Social Media and Marketing

Barry Diller, chairman of online travel company Expedia and InterActiveCorp, recently reportedly described the $700 million Google-ITA deal as “a frontal assault on a core area of Internet life” and also stated that Google was “using its market power” to gain an unfair advantage.

Published: 02 Aug 2010

Barry Diller, chairman of online travel company Expedia and InterActiveCorp, recently reportedly described the $700 million Google-ITA deal as “a frontal assault on a core area of Internet life” and also stated that Google was “using its market power” to gain an unfair advantage.

Late last week, Expedia’s chief executive Dara Khosrowshahi (during the company’s Q2 2010 Earnings Call, transcript posted on Seeking Alpha), also commented on the implications of Google’s acquisition of ITA. He said:

“On Google ITA, I think it’s difficult to speculate. I think everyone knows that Google wields considerable market power, whether it’s in the travel business, or many, many other industries. And so their actions can have very significant consequences in any industry, including ours.”

“I think that one of the keys that we’ll be looking for with Google is, if they start favouring their own content and their own results over the results of third parties, whether that’s algorithmic, inside their system or are they hard coded, et cetera. And we think that to the extent that they do that, that will be a problem. The way we’ve seen them operating in general has been fair, but we think they’d be wise not to kind of favour their own internal products over external products and create an unfair playing field. And if they do, we think that the government will have something to say about that. So we’re great partners with them.”

“In general, their management we’ve seen has done the right thing and it’s working to build a great product, and in general, they work well with consumers. But the market power that they have is potentially significant. And that’s something that we’ll watch. Based on what we see right now and kind of the relationship that we have with them and our spend, et cetera, we think we’ll be in good shape. But again, it’s something for us to watch.”

Opportunity

According to an analysis by Centre for Asia Pacific Aviation, airlines may be global businesses in many ways, as well as exhibiting cutting edge technology in areas like mobile phone check-in at airports and offering user-friendly websites for buying air tickets (along with a host of other “ancillary” items like hotels and car rental). But, when it comes to making use of the enormously rich data that they receive from the world’s top 10% slice of spenders, the airlines are positively living in a Neolithic ecology. They are simply unable to extract and match the fabulously valuable information about passengers that they receive by the millions of items every day. The airlines’ shortcomings are largely the result of investing in “silo” type systems designed to run the various key functions that they need for their own purposes. Until recent years they have taken for granted just how valuable personal information has become – especially of the more privileged portion of the world’s citizens who can afford to travel.

According to CAPA, using a system that is actually established with data mining as a key priority, and melded with their existing massive databases, “Google and friends will be able to milk the airlines’ passengers (in the nicest possible ways) for a whole lot more than a few billion dollars. If they are not able to swamp that US$70 billion figure in a very short time, they will undoubtedly be disappointed. They won’t be doing anything as pedestrian as charging to carry bags, they’ll be selling them the bags – along with the rest of their household needs.”