Google Travel Reveals the Perils of Monopoly
The competition doesn’t stand a chance.
Google has announced that for select itineraries booked on its Flights service between August 13 and September 2, it will guarantee that the price won’t drop. If it does, Google will refund the difference.
Meanwhile, US presidential candidate Elizabeth Warren posted on Medium that “it’s time to break up big tech.” Warren’s plans would preclude multi-sided “platform utilities” from directly participating on that platform. Say, by selling flights.
Any notion that Google is just a dispassionate organiser of information extinguished long ago. However, the latest Google Travel announcements are another step towards participating directly on the platform it hosts.
The product is good and people will use it, just as 1 billion+ people use 8 other Google products every month.
So, I want to look specifically at Google Travel in this article, as its development reflects the questions Google faces today, in microcosm.
We’ll get there by covering these points:
- What’s the deal with Google Travel?
- How does this fit in with Google’s strategy?
- How are its competitors going to react?
- Is the consumer really the winner here?
SEARCHING FOR A BARGAIN
Google Travel is the new home for the search giant’s flight and hotel booking services, along with travel guides and destination reviews. The broad name leaves ample room to add other products in future. Car rental must be coming soon.
The ‘price guarantee’ on flights is a handy way to get some press and attract people to try the service.
We saw something similar with the ‘ Buy with Google guarantee’ on the revamped Shopping platform. Notably, Amazon offers this service on pre-ordered items too.
To get to the bottom of what’s really going on here, let’s take a look at Google Travel first. Then we’ll come back to the question of how this fits into Google’s strategy — and whether it’s a strategy they should be allowed to apply.
The focus on competitive pricing is just one small aspect of the multifaceted Google Travel experience. Here are some of the highlights:
- “Explore”, which offers travel guides in a format like Trip Advisor.
- Flight and hotel comparison, à la Kayak or Booking.com.
- A new travel trends hub. (It needs work. Apparently, Brussels is the trending Thanksgiving hotspot, almost certainly because of the sprouts one might put in a Thanksgiving hotpot.)
- ‘Book with Google’ allows users to pay without going to the airline or hotel website.(Limited availability for now.)
- Once booked, the itinerary is added to Google Maps, where users can see prepared guides from fellow travellers.
- Tickets are added to the Google app and sent to the traveller via a push notification close to departure time.
- Google Maps has a new augmented reality feature to help users navigate a new destination.
- Travellers can ‘follow’ local businesses and see their updates, like on Facebook.
- Google Photos will curate albums from pictures taken on the trip and use these in location reviews, if the user permits.
- All that data can then be used by the Google Assistant to recommend destinations for future trips.
This is clearly much more than just another price comparison site. Google knows, like most travel operators, that some trips are about more than just getting the cheapest fare.
It is an impressively customer-centric approach that takes concepts like the “consumer journey” and applies them in genuinely useful ways.
I’ve taken a crude, colourblind stab at what that might look like below.
Google wants our purchases, our plans, and our preferences.
To gain access, it provides tools that help customers research, travel, and share their experiences in a user-friendly, free platform.
So far, so relatively reasonable.
But should the creator of such a platform engage so directly with its users? How can there be fair competition if one company has all the data and can change the rules of engagement to suit its own ends?
There seem to be two arguments in response to these questions, mildly caricatured below:
- Customers will seek out the best product, whether that is Google or someone else. Competitors should focus on innovating and the entrance of a company like Google should provide some needed impetus. If Google has the best product, they should be rewarded like anyone else would.
- Google owns the platform and the only way to stop it from loading the dice is to introduce new regulations. It is a monopoly that will squash the competition, to the detriment of the consumer. After all, 94% of searches in the US start on a Google-owned product. There is no alternative for the competition.
As is so, so often the case, the truth lies somewhere between the poles.
Let’s dig a little deeper.
“To many Google employees, it’s axiomatic: Facebook is craven, Amazon is aggro, Apple is secretive, and Microsoft is staid, but Google genuinely wants to do good.
- Wired
MONOPOLY MONEY
Google’s monopoly in search has been built on the sheer popularity of its search engine, which has been turned into a finely-tuned advertising machine.
