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Updated: Google (s goog) pulled the trigger on a widely rumored acquisition today by snapping up travel information provider ITA Software Inc. for $700 million. The company has been in exclusive talks with Google for several months, according to a number of reports. Other travel-related entities were apparently trying to mount their own bids for the venture-backed company in an attempt to keep it from being acquired by Google, since ITA’s software provides the flight information, airfare-pricing software and booking systems for many airlines, travel agencies and other services, such as Kayak, Orbitz, and Microsoft’s (s msft) Bing Travel.
Many of these providers are likely to be more than a little nervous at having a crucial part of their business controlled by the giant search company. Google’s acquisition will give it such a dominant presence in online flight data that the deal could even draw federal scrutiny, much like Google’s acquisition of AdMob. The ITA purchase is also a clear shot at Microsoft, who bought the online travel-information service Farecast in 2008 and merged it with MSN Travel to create Bing Travel last year. Google has said it will honor all of the contracts that ITA has with various providers, but the deal is still likely to cause some sleepless nights throughout the online travel industry.
ITA Software was founded in the mid-1990s by a group of computer scientists from the Massachusetts Institute of Technology and raised a $100-million financing round in 2006 from a number of venture capital firms, including Sequoia Capital and Battery Ventures.
Tom Romary, co-founder and CEO of online travel firm Yapta, which helps users find low-priced travel, said that the full-service travel agencies such as Expedia and Orbitz will now be “very dependent on Google for traffic and booking volume,” and if the search giant allows people searching for flights to book them directly, or with minimal steps, then “it’s very likely the average cost of traffic for the [agencies] will increase and their margins will decline.” Romary said this means that Orbitz and Expedia and other services will have to spend more time marketing their services and less time relying on simple flight info or booking abilities as a sales tactic.
Josh Steinitz, CEO of online travel-information service NileGuide, agreed that travel transactions are becoming “ever more commoditized,” and therefore “the defensibility of basic booking functionality will decline.” The Google-ITA acquisition will accelerate that transition, he said, since the search giant clearly wants to provide more airfaire, hotel and other pricing and booking capabilities instead of being “just a jumping-off point” that sends users to other services.
with reporting by Liz Gannes