Competitors Claim ITA Acquisition Would Give Google an Unfair Advantage in Travel Search
[Updated, see page 2] Quite a few online travel-info companies—FareCompare, Fly.com, Hotwire, Kayak, Sidestep, TripAdvisor, and Orbitz, to name a few—get their airline fare and seat availability information from a vast real-time database called QPX, the creation of Cambridge, MA-based ITA Software. Even search engines like Bing rely on QPX for flight data. So it sent shockwaves through the travel industry when Google announced plans in July to buy ITA for a reported $700 million.
Google says the proposed acquisition—which is still being reviewed by antitrust regulators at the Department of Justice—would allow it to innovate faster in the area of online flight search. But competitors fear the Mountain View, CA-based search giant has something more aggressive in mind, and this week they banded together to put pressure on the Justice Department to nix the deal, prompting Google to fire back in a defensive blog post.
The coalition, called FairSearch.org, is led by Seattle-based Expedia (which also owns TripAdvisor), Farelogix, Hotwire (a sister company to Expedia within IAC/InteractiveCorp), Kayak (which owns SideStep), and Sabre Holdings (which runs Travelocity). This week the group launched a website and blog arguing that a Google-ITA combination would give the search company too much power over the way consumers find the best air travel deals. “No one company should be allowed to use its dominance to foreclose competitors from the search marketplace,” argues the site, which includes Facebook and Twitter buttons designed to spark a viral uprising against the proposed merger.
In addition to the online campaign, the FairSearch companies are also meeting with members of Congress to ask them to lean on regulators to prevent the takeover, according to a report yesterday in the Wall Street Journal. Expedia counsel Thomas Barnett, who blocked a proposed advertising deal between Google and Yahoo as head of the Justice Department’s antitrust division during the second Bush administration, told the Journal that if Google controlled QPX, it could give the company the ability to steer Web users “in directions that are best for Google,” which he said would “ultimately end up harming consumers.”
The Justice Department has no obligation to act on the coalition’s complaints—but regulators do take the stances of industry players into account during antitrust reviews.
Online travel planning is a huge business, accounting for nearly 40 percent of all e-commerce in 2009. About one-third of people beginning a travel-related search start with Google. ITA says that about 65 percent of all online ticket sales by airlines, meanwhile, involve a search using QPX.
The members of the FairSearch coalition argue that if Google is allowed to acquire ITA, it could withhold QPX from rivals or offer a degraded version, or use its dominant position in search and search-related advertising to direct traffic away from rivals. If competitors fall away, innovation in the travel search business would slow, the coalition claims. And in the bigger picture, the coalition says, a Google-ITA combination “would enable Google to dominate yet another component of the search market, reinforcing its overall search and search advertising monopolies and once again stifling competition and innovation in the Internet ecosystem.”
In a post today on its public policy blog, Google senior product manager Andrew Silverman says it’s “disappointing” to see a group of travel companies announcing their opposition to the ITA acquisition. Google’s only reason for wanting to buy ITA, Silverman claims, is that “ITA will help us provide better results for our users,” including exact flight times and prices when users enter queries such as “flights from San Francisco to London.” While Google could simply license ITA’s data service for this purpose, Silverman says “we think we can make more significant innovations and bigger breakthroughs in online search for consumers by combining our expertise with ITA’s.”
Contrary to the coalition’s concerns, Silverman argues, Google won’t be picking winners and losers in online travel; improved travel search tools, he argues, would actually drive more traffic to airline and travel agency sites. And there’s no danger of a monopoly in online search, Silverman says, given that the three leading travel sites—Expedia, Priceline, and Travelocity—all use alternatives to QPX such as Expedia’s Best Fare Search service.
With Google behind it, ITA would arguably be in a position to keep improving QPX and offer better service to its existing licensees. But to many ITA customers, that prospect is apparently overshadowed by uncertainty over Google’s intentions—despite the search giant’s statement that it has no plans to sell airline tickets directly.
On top of that distrust, there may be an understandable aversion at many travel companies to the notion of a single-vendor ecosystem, where travel sites have to pay licensing fees for flight data to the same company that’s already charging them millions each year for keyword-based search ads.
But antitrust decisions are about competition and protecting consumers, and it’s difficult to see how a Google-ITA combination would actually make it harder for consumers to find low-priced fares. So the FairSearch coalition may have a difficult time ahead of it in Washington, DC.
Update, 5:15 p.m. PT 10/26/10: I connected this afternoon with Henry Harteveldt, a vice president and principal analyst at Forrester Research who follows the airline and travel industries. He was bluntly critical of the FairSearch coalition.
“This is basically a bunch of crybabies,” Harteveldt says. “There is substance to the concern about whether their data will remain confidential. They want to make sure Google is not going to go in and start snooping on the types of searches that are being done through their websites, and either sell that data to anyone else or do anything inappropriate with it. The other concern is that they want to know that they will have fair access [to QPX] when their current contracts expire, and at a fair price. Those are legimate points. Beyond that, it’s a bunch of sour grapes.”
There’s little merit to the argument that a Google-ITA combination would stymie competition, Harteveldt says, given that there are other sources of flight data, such as Expedia’s Best Fare Search system. ”There is an element of disingenuous behavior here on the part of some of these companies,” he says. “I can assure that if Expedia had been the successful bidder for ITA, we would not be having this conversation.”
Update, 12:20 pm PT 10/29/10: Robert Birge, chief marketing officer at Kayak, sent Xconomy the following comments in response to the remarks above from Henry Harteveldt of Forrester Research.
“It’s noteworthy that Henry validates our concerns as ‘legitimate points.’ He agrees that ITA customers have reason to worry that Google will ‘start snooping on the types of searches that are being done through their websites, and either sell that data to anyone else or do anything inappropriate with it.’ He also acknowledges the concern about whether we ‘will have fair access [to QPX] when their current contracts expire, and at a fair price.’”
“Unfortunately, he offers an incomplete analysis, suggesting that Expedia Inc.’s proprietary Best Fare Search technology—which Expedia does not offer or plan to offer commercially to any other company—is an alternative source of flight data. In fact, Expedia Inc.’s own brands Hotwire and TripAdvisor rely on ITA as customers.”
“Allowing Google, the company that dominates Internet search and paid search advertising revenue, to acquire ITA Software, the predominant provider of search technology to key Websites in online travel, will ultimately harm competition, raise advertising rates for airlines, and ultimately result in less choice and higher prices for travelers.”