If you're reading this, then you likely already know that Google Inc. (NASDAQ:GOOG) has thrown its hat all the way into the online travel arrangement ring, deciding to go head-to-head with the likes of Expedia Inc. (NASDAQ:EXPE), Priceline Group Inc. (NASDAQ:PCLN), and Tripadvisor Inc. (NASDAQ:TRIP).... three of Google's best advertising customers. While the assessments of the foray into travel-booking have ranged from fairly irrelevant to concerning for the big three of the internet-based travel agencies, the acquisition of Room 77's hotel-booking platform may be a far bigger game-changer - and a far bigger problem for TRIP, EXPE, and PCLN - than most investors may realize.
Just to make sure everyone is on the same page, Google announced earlier in the week that it is now a licensee of Room 77's software. The company has developed and now licenses its tool for booking hotel reservations online. Most traders understand that much. What steadfast fans of Priceline and Expedia may not fully appreciate, is that the Room 77 utility is best-suited for travelers who want to find and book a room in a hurry, and may not have time to jump through the hoops that they may have to jump through via a site like Tripadvisor or through a site owned by Priceline Group. How do these hurried travelers choose to search and book? More often than not they don't do it with a laptop or a desktop, but more often than not they do so through a smartphone or a tablet. That's an area where Google can crush the competition, primarily because not only does Google now have a "play" in online travel, but it also owns the medium through which most users look for travel arrangements.
As for mobile, Google currently holds a mobile-search market share of near 90% worldwide, which is far stronger than its dominance in the web-search world online via desktops and laptops. The reason Google is such a force in this arena is that Android is dominant name in smarpthone and tablet operating systems, with more than 80% of the mobile devices out there being powered by the Google OS, and using Google's search tool to look for, well, whatever it is people look for with their web-enabled phone.
Great, but how is that a threat to the likes of TripAdvisor, Expedia, and Priceline when travelers are at their desktops and looking to travel. Each of those companies still has the opportunity to run advertisements on the results pages of people looking to travel? Because it's very likely that the top search result for a query made via Google is going to present a Google-driven option as the most relevant result.... not an advertisement, but a recommended top response to a search query. Even the most relevant and well-placed ads aren't seen as the "go to" choice for a web query.
(And if you don't think Google likes itself in that way, try a Google search for "music app". Apple's iTunes is the leader of that market in terms of customer base, yet Google's Play Music app is presented as the top search result. Ditto for "game apps", despite the fact that Apple still has the bigger and most-sought app ecosystem. You can bet "book hotel" or "travel arrangements" are going to push Google's internal travel-booking business to the top of the results list of a web query.)
All of this matters even more so in the mobile arena, because screens are already small and space is already limited - much more so than on a full-sized computer screen. On a mobile device, users may not even see a display ad paid for by an Expedia or TripAdvisor, as web browsers choose the easiest-to-see option at the top of the search results. The fact that Room 77's platform lends itself to booking directly from a travel app's screen - and Google has eight of them - rather than hoping a user clicks on a banner or display ad after gathering information elsewhere also means Google is better-positioned to become the middleman than Expedia and TripAdvisor are... or were, anyway. When mobile-driven traffic surpasses regular, desktop or laptop driven traffic as it's expected to within a couple of years, Google's in-app booking options will become that much more of a revenue driver.
In other words, Google looks like it's equipped and positioned to cause problems for the other online travel agencies.
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