The Federal Trade Commission has been investigating Google for 18 months and is apparently close to a decision. The allegations, while generally about their search practices, whether they’re a monopoly, and whether they ‘unfairly’ use their search engine to benefit their own complementary businesses versus directing traffic to other companies (and implicitly whether there is a ‘right’ to traffic on the part of those businesses, and whether Google should be thought of as a public utility), are in many ways about how Google has entered the travel space and how they are trying to transform the future of online travel.
The FTC has focused on claims that Google’s search results have emphasized its own products, such as online shopping or travel services, while giving less prominence to smaller competitors in those fields.
I do start off somewhat skeptical of complaints that Google ‘manipulates’ its search results to benefit itself over competitors, in some sort of illegal way, because:
- Google has been getting better and better for consumers, instead of just providing a series of links to other websites like search engines had before, it’s providing answers. That’s what frustrates competing websites the most, if you get an answer to your question directly from Google you don’t have to take extra steps onto other sites to dig for what you’re looking for. That does mean less traffic for those sites. But if I want to find out the time in a certain city, I enter “CITYNAME time.” If I want to know how much a hotel room is going to cost me somewhere in the world, I ask for the currency conversion “convert XXXX [currency] to USD” and if I want to know whether a flight is on time I enter the flight number, e.g. I google “AA1023” and I get the status. That’s a good thing, but it’s the crux of what the government is deciding whether to crack down on.
- Google is hardly a monopoly, they’ve become the most successful internet search but are hardly the monolith of how we discover information, social has become increasingly important over the past five years and Facebook is the leader in that space. They’re fiercely competitive with Facebook and have to give consumers the best results if they want to stay relevant in search, sending traffic elsewhere when they could provide better answers means they can’t be competitive rather than that they face no competition.
- The crackdown on Microsoft provides some great lessons, I think. They bundled their web browser with their operating systems and this supposedly meant they dominated the entire technology world. But innovation passed them by. They no longer have the most popular web browser (I tend to think that Google Chrome is better technology, but they’ve also been surpassed in the mobile space — whether you’re a fan of the iPhone or Android products Microsoft is clearly behind). The best products win. And government restrictions on a company would seem to cause that company to become less innovative. Other than as an acquirer, where has the innovation been from Microsoft over the past decade? I still use Word and Excel and Powerpoint but in many ways I find the current generation of products to be inferior to what I was working with in the last 90s.
Aside from being hugely important for the country, the economy, and the future of innovation, it’s of unique interest to me because of the role that Google has begun to play in the travel arena, largely as a result of their acquisition of ITA Software (the most functional airfare search technology) and now their introduction of a computer reservation system.
Fundamentally I do think that Google ought to have a right to improve services, that’s not just better for Google but also for consumers. And with flight search they have to do it, just to keep up — after all, Bing offered flight search results before Google did, if Google can’t be in the travel space it loses out to other search.
The complaints here against Google aren’t that consumers are being hurt. It’s that consumers are being helped so much that they don’t have as much need for other businesses. It’s the businesses that aren’t competing well that have an issue with Google.
Although in fairness I suppose some of the businesses would say that they are better than Google, they could offer consumers something they don’t currently realize they want, but that those consumers won’t find out about the opportunity. Except that all of these businesses spend huge dollars on advertising which is how they reach consumers, as it’s been done for decades.
I was recently called by an acquaintance of mine that’s a lobbyist. She had a client in the travel space and wanted to get a bit of a better understanding of the issues she was working on. What she was really looking for — since neither she nor her colleagues could come up with anything — was, “Why are Google’s acquisitions in travel bad for consumers?” And she was hoping I could help her brainstorm. See, she was fishing for reasons so that she could then use those to help her clients, who have to compete against Google and would prefer that the government help them not to have to.
But the truth is that I couldn’t come up with any, other than some far-fetched Rube Goldberg sorts of stories, Google outcompeting everyone else and then when no one else is left in the travel space to compete they’d raise prices (as though there were huge barriers to entry in travel such that once they raised prices no one would come along and sell travel for less).
The truth is that travel is changing. How travel is booked is changing. The online travel agencies know that and are trying to adapt, and so is Google, and all of it is to the tremendous benefit of consumers.
