Google, ITA, and the Future of Travel: It’s All About Data, Not Search
Sitting across the table from me, on the seventh floor of a brick building near Kendall Square, is the head of Google travel. He controls where the big, bad Internet giant (NASDAQ: GOOG) will go in the vast competitive landscape of flight and hotel search, airline reservation systems, relationships with online travel agencies, and so on. So what to ask him, and where to begin?
How about, what is Google’s big vision for travel?
“We’re kind of low-key. You know, let the product launches speak, rather than saying, ‘It’s going to be like this.’ No, no. ‘Here’s this thing we built—try it.’ That’s kind of the favored locution.”
OK, well, how is the integration between Google and ITA Software going? You know, the $700 million acquisition that the U.S. Department of Justice barely allowed to go through a year ago, amid complaints of anti-competition? It can’t be easy.
“For ITA Software by Google, we’re doing what we’re doing, and things are going great. We’re continuing to sign up customers for pricing and shopping. We now finally got our reservation system out there. We’re in the middle of conversations with several airlines about it, which is very exciting. On the consumer side, we managed to get Flight Search up very quickly, within a few months of being allowed to finally work together.”
Let’s come back to that. What was your worst air travel experience ever?
He thinks for a moment, then recounts a story from the 1980s, when he was in school at MIT: “I went home for Thanksgiving break. It was just New York. As a grad student, it was ‘minimize price absolutely.’ At the time, People Express out of Newark had a really inexpensive flight. But one trip back, I got to the airport in Newark. We got delayed for a while, we finally took off. The weather was bad, we circled. We circled enough, we ran out of fuel. We diverted to the nearest airport, which was Newark! So we went back to Newark, landed, picked up more fuel. The whole thing ended up being nine hours door-to-door, New York to Boston. I missed all my classes on Monday.”
I asked that question for two reasons. One is to show that the head of Google travel is in fact a regular guy, albeit with a very irregular skill set. The other reason is that Google—with its broad efforts across search, airfare pricing, maps, mobile, user reviews, and geo-location—could conceivably make the entire experience of travel better for consumers, while also making a lot more money for itself. That’s what this is all about; now it’s just a matter of whether (and how) it will happen.
By now you may have figured out that the guy across the table was Jeremy Wertheimer (see photo, left), the co-founder and longtime CEO of ITA Software, based in Cambridge, MA. His official title at Google is vice president of travel, and he reports to Jeff Huber, Google’s senior vice president of commerce and local. Over the past few weeks, I have spoken in depth with Wertheimer and a number of other executives at Google, ITA, and outside companies. My goal: to parse out what the future of travel tech really looks like to Google and others; how this will affect the travel sector and consumers; and what technology and business issues arise when a modern Web giant collides with an old, entrenched industry.
(Hint: it’s really about getting more out of data, which is what Google does best.)
Google and ITA, One Year Later
First, some back-story. ITA Software started in 1996, the brainchild of a group of MIT artificial intelligence guys, including Wertheimer. The company developed an airfare pricing and shopping system, called QPX, that it licensed to Orbitz and then to many other online travel services and airlines such as American Airlines, United Airlines, Kayak, TripAdvisor, and Microsoft’s Bing Travel (fka Farecast). Since 2005, ITA has been working on an all-encompassing reservation system for airlines, called PSS, which it just rolled out for Cape Air (its first customer) last month. ITA’s acquisition by Google was announced in July 2010, but it took almost a year for the deal to pass through an antitrust review. The upshot: Google has to keep providing ITA’s software to existing customers—some of them now competitors—for five years, along with some other provisions to ensure “fair” competition.
Meanwhile, Google is hardly new to the travel industry. Although the ITA deal was viewed by many as the search giant “getting into travel,” that is not technically correct. Back in 2004-2005, the company rolled out Google Earth and Google Maps, followed by local business listings, directions, and other information (such as Street View images). Google also has made strides in providing machine translation of foreign languages, user reviews of restaurants and hotels (both organically and by acquiring Zagat), location-sharing mobile services, and public transit schedules and data. Add these to Google’s advances in mobile and social sharing technologies, and you can imagine a lot of different aspects of travel getting woven together online—more on this below.