The model works exceptionally well: Attract an engaged user base with effective, free products, then charge brands to appear in front of their audience at the key “micro-moments” in their decision-making process.
Google’s product launches are easily understood when framed as a ploy to protect and grow the central search advertising business.
The re-organisation of the Alphabet group adds further credence to this. The group’s loss-making divisions have been separated from Google, which can resume its focus on increasing profits.
Despite efforts to diversify, it all comes back to advertising — Google is expected to rake in over $100 billion from its Ads division this year.
The Cloud division is growing quickly, although ceding such an early and sizeable advantage to Amazon was surely a misstep.
There is nothing surprising in these numbers, perhaps. We know Google is an ad business and the same goes for Facebook, for example.
This scene-setting is important, however, if we want to understand Google’s recent moves into the job market, restaurant reservations, and travel booking.
Google needs to keep growing and when Google needs growth, it turns to advertising. That machine depends on increased attention and use from the audience.
When that input stalls, Google finds other means of kick-starting the economy.
Earlier this week, the latest data from Sparktoro and Jumpshot revealed that for the first time, “no-click searches” outnumbered click searches on Google in July 2019.
In essence, this means a user’s search intent is satisfied within the Google ecosystem without having to click through to a website. (There’s a lot more to it, explained well here.)
Rather than linking out to other websites where a user can find the information they searched for, Google scrapes the content and displays the most important details in the search results page.
A link is sometimes (but not always) provided to the original source.
The graph below shows how this plays out on mobile devices in the US. Fewer organic clicks go to the sources of content, more answers are given in search results, and the paid search activity grows.
Many of these no-click searches are for queries like “weather today” or “who was the 33rd president of the United States?”, and Google claims that it is simply a better user experience to receive these answers instantaneously.
Others — particularly the content owners — may say that Google is taking their content without providing anything in return.
I am more interested in the underlying trend here than the details of that argument, for the moment.
The graph shows that even with the same quantity of search queries, Google can dictate the direction of travel for users and eke out extra ad dollars from advertisers.
The user increasingly depends on Google for answers, which keeps them searching on Google, which provides Google with the commodity advertisers want to buy.
The money is in those intent-rich queries when the searcher tells Google what they want to buy, or where they want to go.
It would take a keen eye to differentiate sponsored listings on Google from organic results today, especially for e-commerce queries. This all helps encourage more clicks on the sponsored links.
And yet, this is still not enough.
Amazon poses a new threat to Google Ads and has one killer app that Google lacks: purchase data. Significantly, Amazon even uses this data to shape its own range of products — a point to which we shall return later.
Instagram’s renewed focus on e-commerce will also be viewed as a significant threat. Google Shopping’s newest features are the obvious response to that reality, but Google Travel is another important component of a strategy to become our “assistant” of choice.
In this age of walled gardens between the tech giants, Google simply can’t allow its audience to carry out segments of their purchase journey with its rivals.
To achieve this aim, it is prepared to jettison its position as a “neutral platform” and nudge the boundary between useful and creepy, with potentially damaging results.
How Are Google Travel’s Competitors Planning to Respond?
To bring back the two opposing arguments laid out in the previous section, one side would say that Google entering the travel market will stimulate competition.
There is some evidence of this already.
Google introduced a broader approach to travel search, allowing the user to view a range of deals without needing to restrict the pool by destination or date. Combined with charts displaying the best dates to book, this made for a popular feature.
Visits to Google Flights doubled from 2016 to 2017.
Kayak, one of the market leaders for online travel booking, responded by developing their own approach to open-ended travel search, as did Skyscanner.
Other competitors, such as TripAdvisor, have re-assessed their offering to pinpoint what makes them different, in the hope that this can help retain their client base.
TripAdvisor plans to launch a new loyalty program for frequent customers and a brand marketing campaign to reduce its reliance on traffic from Google.
The company’s 7% decrease in year-over-year revenue in Q2 was explained partly by “a reduction in SEO traffic” and “the need to optimize paid search spend.”
Now that Google will handle the booking process, it poses an even bigger threat. A range of new airlines and hotel groups have signed up for the program, too.