Back in the mid- to late-90s, online travel agents were putting traditional brick and mortar agents out of business. There’s still a place for travel agents, mostly in bespoke sorts of luxury travel, putting together insider tours and using on the ground knowledge to provide high-end trips for wealthy clients. But mass market use of agencies is a thing of the past. Online booking is so much more efficient. Airlines no longer need individual agents to push their products, gone are the days when consumers had to pick up the phone to get a ticket and the person on the other end of the line would present options that may have been best for the consumer but also may have been the most lucrative in terms of commission or the easiest to offer since their airline-provided reservation system highlighted the home airline’s flights above other selections.
Brick and mortar agencies were losing commissions and began adding fees to book tickets, but the value add just wasn’t substantial enough to sustain that business model, people did migrate online for much of their travel booking, certainly with airfare.
But consumers did lose something in the process, travel booking is incredibly complex, getting the best airfares is complex, and having some idea what a direct versus non-stop flight is, whom to credit frequent flyer miles to, or understanding reliability or the best routes to take for a given set of preferences isn’t something that the online booking systems are especially adept at simulating.
It wasn’t worth paying a human for the knowledge in most cases, but make no mistake there’s knowledge and advice that’s lost when it’s all done by computer in mass fashion.
Recently, though, the trend has been for the computers — the online travel booking sites — to do an increasingly better job meeting consumer needs. When Orbitz took heat recently for ‘charging Mac users more for hotels’ what they were really doing is using demographic and technical data to try to do a better job guessing what consumers were more likely to want. Their data suggested that Mac users tended to what higher-end hotel properties than PC users. So they would suggest a Hilton instead of a Baymont Inn, for instance, in hopes that doing so would make them more likely to get the sale.
Orbitz wasn’t pushing the hotels that paid them the highest commissions. They were pushing the hotels (offering their ‘recommendations’ while still providing the ability to sort by other criteria like price or distance from an address) that they believed most likely to appeal to their customers.
For the most part the online agencies are all selling the same products. They have the same airline inventory to offer and the same hotel inventory to offer. The way they can differentiate themselves is in the booking experience, and the extent to which they can help guide customers through the maze of travel — through peer recommendations, through expert recommendations, through guessing algorithms which match consumer preferences to booking recommendations.
A website that doesn’t do a good job guessing what a customer wants doesn’t get the sale, a customer moves onto the next website, which usually has access to more or less the same deals anyway and the website that presents them with the easiest access to the choice that best matches their needs wins with the commission. Working on recommendation algorithms is about making the sale by meeting consumer needs.
It’s the same project that has Google trying to learn what consumers want, and present them with the best options given their preferences. Although the Frommer’s acquisition makes little sense to me (why in the world would Google need to own expert commentary when their search results could point to it or even display it directly, and if they need to pay for the content why not just license it? After all Frommer’s advice isn’t always great but at a minimum grows stale.), it’s part of this larger project of providing customized advice and not just a transactional checkout experience.
The lobbyist who called me wanted to know in particular why a Frommer’s acquisition was bad, and while I tend to think it’s probably a waste of Google’s resources there’s little downside for consumers. And integrating advice with travel booking is uniformly positive, a trend that the entire online travel industry is headed out of necessity, in order to outcompete each other.
What consumers lost in the move from brick-and-mortar agencies to online agencies they’re just now beginning to get back, a mass-market product that provides advice as well, and ultimately the advice that a given consumer wants, tailored to their own preferences.
But the online travel agencies are worried that Google might be better at doing this than they are. So they’re hoping the government gets in the way and tells them it’s a platform on which they shouldn’t be allowed to compete.
I rarely need the advice of a travel agent (and when I do, I know several ‘real’ agents that I reach out to, far more specialized than Travelocity or Expedia). But it also strikes me on an almost daily basis how hard travel is for most of the world, how confusing. And anything that helps demystify it has to be good for consumers.
I wonder if my blog readers are ultimately in the same position, savvy enough that they don’t need the revolution that’s long overdue for the rest of the traveling world? And if as a result folks in a position to express an opinion about what’s about to happen, won’t. Which will be a shame, really.
Ultimately online travel booking is a robust space, Priceline just announced the acquisition of Kayak for $1.8 billion, they certainly see a bright future in being the best at finding airfare and hotel stays in an otherwise-confusing market. Bing will take you straight from a search to its own booking site. Google doesn’t. But shouldn’t it be able to? When they acquired ITA Software, the Department of Justice didn’t place any restrictions on their ability to serve consumers. Now the Federal Trade Commission is considering those very same questions again.