Expedia would be hurting if Google acquires ITA Software -- but not as much as you might think.
During Expedia's third quarter earnings call yesterday, an analyst cited Hitwise data indicating that Expedia Inc. gets about 25% of its traffic from search engines and the majority of that comes from Google.
So how would Expedia's marketing mix change if Expedia properties lose a chunk of that search traffic over the next few years because of an Google-ITA merger?
Dara Khosrowshahi, Expedia Inc.'s president and CEO, said a majority of that search traffic comes from consumers doing a Google search for "Expedia" or "hotels.com" so "that person is going to find Expedia one way or the other because they are searching for something very specific."
Search engines are Expedia's most expensive, least-profitable channel, Khosrowshahi says, and Expedia might see a traffic hit from a Google-ITA combo.
"But, certainly it would not affect our profits in the same way because that traffic tends to be much, much less profitable traffic," Khosrowshahi says. "That is one of our most expensive channels, so to speak."
As a hedge, Expedia is investing in its loyalty programs, email marketing and other ways to drive direct traffic, Khosrowshahi says.
So, although Expedia is spearheading FairSearch.org to block the Google-ITA deal, Expedia wants to assure Wall Street that the sky would not fall if the acquisition goes through.
In other news, Expedia officials say the company will continue to mull acquisitions for its media, Egencia corporate travel and online travel agency businesses, particularly in new, international markets.
In the third quarter of 2010, Expedia Inc. saw revenue in its high-margin advertising and media business, driven by TripAdvisor, grow around 44% to $139 million.
Overall for Expedia Inc., net income rose 51% to $176.6 million on revenue of $987.9 million, a 16% hike.
Gross bookings in the third quarter rose 17% to nearly $6.9 billiion.