Tuesday, December 27, 2011

Google vs Travel agencies.

Surprise, surprise! Google search results benefit its own business more than competition.

Dec 27, 2011. WSJ -- Starting in December, Google began placing its new flight-search service atop general search results so that its own results appear prominently above links to major middlemen such as Expedia Inc., Orbitz Worldwide Inc. and Priceline.com Inc.

Last year, Google faced antitrust scrutiny from the Justice Department over its plans to acquire ITA Software Inc., the flight-data company that powers Google's new tool and some of its competitors, including Orbitz and Kayak Interactive Corp. Those sites opposed the Google-ITA transaction.

Just how Google ranks and displays searches has become a key question for modern commerce, where Google stands as a gatekeeper for buying decisions.

Google's flight search is a boon to airlines that have long struggled to draw traffic away from online travel agencies, which charge airlines for bookings.

It costs airlines more than $11 to process a booking made via online travel agencies, compared to less than $1 for one made on their own websites, said Henry Harteveldt, analyst at Atmosphere Research.

To me, the most surprising piece of the news is the >10X difference in processing costs when you buy directly from an airline vs travel agency ($1 vs $11 respectively). A part of it is probably advertisement costs on Google searches. 

tags: information, control, business, model

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