So, as of this month, Google and ITA have been officially working together for a year. What do they have to show for it? Critics and competitors would say “not much yet.” Last September, Google rolled out its initial flight search product, Google Flights—which uses ITA’s QPX software—to mixed reviews. People liked the speed and simplicity of the site, but wanted more options and airlines represented. Since then, Google has added more features, like flights from the U.S. to 500-plus international destinations, flights between smaller regional airports, and snazzier visualization tools.
One innovation is a map showing destinations you can fly to from your home city (see screenshot, left), with corresponding lowest prices, which can all be filtered by the dates you want to travel (or types of dates, such as weekends), whether you want nonstop or connecting flights, and other preferences. “A lot of it is just helping people navigate a big complex space of data that changes dynamically all the time because all the suppliers are optimizing second by second,” says Wertheimer. “You want to make sure people see all the options they want to see, and not be overwhelmed by it.” Overall, it’s “a completely different experience of finding a flight,” says Noam Ben Haim, Google’s senior product manager for flight search and travel initiatives.
The company’s rivals are considerably less impressed, however. One competing travel tech CEO, who asked to remain anonymous, called Google’s flight search “a disappointment to all the airlines that signed up that I’ve spoken with.” The CEO added that Google’s plans for flight search “are clearly to expand internationally” and “to send more traffic from Google organic results.” That last bit implies the Web giant will show its own flight listings in non-sponsored search results.
Meanwhile, Stephen Kaufer, the CEO of Newton, MA-based TripAdvisor (NASDAQ: TRIP), which competes with Google in travel reviews, trip planning, and advertising, told me a few months ago that he thought Google Flights “bit off more than they could chew.” He said that “ITA has awesome technology,” but that (referring to Google’s flight search) “you need to have the business relationships with the airlines to have a successful product.”
Google would counter by saying it has built up relationships in the industry over the past decade. “We’ve been in the travel business for a very long time,” says Jane Butler, managing director of travel at Google, who works on the advertising side of the business. Online travel agencies, she says, “were among the first to really get Web marketing.” She’s referring to companies like Expedia, Orbitz, and Priceline, which compete with Google’s new travel offerings. But Orbitz, for one, has started working with the search giant so consumers can book airline tickets through its site when they do Google searches.
Hotels also have been a big focus for Google. Last summer, the company released an experimental tool called Hotel Finder, which lets you search for and discover places to stay in many cities. The effort built on the company’s efforts in listing hotels in Google Maps, and required working with hoteliers to get pricing and availability data, as well as things like high-quality photos of their establishments. One neat feature: being able to specify the geographic region and neighborhoods you’re searching on a map, by dragging the corners of a four-sided perimeter shape (see screenshot, above).
(As an aside, a hotel reservation startup called Room 77 has maps of every floor of every hotel in its system and uses Google Earth to show you what the view out the window from a specific room would be like. Can you say “acquisition target”?)
As for airlines, Butler says, “We want to help them reach users doing flight queries.” Currently, consumers buy tickets mostly through airlines’ sites when they do a Google flight search. Butler emphasizes that focusing on end users and showing them the best travel choices is “the starting point with an airline or an [online travel agency].” She adds, “We respect their distribution decisions.” It seems Google might be interested in playing some sort of intermediary role in bookings, but the company declined to comment on whether it gets revenue from referral fees or other sources.
In fact, Butler has a much broader view of Google’s interest in travel. The real business potential, she says, is that “we can better match advertisers with users [through] the most relevant messages.” That means if consumers are using Google throughout the travel process—and across Web, mobile, and features like video-sharing (YouTube) and payments (Google Wallet), say—the company should be able to serve up ads that are better targeted and more effective. “Through researching, booking, experiencing travel, and sharing, Google has unique assets to bring to bear at each of those points,” she says.
