Interview Transcript

How have Online Travel Agents (OTAs) experienced Google's growth in Travel?

BOBBY: Google Flight Search didn’t really get it right, but only because for the first few years, in my mind, flight searches are a really hard problem to get right really well. They’re generating around $120 Billion a year and travel (the numbers are hard to spit out) is somewhere around $10-20 Billion a year. They’re not really under commercial pressure to do anything right so it’s only when the law of large numbers starts to hit a business that you need to really disrupt, transform or pivot. In a normal investment, you reach some level of market saturation with your own product and where you go. But Google had so many different levers that they can pull.

For me Google Flights has been a long term play saying “Ultimately we’re going to go from an aggregator of information, to an advertising platform that’s really powerful for our OTA partners (and to a lesser extent our airline partners), but eventually we’re going to take over the entire user experience. Anyone that doesn’t power the transaction either as a supplier or a customer service function is going to go away. We’re going to take all of that layer out and completely replace it with Google products.” Which is where we are today.

Ironically if you use Google trends and look at the brand traffic for big metasearch brands like Kayak or Skyscanner vs Google Flights, you see that Google Flights has completely taken over brand traffic now for flight search. That’s the power of Google really, to be able to play a ten year game essentially without needing to make commercial reality of it as part of your strategy. No other company (certainly in the travel world) can do that. As Alex mentioned, look at what that’s doing finally to travel company valuations.

We’ve seen in the last few weeks what’s happened with Expedia, what’s happened with Priceline, you can apply this scary logic to any OTA. If it was a standalone metasearch that’d be really bad, but even for a group company like Expedia that plays in all sectors. For Mark Okerstrom to come out and to point to a colossal brand like Expedia and say we’ve been sunk below the bow by an arbitrary decision by Google to go from three to four links in paid search, just points to the weakness of anybody that’s not called Google.

Where this really becomes a problem, the regulators need to think about this. In the end if Google Flights is better than Expedia flight search, arguably you’d say ‘Well that’s better for the consumer”. But actually what’s happening today, when investors (be it venture capital investors or private equity investors) assess investability of a sector or investability of a layer within a sector such as Travel, they’re going to run a mile from anything that needs access to the consumer with a travel product.

You already see that the innovation capital available in the travel technology industry is pretty much non-existent now unless you have an established business with a strong annual recurring revenue (ARR) and a three year exit plan. That’s actually the impact that’s going to play out over the long term, there’s going to be (there already is) a stifling of information because Google are just too big and too powerful and they’re going to cap the ultimate market potential of any innovation in the travel sector.

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