Travel Weekly’s Breakfast briefing last week provided a fascinating insight into the thought processes of Google’s top UK team. For me it provided a clear indication of their future direction in travel.
As a “customer” centric business, Google described how customers’ demands for instant answers, rather than lists of relevant links, has driven much of their innovation as the market migrates to a mobile dominated search space.
This has driven the development of both their Flight and Hotel searches, which allow customers to enter the data required to move directly to a relevant result or “answer”, when they click through to the supplier. Add in the ability of a younger generation of early adopters, to use voice activation tools such as Siri, to drive their mobile searches and you can quickly see their point.
Google customer centric idealism is financially facilitated by the “Auction” nature of their bidding model. Reduced click volumes resulting from delivering higher quality answers to customers, are compensated by high bid costs making Google revenue neutral on almost all improvements in customer experience.
Interestingly, Google stated that the biggest driver of click inflation is a flat market, with little growth in search volumes, as this forces advertisers to spend more to maintain or increase their share. Currently, most desktop markets are in decline due to the big switch to mobile, which has resulted in bid cost inflation in this sector. Ironically, although mobile click cost started lower, rapid inflation has also occurred in this sector driven by competition for the reduced advertising space available.
Google’s auction model automatically means they are likely to be the biggest winners from the above market forces, unless customers can find answers more quickly and easily elsewhere. Hence Google’s move with its Flight and Hotel finder tools entering the travel price comparison sector in order to head off threats from sites like Skyscanner, Teletext and Travel Supermarket. Price comparison sites make it easier to answer a key customer question, “Who is the cheapest provider?” thus encroaching on Google’s desire to provide the most relevant answer to a customer’s search.
Google’s current model remains firmly a media play, with customers being handed off directly to the airline or to major OTAs within their hotel search to complete the booking.
In my opinion Google are like to remain a media play for the holiday transactions serviced by OTAs, because of the high regulatory burden that comes with being the “principal” and their inability to provide an answer quicker in this complex transaction.
In the flight sector Google is also faced by a customer’s clear preference to book directly with the airline carrier and are therefore unlikely to add value.
However, the hotel only sector is less clear-cut in my mind. Currently this sector remains highly fragmented with Google being forced by technology restrictions, to integrate with “intermediary” OTAs who aggregate hotel stock and take payment. The key question is can Google add value by removing this layer?
Unless there is a specific advantage of booking directly with the hotel, the answer is no. Google’s recent launch of “Hotel Offers”, where hotels can offer “discounts” or “added value” offers to a targeted range of Google customers, is a move at adding such a motivation and may indicate their future direction.
In my opinion, rather than becoming an OTA, Google are more focused on driving higher “answer” relevancy by working with advertisers to apply the “big data” they generate from customers movements within their sites, to drive more tailored advertising.
Remarketing advertising is a perfect example of this, with the highest converting OTAs already spending 30% plus of their PPC advertising funds on remarketing. We all know that currently remarketing is a relatively crude tool, and you’re often hounded for weeks by adverts for items you have already brought elsewhere. However, imagine the “Big Data” that Google can bring to the party.
Most websites use Google Analytics and attribution tools that tell Google which customers have brought items during a site visit and which ones have not. Imagine if this data could then be passed to a competitor, to allow them to identify what the customer was looking for but did not buy from their competition. This could then be used to target these customers with highly personalised and relevant “pre-visit” marketing adverts.
At the end of the day advertisers might not like this, but it is highly customer centric, allowing customers to find via Google the best provider for their needs quicker than ever before. Don’t rule it out guys, given the power Google has to dictate terms to the online advertising market place.