July 2010 Archives

Search consultancy Greenlight has just distributed a comment on Google's purchase of ITA Software. Here's an edited down version:

In its early years the internet was heralded as the great disintermediator, allowing manufacturers and suppliers to have direct interaction with their customer bases.

This was Phase One. It was rapid. There was a dramatic increase in market transparency that allowed people to see prices and products from multiple suppliers, allowing them to compare prices and buy direct.

As the internet grew, that market transparency began to diminish. With thousands of sites selling a product/service, how could someone determine whether they were getting the best price?
 
This ushered in Phase Two. New companies such as Travelsupermarket and Kayak re-established market transparency with innovative technologies, aggregating data and essentially reintermediating the supply chain.

But if the likes of Travelsupermarket have good technologies, the likes of Google have incredible ones, allowing them to usher in what appears to be Phase Three. Its reach and resources make Google the ultimate informational intermediary, essentially reintermediating an already reintermediated supply chain.
 
All Phase 2 intermediaries should now be rethinking their business models in light of this move, and at the very least determining how they should operate in the next few years.

So the rumours were true then - Google has confirmed this morning that it has paid $700m cash for ITA Software.

The speculation in the run-up to the deal was rife, and is likely to continue for some time to come, not least until the deal gets through the regulators.

Google has been quite transparent in terms of its official communications about the deal, giving the market something concrete upon which to base their panic/delight/disinterest. Delete where appropriate.

As ever, the press release doesn't give much away, but a microsite within Google's online press office is more forthcoming.

Based on what we know so far, the following quotations,  taken directly from the microsite, are probably the most relevant.

"Google does not plan to sell airline tickets directly"

"By acquiring ITA Software, Google plans to offer new flight search tools that makes it easier for users to comparison shop for flight options, availability and airfares"

"We are very excited about ITA Software's QPX business"

"ITA Software's European revenues aren't large enough to warrant European regulatory review."

The deal makes a lot of sense in a number of ways, but then are also technological, cultural and commercial implications which have many experts scratching their heads. One thing is for certain and that is uncertainty.