ANALYSIS: Google faces fight on the searches

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TripAdvisor and Expedia lead complaints to Europe's competition regulators about fairness of online firm's algorithm, writes Martin Cowen.

Google is rarely away from the headlines. In April it told Wall Street that in the first three months of 2012 it generated revenues greater than $10 billion.

It also appeared on the European business pages after travel giants Expedia and TripAdvisor both launched official complaints to the European competition authorities about alleged anti-competitive practices by the search giant.

The story subsequently raised eyebrows in aviation boardrooms when Amadeus publicly backed Expedia's concerns, specifically in reference to Google Flight Search (GFS).

GFS is Google's highest-profile move into the travel sector. It bought ITA Software for $700 million to power a flight search business, linking Google searchers to airline websites' booking pages. It promised that GFS will be rolled out internationally.

GFS launched in beta in September 2011. Experian Hitwise found that, in March, Google Flight Search was the 57th most visited travel agency website, with over 508,000 visits. Kayak.com, the largest comparable business, registered 21.5 million visits and was number five on the list. The top spot went to Expedia, with 46 million visits.

James Murray, digital insight manager for Experian Marketing Services, says: "Google Flights is still new to this market and whilst it's not competing on the same scale as the likes of Kayak, it is early days. In the last six months, Google Flights has seen a 300% uplift in visits and is on a rapid growth trajectory. This is definitely one to watch for the future."

Despite GFS's low penetration thus far, Expedia, TripAdvisor and Amadeus are not alone is bringing the fight to Europe. FairSearch.org, a US lobby group set up to keep an eye on Google, launched a dedicated European division at the end of February.

Expedia Inc's only official comment states that it has sent the European Commission "details [about] specific business and search practices by Google that constitute a violation of European Union competition and consumer protection laws". It has declined to make details of the filing public, while a Commission spokesperson confirmed that the document was confidential.

Amadeus's carefully worded statement says that it "shares the same concerns as Expedia" but has not filed an official complaint of its own. In response to emailed questions, Amadeus declined to comment on whether it has seen Expedia's filing, repeating that it was "supportive" of Expedia's position.

Even without the regulatory issues, GFS in Europe faces a number of operational challenges - namely how it will power its European site. ITA at present does not appear to have a big enough presence in Europe to do so.

The biggest names in flight search across Europe also developed their own systems. Skyscanner, the most visited European flight search business, has built its own core technology, which it says means its results are "independent from centralised sources such as the GDSs and ITA".

In the past twelve months, Skyscanner leads have generated $2 billion of seat sales, covering direct bookings to the airline and their online travel agent partners.

Travelsupermarket is another established flight search business. Managing director Robin Sutherland says that "the vast majority of our technology we have built ourselves" but that it would not rule out a bigger third-party involvement in the future.

Sutherland adds that GFS's presence in Europe is not necessarily a bad thing. "Price comparison penetration in travel is relatively low," he explains, "and we would welcome more competition in the sector."

Fly.com, part of Nasdaq-listed Travelzoo, uses ITA for its US flight search site. Its European business is focused on the UK and Germany. UK general manager Aaron Ritoper says "travel is local" and that Fly.com and Travelzoo "have people on the ground, talking to suppliers every day".

Outside the USA, Fly.com integrates various sources to give it a comprehensive offer with live availability. "We partner with airlines, online travel agents, Amadeus and [travel planner] Travelfusion," he explains.

He outlines Google's options in Europe: "I reckon scaling up ITA for Europe would be its preferred option but would take time, so it might be tempted to look for other partners or acquisitions."

Having spent $700 million on ITA, Google is not averse to splashing the cash. Interested European businesses should be aware that its Q1 2012 financials show its "cash, cash equivalents, and short-term marketable securities" at the end of March were worth $49.3 billion.