Without question, Google will continue to aggressively grow its multi-billion dollar advertising business by securing stronger direct relationships with both the supplier and the traveler.
— Luke Bujarski
We see Google as the most relevant and disruptive company in travel today. Directly or indirectly, Google touches just about every travel brand that has any online presence. You’re either spending with Google on advertising or you lean on Google products to drive traffic to your storefront. Google has always played a pivotal role in travel, since the early days of search. Now, travel ad spend accounts for a significant portion of the company’s total ad revenue, about 12 percent, according to Skift estimates. Increasingly, the company is building its direct relationships with suppliers and the traveler. The company’s enormous user base across all of its products means that it can target travelers across the entire travel funnel. In less than 20 years, Google, now a part of parent company Alphabet, has grown to be the second largest company in the U.S. by market cap, which now sits just north of $700 billion. Driven by its mission “to organize the world’s information and make it universally accessible and useful,” the company employs more than 78,000 people and operates in over 100 countries. Alphabet is set to do $110 billion in sales this year, but more impressive in our view is its ability to compound such a large top-line dollar figure at a 20%+ growth rate over the past several years while maintaining an operating margin around 25 percent. Underpinning this success is Google’s network effect from its billions of users.
As customers are free to use whichever search platform they choose, Google ultimately relies on providing value through its high-quality search results and by meeting users at their preferred formats and devices. To protect its competitive advantage, the company tries to surround its users with the Google ecosystem, which has led to an expansion beyond desktop into mobile and voice searches and from text searches to video services like YouTube. This is also the impetus for Google’s push into hardware devices like the Pixel phone and the reason why the company seems to obsessively tweak how it displays results.
Clearly, travel is important to Google given its revenue-generating potential. Travel is also important to Google because travel is so integral in our daily lives. Beyond basic search, many of Google’s products have taken on more prescriptive functions. Google no longer tells us how to get from point A to point B; it tells us the most optimal route based on traffic and other considerations.
Google can auto-generate suggestions on things to do and places to see. It can preempt and correct our behavior by reminding us of flight times and other calendar items. Google also has the resources, the platform and the user base to consistently improve its products over time. We truly believe that if left unchecked by competition or regulators, a company like Google could become an even more essential extension of our day-to-day lives. Travel is just one of these functions. The question, therefore, is how far can Google realistically go?Originally posted by Skift on December 19, 2017; written by Luke Bujarski