This could create more competition and lead to positive outcomes for the consumer, in terms of service and price.
Moreover, Google’s bargaining chip is a persuasive one for the airlines: It has a very engaged audience of people who depend on it for reliable information.
Research firm Phocuswright reported that Google Flights hit a 25 per cent conversion rate in April 2017, compared to 7 per cent for Kayak.
This occurred when Google was sending all of its traffic through to the airline websites, in the same fashion as Kayak. Other factors play into this, but those numbers are compelling.
Google Travel will reduce “friction” by allowing those travellers to book on Google, with one click.
Again, that could be a positive for the consumer and should lead to higher booking rates for the airlines and hotels.
The current market leaders took consumers away from traditional travel agents and the same dynamics are in play here.
On the other hand…
If offered a straight choice between Google and Bing!, most people would choose Google.
It is possible that Google Travel will be the preferred choice of consumers, due to its superiority as a service.
However, the die is loaded in Google’s favor when the user makes a search on the Google search engine, on the Chrome browser, on the Android OS — potentially even on a Pixel phone.
Google starts with search and just keeps adding layers until we’re living in a Google home and driving a Google car in a Google city. Try searching on Bing! from in there.
After giving the user so many free services, Google will need to make its money somewhere along the way.
We can see this in action already. A search for “flights to san francisco” on a mobile device brings up paid search listings, a massive Google Flights ads box, and multiple options to go to the Google Flights hub.
Some naive observers have remarked this week that the user can simply scroll beyond these listings if they don’t like what they see. To do so would be a conscious effort on the part of the everyday consumer that they are unlikely to make and have no reason to undertake.
Furthermore, Google can rig the organic search listings in its favour anyway. Data from SearchMetrics show that Vimeo, YouTube’s closest rival, very rarely shows up in video search results. Meanwhile, YouTube enjoys almost complete dominance of these results.
People do prefer YouTube and it is a very strong domain, but Vimeo isn’t even getting the chance to offer an alternative.
Of course, airlines and travel agents can pay to show up in paid search positions and they already do. This puts them in competition with each other.
The difference is that now they are also competing with Google, the owner of the platform.
The complaints are piling in, but will take time to settle.
Google was fined $21 million in India in 2018 for giving “disproportionate real-estate” to its own flights service in results. That ruling was in response to a complaint filed way back in 2012.
Google Shopping has been the focal point of anti-trust cases in the EU, Brazil, and many other countries. The EU has already started handing out multi-billion euro fines to the search giant.
As the economist Joseph Schumpeter noted, monopoly can actually spur innovation and “perfect competition”, where each company avails of the same tools and sells the same wares at the same price, is to be avoided.
If Google’s monopoly is built on the consumer’s preference for its services and Google continues to innovate, other travel sites will simply have to try and compete.
This brings us to the tension at the heart of this question. There is evidence that people simply like and trust Google. But how does Google know what the customer wants in the first place?
As Elizabeth Warren stated this week in relation to the tech giants:
“They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation.”
The EU has already asked Amazon to explain how it identifies “The next big thing.”
The suspicion here is that these platforms oversee the interaction between consumers and companies, providing access to data about the gaps in the market.
They are then in an unassailable position when they use this sensitive information to create new products that cater to a desire that they know is currently unmet.
Amazon develops these products, to which it then provides priority in its search results, while charging everyone else for the right to show up in second place. The revenues from the paid search clicks can fund the creation of more products, until Amazon owns the market.
One can see how this series of events could also apply to Google Travel.
In that instance, the “monopoly spurs innovation” line no longer applies. Why try and compete when there is no chance of winning?
A service like Google Travel is impressively customer-centric, but we still need to ask where the insights came from to shape the product.
With the data at their disposal, there is also little incentive for Google or Amazon to invest any more than they need to, in order to attract the customer. Only they know what the customer truly wants.
The argument here is not a straightforward discussion between left and right, or free-market thinkers and outright interventionists.
If Google Travel had to compete directly with other travel sites, all with access to similar data sources, we may arrive at a solution where the consumer really is the winner.
