travel information and agencies such as Orbitz. If you’re curious about ITA, here’s a profile. I’ve spoken to a handful of people this morning, none of whom want to go on the record about this, but the consensus seems to be: “Hmm, interesting, I wonder what Google’s up to?”
Here’s what I’ve concluded: Google’s bid is just a direct play to up the ante on its search and advertising business in general, especially in the travel search vertical. It would certainly be viewed as a competitive move against Microsoft’s Bing, which is a customer of ITA’s and has been lately been beefing up its travel offerings.
Google obviously generates a lot of advertising revenue from the various travel companies, whether it be airlines themselves or the travel sites such as Orbitz and Expedia. Over time, however, Google has been adding more and more data on various vertical markets — think about weather, sports scores, and financial information. Travel pricing data has been absent from the Google Web site, other than through ads. Gaining more access to intelligent travel data would ad value to Google’s search and advertising products whether Google decides to directly publish the data or not.
Obviously, the first thing that comes to everybody’s mind is “Would Google publish ITA’s travel data?” It seems unlikely. The travel data business is incredibly complex and I’m sure there are myriad reasons, both legal and technical, of why this would be hard for Google to do. It would also make Google more of a direct threat to Orbitz and Expedia. Furthermore, if Google were to do this, ITA’s core business of selling to other travel portals could be cannibalized while at the same time raising competitive issues from the Federal Trade Commission (FTC). So it seems unlikely that Google would be this aggressive.
That’s why I think this is more likely that this is just a straightforward move to beef up the vertical power of Google’s search and advertising business in the travel industry, as well as the acquisition of a comany that sells intelligent software, which is part of Google’s core business. Orbitz, Expedia, and other travel sites such as Priceline buy lots of ad from Google. As I mentioned, travel portals, such as Orbitz, are also ITA customers. ITA sells them the technology to find pricing information. Google could simply tie together the intelligent pricing data with advertising and market an integrated product for the travel industry. Think of it as “ITA + Advertising.”
It’s all just a lot of speculation at this point, but it points to the rising power of Google in its mass control of intelligent data. I spoke to several analysts off the record and nobody was willing to take a big leap of what this means, but they all seemed to think that it is probably not a big direct threat to the travel portals such as Orbitz, Expedia, and Priceline. This seems to be confirmed by the market. Shares of Orbitz, which has the most exposure to the deal as an ITA customer, was barely changed this morning (Orbitz was trading at 6.98, up 2 cents).
Would this deal raise eyebrows with the authorities? Probably. I think you would see an FTC review, because of the implications of Google’s rising power in data collection. Microsoft would cry foul, because ITA supplies Bing. And the Euro-cops would definitely freak out about Google getting its hands on more data, as they are already freaking out about Google privacy issues in general.