And that brings us back to the ITA integration—a prime example of “unique assets.” I asked Wertheimer what consumers might expect five years from now, in terms of futuristic travel experiences. “You might find the pieces knitted together a lot better. Right now, in other things, you get used to a pretty seamless experience. If you want to do something, lots of companies—Google and others—have been very successful by making it as simple as possible, as few gestures as possible, to accomplish what you want,” he says. “We’ll do a lot of work under the scenes so that what you’ll see on top is nothing. You’ll just basically get to the airport, we’ll know you’re Greg, we’ll know you’re going to San Francisco, and you’ll be able to do the few things that actually matter.”
Wertheimer sums it up this way: “We want to make planning a trip no harder than buying a book or a song or a movie, and executing on it no harder than executing on buying [those things]. That would be my goal.”
To that end, ITA’s business, including its revenue model, is “pretty much as it was” before the acquisition, says Wertheimer. “We put the name on, ‘[ITA Software] by Google,’ but didn’t actually change the business that much. We liked the path it was on, Google liked the path it was on—we’re still on the path.”
But that raises a question about the future of the reservation system (PSS) part of ITA’s business—and what Google’s interest in that might be. After all, it seems unlikely that Google wants to invest in building software for airlines to run their businesses. But there might be more than meets the eye here.
What if ITA’s system (used currently by Cape Air) became the back-end technology for lots of airlines? Would that allow Google, with its vast computing and analytics capabilities, to connect the dots and radically transform travel logistics and business in ways we can only imagine? In an ideal world, could some sort of real-time, global airline and air-trafficking system reduce delays and reroute flights more efficiently? (In case you haven’t noticed, Google doesn’t talk much about its future plans. So it’s up to me to speculate.)
It’s All About the Data
Wertheimer begins with a caveat. “One distinction I draw is, when you fly on Cape Air, it’s not that Google knows everything about your Cape Air flight,” he says. “Cape Air knows everything about your Cape Air flight. We happen to have written the software on the computers, but your relationship is with Cape Air. It’s not like that information is now dumped into the big pot of all things that could be used. There are lots of controls.”
That said, there are certain aspects of travel that could be coordinated in smarter ways, he says. One idea is for airlines to track your bags and have them delivered to your hotel after you arrive at your destination. Wertheimer also points to a “re-accommodation system” in ITA’s airline reservation software that automatically deals with problems such as flight cancellations and communicates with travelers via cell phone to tell them their options. “We have pretty sophisticated technology to do full-scale planning in that moment: here are the passengers affected, let’s go re-plan and figure out what needs to be done,” he says. “It’s fun, coming from AI, that’s the kind of ‘automagic’ system where you can go, ‘Oh look, it’s intelligently looking at all the different things that are broken and fixing them.’ So you’ll certainly expect more of that. And gee, wouldn’t it be nice if you could coordinate that across travel suppliers?”
I wondered how Google’s ownership would affect ITA’s prospects for landing new airline customers. The sense I got was that while there might be a competitive “fear factor” to overcome for travel sites licensing ITA’s pricing and shopping software (QPX), the company’s reservation software (PSS) might actually get a boost. Gianni Marostica, ITA’s former chief commercial officer and now Google’s commercial director of travel, says that ITA, despite its growth, was “still a reasonably small company.” Airlines “don’t know if they want to sign a big enterprise-wide deal with a small company,” he says. “Now we’re part of a bigger entity, and there’s more oomph to push it forward.”
Selling and coordinating software across different airlines is one thing—but what about other modes of transportation? If international travel is a growth market, then incorporating train schedules in Europe, say, should be important to Google. “You want to have more data, and you want it as comprehensive as possible. Where’s the train, bus, cab, where’s the pack mule?” Wertheimer says. “The dream is certainly to integrate every bit of information that’s there. Often it’s just a matter of working with suppliers, convincing them that this is relevant to them.”
