Giant Step Into Travel for Google

Giant Step Into Travel for Google
By BRAD STONE and JAD MOUAWAD
Copyright by The New York Times
Published: July 1, 2010
http://www.nytimes.com/2010/07/02/technology/02google.html?_r=1&th&emc=th


New Google tools to help people search easily for flights are now on the runway. It will be up to antitrust regulators to decide whether they can take off.

Google said Thursday that it had agreed to acquire ITA, a 14-year-old flight information software company, for $700 million in cash.

Google said it planned to create flight search tools on Google.com, a move that could upset the entire $132 billion-a-year air travel industry as well as its rival Microsoft.

The deal is another significant step by Google away from how it has traditionally conducted business. Instead of pointing searchers to the most relevant Web sites, the company is increasingly giving information directly to users in categories like shopping or local services like restaurants. Providing information on flights and fares would be a new area for the company.

With 63 percent of the American search market, Google has recently drawn scrutiny from antitrust regulators every time it has moved into a new business. Its acquisition of AdMob, a mobile advertising firm, won approval by the Federal Trade Commission after an intensive six-month review, and only after a rival, Apple, undermined possible objections by introducing a competing mobile ad network. The government has also examined Google’s scanning of millions of out-of-print and hard-to-find books.

Antitrust enforcers previously reviewed and approved Google’s 2007 acquisition of Doubleclick, and were prepared to block a proposed deal with Yahoo in 2008 before Google walked away.

Eric E. Schmidt, Google’s chief executive, predicted a “significant review” of the ITA acquisition. He told analysts and reporters Thursday in a conference call: “We think they will spend a fair amount of time going through it, trying to understand it, both because of size and price. We welcome that.”

Samuel R. Miller, an antitrust lawyer at Sidley Austin, said: “I would think antitrust enforcers will take a very hard look at this. Every time Google makes another acquisition, it only reinforces the argument that they are basically trying to acquire other companies that may present potential competition to their core dominance in paid search.”

Google does not compete directly with ITA, but many of its largest rivals in the travel search market, including Microsoft, use ITA’s data.

ITA was founded in the 1990s by computer scientists from the Massachusetts Institute of Technology. The company revolutionized the ability of consumers to find the cheapest fares by making it easy to compare fares among airlines. It has licensed its product widely, and customers include companies like American Airlines and Continental Airlines. Web sites like Hotwire, Kayak, Orbitz and Farecast, which is now part of Microsoft’s Bing search service, also use ITA’s software.

Mr. Schmidt said that Google would honor all existing agreements and seek to add new partners.

“Airline travel and search are a perfect opportunity for more innovation, more investment and more interesting products,” Mr. Schmidt said. “The whole idea is to give people more of what they want, and more information when they are searching.”

Companies that may lobby against the deal include Microsoft, Expedia and Kayak; reservation networks like Travelport, Sabre and Amadeus; and possibly even some airlines. The deal has been rumored in the travel press for months.

Airlines could be concerned “how Google will present this information, how will it appear in Google search and whether they will have to pay for the results,” said Henry H. Harteveldt, an analyst at Forrester Research. “What airlines do not know is whether they will have to bid to have their own Web sites listed against the travel agencies.”

Google declined to predict what kinds of services might result from the acquisition. In the conference call, Marissa Mayer, Google’s vice president for search products and user experience, talked about being able to answer more open-ended travel queries, like “Where can I get within seven hours and within this price?”

“Travel is one of the hardest problems around, both in the way people like to address queries and the accuracy and speed which you need to give people the results they are looking for,” she said.

Rick Seaney, the co-founder of farecompare.com, which uses ITA’s technology, said the deal might prompt some antitrust concerns, especially from Microsoft.

“We have got a couple of months to contemplate this,” Mr. Seaney said, citing the expected lengthy review process. “We don’t really know what it all means yet, other than they will continue on with their existing relationships.”