Google Wants to Kill These Companies

by Tom Taulli | August 14, 2012 2:02 pm

On Monday, Google (NASDAQ:GOOG[1]) announced the purchase of Frommer’s travel guides. It’s a small deal — with the price tag not disclosed — but it’s still important. Essentially, Google is making a big push into major categories like travel and dining. And yes, this should be scary for some well-known online operators.

Keep in mind that Google has been fairly successful in leveraging acquisitions to dominate new markets. Some examples include its deals for YouTube and Android.

No doubt, the acquisition pace continues to be strong. Besides its deal for Frommers, Google has also purchased Zagat and ITA (which provides software and databases for the travel industry).

So which companies may be vulnerable as Google spreads out? Here’s a look:

Yelp (NYSE:YELP[2]): The stock has had a nice rally, up 28% since the start of August. In its latest earnings announcement, Yelp upped its full-year guidance from a range of $128 million – $132 million to $135 million – $136 million. Actually, it still has lots of growth potential, especially in foreign markets.

Yet over the next year, Google could put some pressure on Yelp. The search giant will start to integrate its Zagat reviews on its search pages as well as into its fast-growing Android platform.

Remember that Yelp also gets over half of its traffic from Google search queries. Thus, if Google makes a major change in its algorithms, that could be a big problem for Yelp. According to its recent 10-Q: “Google has removed links to our website from portions of its web search product and has promoted its own competing products, including Google’s local products, in its search results.”

Kayak (NASDAQ:KYAK[3]): The company, which is a search engine for flight, hotel or other travel products, came pubic in July at $26 a share and is now trading at $29.47.

It’s a strong business, showing 39% revenue growth in the first quarter. Kayak’s mobile apps have also gotten lots of traction. Since 2009, there have been over 15 million downloads.

Google has its own Kayak-style travel search engine as well. Oh, and Kayak relies on the ITA database that Google now owns, which could make the company vulnerable to any changes in that system. But perhaps the biggest threat is Google’s control of its search queries. If it funnels traffic to its own travel properties, Kayak could be in dangerous waters.

TripAdvisor (NASDAQ:TRIP[4]): A spinoff of Expedia (NASDAQ:EXPE[5]), the company is a destination for travel research and reviews. It has websites in 29 countries.

Like Kayak, TripAdvisor also relies heavily on traffic from Google and services from ITA. But the Frommer’s acquisition is a direct shot at the company. The Frommer’s content could be the basis of a thriving travel/reviews platform. It also offers synergies with other properties like Google Places and Google Hotel Finder.

And investors are worried. In Monday’s trading, TripAdvisor was off by 5%.

Tom Taulli runs the InvestorPlace blog IPOPlaybook[6], a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling”[7] and “All About Commodities.”[8] Follow him on Twitter at @ttaulli[9]. As of this writing, he did not own a position in any of the aforementioned securities.

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