Comment: Will Google ever become an OTA?

Following a Travel Weekly ‘Talk to Google’ event, Teletext Holidays chairman Steve Endacott gives his take on the search giant’s strategy.

Travel Weekly’s ‘Talk to Google’ Business Breakfast last week provided a fascinating insight into the thought processes of Google’s top UK team and for me provided a clear indication of their future direction in travel.

Google as a “customer-centric” business described how customer demand for instant answers, rather than just lists of relevant links, has driven much of its innovation as the market migrates to a mobile-dominated search space.

This has driven the development of both its Flight and Hotel searches, which allow customers to enter the data required to move directly to a relevant result or “answer”, when they click through to the supplier. Add in the ability of a younger generation of early adopters to use voice activation tools such as Siri to drive their mobile searches and you can quickly see their point.

Google customer-centric idealism is financially facilitated by the “Auction” nature of its bidding model. Reduced click volumes resulting from delivering higher quality answers to customers are compensated by high bid costs, making Google revenue neutral on almost all improvements in customer experience.

Interestingly, Google stated that the biggest driver of click inflation is a “flat” market, with little growth in search volumes, as this forces advertisers to spend more to maintain or increase their share.

Currently, most desktop markets are in decline due to the big switch to mobile, which has resulted in bid cost inflation in this sector. Ironically, although mobile click cost started lower, rapid inflation has also occurred in this sector driven by competition for the reduced advertising space available.

Google’s auction model automatically means it is likely to be the biggest winner from the above market forces, unless customers can find “answers” more quickly and easily elsewhere.

Hence, Google’s move with its Flight and Hotel finder tools, to enter the travel price comparison sector in order to head off the threats from sites like Skyscanner, Teletext or Travel Supermarket.

These sites, via price comparison, make it easier to answer a key customer question: “Who is the cheapest provider?”, and hence encroach on Google desire to provide the most relevant answer to a customer’s search.

Google’s current model remains firmly a “media play”, with customers being handed off directly to the airline or to major OTAs within their hotel search to complete the booking.

In my opinion Google is likely to remain a media play for holiday transactions serviced by OTAs, because of the high regulatory burden that comes with being the principal and their inability to provide an answer quicker in this complex transaction.

In the flight sector, Google is also faced by customers’ clear preference to book directly with the airline carrier and again it is unlikely to be able to add value.

However, the hotel-only sector is less clear-cut in my mind. Currently, this sector remains highly fragmented, with Google being forced by technology restrictions to integrate with “intermediary” OTAs who aggregate hotel stock and take payment. The key question is whether Google can add value by removing this layer?

Unless there is a specific advantage of booking direct with the hotel, the answer is probably no.

Google’s recent launch of Hotel Offers - where hotels can offer “discounts” or “added value” offers to a targeted range of Google customers - is a move at adding such a motivation and may indicate their future direction.

In my opinion, rather than becoming an OTA, Google is more focused on driving higher “answer” relevancy by working with advertisers to apply the “big data” they generate from customers’ movements within their sites, to drive more tailored advertising.

Remarketing advertising is a perfect example of this, with the highest converting OTAs already spending 30% plus of their PPC advertising funds on remarketing.

We all know that currently remarketing is a relatively crude tool, where you’re often hounded for weeks by adverts for items you have already bought elsewhere. However, imagine the big data that Google can bring to the party.

Most websites use Google Analytics and attribution tools that tell Google which customers have bought items during a site visit and which ones have not.

Imagine if this data could then be passed to a competitor, to allow them to identify what the customer was looking for but did not buy from their competition. This could then be used to target these customers with highly personalised and relevant “pre-visit” marketing adverts.

At the end of the day, advertisers might not like this, but it is highly customer-centric, allowing customers to find via Google the best provider for their needs quicker than ever before. Don’t rule it out guys, given the power Google has to dictate terms to the online advertising market place.