Google to Buy Flight Software Maker ITA For $700M
Google July 1 agreed to buy flight information software maker ITA Software for $700 million in cash, a deal that is sure to intensify the scrutiny the search engine receives from federal regulators concerned the company is growing too large.
ITA offers airlines, search engines and online travel companies software that organizes flight information, including flight times, availability and prices.
Airlines such as Alitalia and US Airways, metasearch engines such as Kayak and Microsoft Bing Travel, and online travel companies such as Orbitz and Hotwire use ITA's QPX program to provide their consumers accurate info about flights.
Despite improvements in flight comparison technology, finding the right flight at the best price can still be a frustrating experience because pricing and availability change constantly, said Marissa Mayer, Google's vice president of search products and user experience, in a blog post.
Mayer said Google will use ITA's technology to build new flight search tools that will make it easier for users to search for flights, compare flight options and prices and shuttle users to a site to purchase tickets.
Noting that half of all airline tickets are sold online, Google CEO Eric Schmidt said on a conference call Google will use ITA's technology to build its own flight search tools to pad Web search that helps users look through images, newspaper archives, books and geographic data.
On those grounds, the deal appears to be a perfect match. Google loves smart computer programmers; ITA was founded by computer scientists from MIT. Google wants to broaden its search efforts to the lucrative online travel niche; ITA is one of the best in the business at this.
"We think we can... drive more traffic, that is, more customers, to the airline and online travel agencies' Websites and that ultimately then will determine fares and availability in a better, consumer-friendly way," Schmidt said on the call.
However, Google is under tremendous scrutiny by federal regulation bodies such as the Justice Department and Federal Trade Commission, which fear the company is becoming the Microsoft of the Web: that is, too powerful and a threat to other Internet companies.
Schmidt, who acknowledged he expected a "significant" review of the deal from regulators, promised that Google will honor all existing agreements in the market.
This suggests that it will not shut off rival Bing's access to pricing comparison and flight info. Bing uses ITA's QPX software to power the Bing Travel flight comparison Website.
Google must also prove that its deal not only won't affect ITA's current customers, but is good for the online travel market and for consumers who use the data provided by ITA's software when booking flights with US Airways, Kayak and Orbitz.
Google argued on a special Website about the ITA bid that because it does not currently compete against ITA Software, the deal will not change existing market shares. Translation: the merger should not affect competition.
Google bid to acquire mobile display ad provider AdMob for $750 million in November, a deal the FTC finally cleared in May after months of investigating whether the deal would restrict competition in the burgeoning market for mobile online ads.
2010 is half over, so it wouldn't be a shock if the deal didn't receive regulatory approval until 2011, if it is approved at all.