Microsoft (MSFT) rises Thursday evening on Q4 earnings beat >>> READ MORE

Google Just Became a Real Problem for Online Travel Agents

Search giant's foray into travel-booking turns the PCLN partner into a competitor

    View All  

In retrospect, it’s clear that companies like TripAdvisor or Priceline should have been watching more closely. With Room 77’s capabilities being added to Google’s HPA tool, and with the Department of Justice permitting the company to display its own travel-booking options when a traveler enters a search query, Google itself is becoming just as relevant and useful to travelers as Priceline or Expedia may be.

The Numbers Say It All

For perspective, on average, Expedia and TripAdvisor spent 42% of last year’s revenue on promotion and advertising — mostly online ads, which of course, plays into Google’s hands. About 90% of Priceline’s online-ad spending in 2013 was passed along to Google. It’s a figure similar to how much of the TripAdvisor and Expedia marketing budget is ultimately given to Google.

Theoretically, most — if not all of Google’s piece of that pie is in jeopardy if any of the online travel agencies decide they don’t want to feed the beast that’s now making life difficult for them.

Yet, it would be naive to think any of the internet travel agencies would stub up in that way. While most of them have upped their use of television advertising, Google is still an important means of connecting with travelers — nearly 70% of all travel arrangements are now made online, and Google’s share of the search market remains enormous. It would be destructive for the internet-based travel agencies to not utilize what’s still one of their best sources of revenue-bearing leads.

The maneuver also positions Google even better than other online-booking agents in the space where it’s increasingly important … mobile.

As it does in the world of searches performed on connected PCs and laptops (particularly in the United States), Google also owns a dominating 90% of the mobile search market. How does Google do it? It’s simple — 79% of currently-active smartphones are Android-powered phones, and the Android operating system not only displays search ads stemming from user queries, but also displays the company’s advertisements within apps.

The travel arrangement apps available through Android will be no different, and with paid mobile search expected to overtake desktop search by the end of next year, it’s clear that mobile will be the hot spot for growth in the foreseeable future.

But won’t PriceLine, Expedia, and all the rest of the online booking agencies still be featured in mobile ads? Yes, but, the fight for space on small mobile screens favors Google.

See, the lines between “search results” and “advertising” have already been blurred on Google’s search results pages, and with limited space to display (or even see) an advertisement on a four-inch screen, a person is likely to select the easiest and most obvious booking option available on a mobile device. That means the advantage goes to the top search result, and barring that, the choice made readily available within one of Android’s many travel-related apps.

It’s also worth noting that the Room 77 platform specifically caters to travelers looking to book a room quickly. That quick booking is more apt to happen on a mobile device than it is on a computer, again playing into Google’s hand.

The bottom line: This is big trouble for travel arrangement sites Expedia, Priceline, and TripAdvisor.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

©2017 InvestorPlace Media, LLC