Google’s travel push anger web rivals

The article is extracted from the Wall street journal and was published on December 27^th 2011. The article is outlining the Google’ strategy to develop its presence on the travel market and the consequences it has on the main online travel websites.

Google power on the Internet is huge. According to Compete Inc., an American web analytics firm; 10% to 20% of the traffic made on the top travel websites such as Expedia and Orbitz is provided by Google. The company has first started its business with providing a search engine tool where the contents of websites are analyzed through a complex algorithm to determine their ranking position on search results page.

Nowadays, search engines are determinant in the success of e-commerce websites and any changes in their ranking position on search results pages cause dramatic changes on the traffic, conversion rate and visibility of these websites.

The method for ranking a website provided by the algorithm has always been a secret for the world but as long as the company was positioned as a search referee, the websites had to rely on Google. Hence, over the last few years, Google has expanded its market to other services such as social networks (Google +), advertising (Google Adwords), music (You tube) and emailing (Gmail).

The company is now looking at extending its business in order to take a piece of the $1 billion online travel market.

Google flight

In December 2011, the company has launched a flight search tool on which the first results are exclusively links to the airlines websites and top travel websites only appear further down. In addition, the software that supplies the flight data for Google is the same supplier than for its competitors Orbitz and Kayak.

Therefore, when Google has shown interest in acquiring ITA software Inc. , the top travel websites sued the company in justice for antitrust scrutiny. In response to the department of justice accusation, Google has promised to provide tools for driving more traffic to online travel agency and make the flight data available for its competitors.

However, the company was not required from the DOJ to link directly to the travel websites and it apologized for its failure to competitors by saying airlines companies themselves were preventing them from doing it. Indeed, the situation is benefitting airlines that were losing traffic with OTA’s and forced to pay high booking commission (e.g. it costs $11 for processing a booking from OTA’s against $1 when processing directly on the supplier website).

Nowadays, Google is becoming the competitor and the supplier for travel websites and has broken its promise to provide links directly to travel websites. In this case, the real question that is raised here is on Google’s ability to remain an unbiased search engine while making business on travel market. For the moment, the flight search tool only concerns the domestic market but the company is already looking at expanding it to international market. 

By becoming both judge and jury and taking advantage from its quite monopolistic position, Google raised the issue of ethics in e-commerce. Besides, the impunity that Google is benefitting from the U.S justice administration let us think that e-business is still in its development phase and has to be controlled and limited for the benefits of both consumers and competition. 

Indeed, although free competition is defended in all domains by authorities such as the Federal Trade Commission or the Department of Justice (Antitrust division) in the US, the Internet stills suffers from a lack of rules as technologies and innovations go faster than regulations. 

Nevertheless, at the end of procedures that can last several years, some companies manage to make the law apply to some websites accused of unfair competition and abuse of dominating position. For example, in September 2011, Vistaprint was convicted to pay 250 000 euros for having used misleading web banners advertising free business cards giving to the website a competitive advantage contrary to the free competition regulations. Let’s hope this case can set a legal precedent to guarantee free competition on the Internet.