Google’s Ambitions in the Flight Business Should Worry Rivals

On 1 July Google announced that it intends to buy flight search provider ITA Software for $700 million in cash. ITA is one of the leading providers of flight search information and bookings, competing with Amadeus, Sabre, Expedia and others. It has agreements with a large number of airlines and travel search sites including, Kayak and Microsoft’s Bing.

Although Google has said it’ll honour existing agreements, the acquisition raises many questions about the search giant’s intentions for serving the travel industry, about why it needed to acquire ITA rather than licence the technology (as others do), about how existing players will work with the new owner, and about whether the Federal Trade Commission will see a potential for linking Google’s advertising with flight search results as too much control.

But how does the deal fit into Google’s recently announced mantra of “mobile first” as the priority guiding developments? And what implications does this deal have for the mobile industry?

In our view, the mobile industry has a lot to offer the travel industry in terms of reaching people and providing relevant services at the point where they are most needed. In the short term we believe that Google’s acquisition of ITA will have little impact in the mobile field, but in the longer term we expect much more travel-related activity on phones — including flight bookings — and this is another area where Google will control a key resource.

At present, flight search and booking is best done on a PC because it’s a complicated task with many parameters in a search and, consequently, a fairly complex user interface. To illustrate this, Apple’s App Store contains many thousands of programs in the travel category, with only around 330 of them relating to flights and just 10 of these offering flight searches and booking. Interestingly, most of those 10 get poor ratings from users.

However, developers have shown that careful attention to interface design can give an experience on a mobile device that’s better than the alternatives. For example checking local cinema listings is quicker and easier on an iPhone than booting up a PC, loading the browser, searching and so on. I expect the ease of use for flight booking applications to improve strongly over the next couple of years.

As that happens, there’s no reason why people won’t use their phone for flight bookings. Kayak, one of the leading flight search providers, finds that iPhone apps already account for 5 percent of the searches it handles. It’s stepped up its investment in mobile and is now devoting a fifth of its development resources to this area.

Although flight search and booking on mobile devices may become mainstream and control fairly large sums of money, the opportunity for the mobile industry to work with the travel industry is much broader, with flight search as arguably one of the least interesting parts. The mobile industry plays to all the cool Internet trends that the travel industry could use. These include hyper-local information (for example, the iPhone app that informs people about delays at Baton Rouge Metropolitan Airport), users’ context (on holiday or travelling for business?), crowd-sourcing (for example, TripAdvisor) and newer technologies such as image search and augmented reality from the likes of Layar.

The main problem here, of course, is scale — how to do anything on a big enough scale that it becomes of use to large numbers of people. At present this is being addressed in two ways. The main way is that many developers provide applications serving local interests. There are thousands of these apps on, for example, the App Store. The second way is that larger providers are starting to form partnerships with the travel industry. For example, Nokia Maps contains information from Yellow Pages, Lonely Planet and Michelin Guides. Nokia has said publicly that it sees good opportunities in working with the travel industry. It has acquired Dopplr, a social travel site within the past year. Facebook has moved into this area too, recently acquiring social travel startup NextStop.

In my opinion, Google’s move to acquire ITA is motivated primarily by a desire to expand the PC Internet side of its business and put Google in a position to provide a joined-up and more comprehensive set of travel services, which could work well on mobile later. We should remember that Google has launched many initiatives that have subsequently come to very little. However, the $700 million price tag suggests this acquisition will be treated seriously in Mountain View. Other large mobile players, such as Nokia and Apple, should take it as a warning.