July 1, 2010
Beating out a rival bid reportedly organized by Kayak.com and Expedia, Google on Thursday said that it had reached a $700 million deal to acquire ITA Software, a maker of software for organizing airline travel data.
The deal is likely to be subject to regulatory scrutiny, given that ITA's QPX software is used by about half of the online travel industry in the U.S. Alaska Airlines, American Airlines, Bing, Continental Airlines, Hotwire, Kayak, Orbitz, Southwest Airlines, TripAdvisor, United Airlines, US Airways, and Virgin Atlantic Airways, among others, are ITA customers. Google insists that the deal will lead to better flight information for travelers and travel companies. It says it has no plans to sell airline tickets directly or to dictate ticket pricing. It also says it will honor ITA's existing agreements and that it hopes to attract new customers. In a conference call for the media and investors, CEO Eric Schmidt expressed confidence that the deal will be approved. "We're pretty comfortable that because of the unique nature of the innovation that can be done here, that this is pro-competitive and pro-consumer," he said. Schmidt said that Google has been pursuing a deal with ITA Software for a long time and lavished praise upon the company for its technical prowess -- founded by MIT computer scientists -- and its ability to innovate. Google's motivation for the deal, said Schmidt, is to improve travel search, one of the company's most popular search categories. About half of all airline tickets in the U.S. are now purchased online. "I don't know about you all, but I find [online travel search] frustrating, with pricing and options changing all the time," Schmidt said. "It's ultimately not a very good user experience." Currently, Google responds to two types of travel queries. A search for a specific flight number returns flight tracking information. A search for a specific trip, such as SFO to LAX, returns input boxes for refining travel dates and links to travel sites like Expedia and Kayak to purchase tickets. Microsoft's Bing goes a step further. It includes a dedicated Travel section and, when presented with a specific trip, returns limited price information and a link to a Travel page with more detailed pricing information, query refinement options, and links to other travel sites. Improving the travel search user experience will require a change of tack for Google. Having spend considerable effort in recent years making diverse types of media accessible through a single search box -- Google's Universal Search initiative -- Google expects to develop a unique interface for travel queries. "Travel is one of the hardest search problems around," said Marissa Mayer, VP of search and user experience, during the conference call. "We do need to have both a special set of data and a vertical interface." Though Mayer offered few specifics about Google's plans for improving travel search, she suggested that ITA's technology could allow Google to provide answers to complex queries, such as what destinations can I reach in seven hours for less than a specified price.
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