And that brings us, finally, to an overarching theme for understanding Google’s vision for travel: it’s all about the data. The first part of the theme is travel data. If you’re interested in getting from point A to point B, Google wants to show you all the relevant ways of making the trip; right now it’s by plane, public transit, or driving, biking, or walking directions, but eventually it could include more options like intercity railways, buses, ferries, robot cars, or (if someone would kindly invent one) teleporters. Google also wants to show you stuff that helps you plan your trip: maps, hotels, restaurants, car rentals, package deals, stops along the way. All of this takes a massive, ongoing effort in data collection and integration. (Wertheimer says there are ITA employees who work on nothing but tracking tax rules and conditions, so as to keep all ticket prices accurate and up to date.) ITA gives Google a leg up on understanding airfare pricing and relationships with airlines and online travel agencies, but that’s just one piece.
“As with any network that you’re growing, the benefits of being part of it for the supplier keep increasing,” Wertheimer says. “I’m optimistic over time. But it’s not like in the blink of an eye everything will be there. It’s a slog.”
The second part of the theme is about your data. In particular, tying together the various travel-related experiences a consumer might have on Google’s sites. “The idea in general,” Wertheimer says, “is to try to make it less impinge on your consciousness that Google happens to have a bunch of different things, and make it more one experience. It’s not that I really care that a big red thing comes up and says, ‘Now you’re using Google Travel.’ No, no, no, you’re traveling, you’re using Google, so guess what, it’s doing the right things.” That means consumers should be able to get relevant travel information without necessarily specifying in the search box that they’re taking a trip, for example. “Users show interest in traveling in many, many ways,” says Ben Haim, the Google product manager. “Online, people get inspired and dream.”
The Competitive Road Ahead
As Butler (the ad executive) alluded to, the real payoff for Google lies not in outcompeting other travel search sites or collecting fees from airlines or travel agencies—it’s in gaining advertising revenue from knowing more about consumers’ travel plans and experiences, and being able to serve up more personalized ads and content. You can imagine this strategy becoming even more important as more consumers interact with Google on smartphones and adopt technologies such as mobile payments and photo/video sharing.
Indeed, Google’s competition with companies like Kayak and Fly.com in so-called “metasearch”—aggregating travel data for search and redirecting consumers to other sites to make purchases—may no longer be as important to the industry. “Metasearch is less and less relevant,” says Michael Raybman, the founder of travel site WaySavvy. “It’s about more personalized search results, and a lot of innovation in advertising.”
Consumer privacy is a big issue, of course, especially as Google updated its policy last month so it now combines user data from its many sites and services. But an argument can be made that there could be a strong benefit to consumers in terms of price and user experience—and, what’s more, that the claims of Google’s anti-competitive behavior in travel search are overblown. “The thought of ITA’s technology being unleashed into the Google organic search process has a huge consumer benefit and should in fact lower prices by giving people access to this exceptional low fare finding technology,” said one travel tech CEO and airline industry veteran, who agreed to comment on background.
Meanwhile, back at ITA, there is still a sense that Google and ITA are separate entities (though their engineering cultures are similar), with a customer-vendor sort of relationship. That may change in the coming years as the integration matures and the companies join together in a new campus slated to be completed in Kendall Square by mid-2013. But for now, Wertheimer says, “It’s like being back at MIT. Google is like computer science taken to its logical conclusion.”
On the day we met, Wertheimer was preparing to fly to the Bay Area later that afternoon. He said he likes to park his Chevy Volt at the airport and charge it up. He doesn’t fly all that much these days, and very rarely does he have a flight get canceled (except for the time he had to come back from Alaska by boat). But our chat about the future of travel made him reflect on how far we’ve all come in our expectations.
“Parts of travel pre-date the Internet by centuries,” he says. “It’s kind of funny how we all get to the point where we just expect to go anywhere, anytime I want, on schedule, no matter what, forget weather—I should be able to do it. It’s not an assumption people used to just make about the world, that you could get from anywhere to anywhere else in no time at all, and do it reliably.”
If Google has its way in travel, people will assume that, and much, much more.