Google Takes a Bite Out of the Travel Pie

The beauty of Google (Nasdaq: GOOG  ) lies in its constant effort to reinvent itself since its launch way back in 1998, as it powers its way into new avenues of revenue generation. But what began as, and still is, essentially a search engine has now emerged as an overpowering market competitor for some.

Yes, Google is very much a part of our lives. We use it to search, listen to music online, find local discounts, download software for smartphones and tablets, and now search for convenient flight bookings. In the process, however, it has ruffled a few feathers.

The latest move
In Google's latest venture, the company used its undisputed dominance in Web-based searches by placing its own results for flight searches between two destinations, above other listings pointing to travel vendors like priceline.com (Nasdaq: PCLN  ) and Expedia (Nasdaq: EXPE  ) . These vendors are already crying foul about this being an unethical move, as they derive around 20% of their site traffic with the help of Google. Priceline has already complained about being able to generate a comprehensive travel itinerary and minute-by-minute travel schedule on Google's City Tours.

Frankly speaking, as far as ethical issues are concerned, if I were part of the Google think tank, I would probably be doing the same thing -- making the best use of my resources. Online travel is a $110 billion industry, and all flight searches are done chiefly through Google, with Microsoft's (Nasdaq: MSFT  ) Bing search engine being way down the list. But Microsoft does a similar thing with Bing Travel, by enabling you to book a hotel appearing on its map then and there.

How does it pay out?
So, how does Google exactly benefit from this listing move? First, it's positioning the links provided to airline sites as advertisements, although how much revenue is being derived from such a move is not yet known.

Second, it's the usual process of increasing site traffic and related advertising. And this is where the Facebook factor comes in, the single biggest challenge Google's facing these days.

You can't wish away Facebook
A recent Citi Investment Research study in September says it all. Facebook takes up about 16% of the time that Americans spend online, while it's somewhere around 11% for Google. An undisputed social networking king (where a lot of advertising revenue is flowing into) with major plans to launch a $10 billion IPO isn't good news for Google, and the Internet giant is doing all it can to beef up. Google tried a direct face-off with Google+, but it simply didn't take off, so this time it's playing the other way round. 

The Foolish take
Google is still probably one of the best examples of how the Internet can be used as a tool by a company to gainfully infiltrate almost all aspects of an end-user's life. Its online flight search foray is just another pointer to Google's ability to constantly innovate while trying to open new lines of business. And this just covers domestic routes, with Google working on international ones in the near future.

To stay updated on the latest developments about Google, just add it to your watchlist. It's free.

Fool contributor Subhadeep Ghose does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Google and Microsoft. Motley Fool newsletter services have recommended buying shares of priceline.com, Microsoft, and Google; and creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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