NB: This is a guest article by Evan Konwiser, co-founder of FlightCaster.
Over the last several weeks we've seen continued hype on the output of the Google acquisition of ITA Software.
There are leaks apparently suggesting that Google is close to launching an airfare search tool with ITA data for the first time. We've also seen Kayak continue to be hesitant about an IPO until its relationship with ITA is worked out.
Many think that Kayak's valuation is heavily tied to Google's next move. Overall, there has been lots of speculation that big changes are coming as a result of this acquisition.
I disagree. Prediction: Google acquisition of ITA turns out to be nothing.
Okay, maybe not nothing in the sense that they won't release a flight search product and it won't be useful, maybe even cool. But nothing in the sense that it won't fundamentally change the industry nor will it be better or more useful than the current best in class tools out there.
Someone had to say it.
For those of you who disagree, let me outline my evidence below. In full disclosure, I spent some time working at Kayak back in 2007 and know some of the team.
But that doesn't figure into this since it was so long ago and I own no equity. Additionally, most of this discussion applies to other meta-search sites as well. Kayak is just a good case study as the largest and has an impending IPO.
So why Google and ITA Software is overhype:
1) The advantage of having ITA Software in-house is unclear
Put simply, ITA doesn't really give Google anything that Kayak doesn't already have. I say that with no knowledge of what new-fangled technology they have had under development, true.
But I feel confident in this since many of the forward looking challenges in air travel are NOT solved by what ITA does, rather they rely on direct connects with airlines and GDS (which will eventually make ITA's flight search tool obsolete or at least far less important).
I believe much of Google's acquisition of ITA was to apply their technology to other applications, either non-travel or non-air. For example, Needlebase.
Think of the applications of ITA technology for Google's primary business: Searching the web, and putting structure behind data in other industries where the data sources are far more disparate and unstructured.
Additionally, Kayak has been one of ITA's marquis partners for many years before Google came sniffing. As such, I believe they were uniquely suited to know about the future of ITA's flight search initiatives and at least as of early 2010, probably knew any major project underway.
2) In talent, Google versus Kayak is a fair fight
Kayak obviously only has a fraction of the number of engineers as Google, and it's unclear how many Google has put on it's travel product. But Kayak has an exceptionally talented engineering team led by guru Paul English, one of the most respected technology leaders anywhere.
Google has great leaders as well, but not necessarily in travel (in fact, some are leaving). Google has already peaked as an employer and faces immense competition for talent in Silicon Valley (and Seattle), whereas Kayak is still a pre-IPO darling of the Boston area (and believe it or not, lots of top talent engineers like the east coast also!) Google has always had problems venturing into new things (e.g. Health, Social, etc.).
One might point to ITA's extensive travel experience, but I'd discount that as they have very limited experience in consumer technology. When it comes to product innovation, speed, and engineering horsepower -- Google doesn't have an obvious advantage, perhaps even a disadvantage.
3) ITA is not the only game in town
The competitors are not as mature, no doubt about that, but look for Everbread's Haystack product to emerge as a leader in Europe (and, hopefully, eventually the US).
Amadeus and Expedia also have competing technology that powers their tools. But even more importantly, "Direct Connect" and APIs are going to make a lot of these tools less important over the next few years, just as scraping worked pretty well in the early days of meta-search.
Also, ITA's competitive advantage is vey heavily US domestic. Sure, that is a big market, but travel is a global industry and ITA gives Google very little competitive edge outside the US, where Kayak has been expanding aggressively in recent years.
Conclusions
At the end of the day, this business simmers down to a few fundamentals:
- People want low fares. That's still the problem, silly. (The problem is NOT: Where can I fly for $176.40 on a Wed in August that's more than 1,467 miles from JFK, and has free wifi but no PTVs)
- Fare integrity in meta-search remains the biggest issue (and Kayak has spent the last 7 years working on that problem. ITA doesn't help Google since it doesn't transcend from search to booking paths)
- Direct Distribution (and more open APIs) is coming, and it favors meta-search over OTAs (All boats float up for Kayak, and potentially Google. And the headroom is MASSIVE).
One could argue that Google feeds a lot of traffic to Kayak and regardless of product quality, they could simply funnel people elsewhere.
I think this is unlikely, since their business model doesn't support this. If Kayak (and OTAs) want traffic from Google, they must pay as they are today. If Google wants their money, they must send traffic. Google is already on anti-trust thin ice, so between that and protecting their revenue, I don' t expect them to try anything drastic here.
Remember, Expedia, Orbitz et al are on Kayak's side in this issue, so I expect Google to remain a source of traffic for everyone even if they're doing it from some sort of pre-search results in Google search.
Let's stop fretting about Google's impending entry into travel. Yes, they will launch new features and products, and I'm sure some of them will even be pretty darn cool.
But the fundamentals don't change because the industry is shifting from the supplier side (airline distribution), not the demand side (consumer). The hype of the consumer search space, especially around Google, is misplaced.
Travel is about flying, after all, not buying tickets. Let's put the sexy back where sexy belongs: On the tarmac, and not in the browser. (After all, if you want sexy in the browser just stare at Hipmunk).
NB: This is a guest article by Evan Konwiser, co-founder of FlightCaster.