Google Said to Hold Talks to Buy ITA; Travel Program Firm Seeks $1 Billion
Google Inc. is in talks to acquire ITA Software Inc., a maker of travel programs used by companies including Orbitz Worldwide Inc. and Microsoft Corp., three people familiar with the matter said.
Context & Ripple Effects
The report lands in the middle of a buying run for Google: the confirmed Agnilux hardware pickup came a day earlier, and the broader land rush into location — Twitter, Foursquare and Gowalla all racing in — has Google competing on multiple vertical fronts at once. It also follows a bruising week financially, with the stock's worst single-day drop in 16 months even as quarterly results showed a solid advertising rebound, which makes a large non-advertising acquisition a visible statement about where growth comes from next.
What makes ITA the interesting target is who else runs on its software: Orbitz Worldwide and Microsoft both use ITA's travel programs, so a deal at the reported $1 billion ask — still just a rumor attributed to three unnamed people — would put Google upstream of its own competitors' travel products rather than merely beside them.
First-order effects
- ITA's licensing customers — Orbitz and Microsoft among them — would see their core travel-search infrastructure fall under the ownership of a company that competes with them for travel queries, if the reported talks produce a deal.
- A sale at the reported $1 billion would mark this stretch of acquisitions as infrastructure-driven rather than talent-driven, following the small confirmed Agnilux purchase with a purchase of software that other businesses already depend on.
Second-order effects
- Rival online travel players would face a build-or-buy decision on flight-shopping technology, since remaining on an ITA platform owned by Google means paying a direct competitor for a critical capability.
- Microsoft, which uses ITA software while operating its own search engine, would come under particular pressure to source or develop alternatives rather than deepen a dependency on Google's stack.
Third-order effects
- A Google-owned ITA would put a live test case in front of regulators on whether a dominant search engine should be allowed to acquire the data infrastructure beneath a vertical it ranks, with self-preferencing concerns the likely center of any review.
- If the pattern holds across Google's 2010 acquisition activity — local, hardware, travel — the structural direction is a search company consolidating ownership of the layers between its results page and the transactions behind them.
The trend: Search engines are shifting from linking out to commercial verticals toward owning the underlying software and data infrastructure of those verticals, with travel the clearest early case.