Mountain View, California — In its biggest acquisition deal of the year, Google Inc. is fully geared to rock up the online travel market with its $700 million acquisition of ITA Software Inc., whose airline reservation search tools power leading Web-based travel agencies like Chicago-based Orbitz Worldwide Inc., empowering the Internet’s search engine behemoth an entree into the rapidly growing online travel industry.
Google has agreed to make the all-cash deal for the Cambridge, Massachusetts-based travel-search software firm ITA Software for $700 million dollars, a move that would make Google both a vendor to and powerhouse competitor of travel aggregators such as Kayak.com and Microsoft Corp.’s rapidly growing Bing Travel, which present consumers with a display of airfares but do not handle reservations, the companies announced on Thursday.
The deal is Google’s sixth-largest acquisition in company history.
During a conference call with reporters and analysts after the agreement was announced, Google chief executive Eric E. Schmidt said that “airline travel and search are a perfect combination,” and that the purchase “opens exciting prospects for us to create new ways for users to more easily find flight information online.”
Schmidt said Google purchased ITA, rather than just buying a software license, which it intends to use ITA’s software so that its engineers could work more closely with the data, in order to create new tools to make it easier for users to comparison shop for flights and airfares, and enrich the general search the company currently offers.
Travel based searches make up an important portion of Google queries, so the company wants to enrich its technology in this area, which is ripe for innovation, Google and ITA executives said during a press conference.
“Travel is one of the most complicated search dilemma around, both in terms of how users like to communicate their queries and in terms of the data and accuracy and speed needed to get people the types of results they are looking for,” said Marissa Mayer, Google’s vice president of Search Products & User Experience.
The Cambridge firm develops innovative software for major online travel services such as Orbitz.com and Kayak.com, and airlines such as Continental Airlines Inc. and Air Canada. ITA’s software uses algorithms to combine and parse flight information from airlines, including pricing and availability data, to create an up-to-date database that can be searched by consumers.
Today, almost 50 percent of airline tickets are purchased online. Microsoft’s Bing search service, which rivals with Google, already has a prominent travel area that uses ITA software, and features tools like ticket price predictors.
But the deal is expected to face strict scrutiny from federal antitrust officials, analysts said, given Google’s conflicting role and clout as a sprawling Internet giant.
Schmidt asserted that Google has no plans to sell airline tickets directly to consumers, but instead will drive potential customers to airline and online travel agency websites.
ITA, a 14-year-old, 500-employee company was established in 1996 by computer scientists from MIT, and aggregates seat availability and pricing from airlines and is paid per search by travel sites to return results.
In an interview, Jeremy Wertheimer, chief executive and president of ITA, said that although “there were other offers that came in, unsolicited,” the Google offer “was the best for our investors, our employees, who will be hooking up with a company they want to work for, and our customers.”
Wertheimer, said the 500-person company has been involved in the online travel information market from its beginnings and looks forward to leveraging Google’s resources to further develop and refine its software.
He said the Google deal gives ITA “access to a really big technical platform, and access to excellent people.” “We are proud of what we have accomplished. Although we have come a long way, we feel there is a lot more that we can do to improve online travel,” he said.
Schmidt said he was optimistic about getting approval from the feds, which spent more than six months evaluating — and eventually approving — Google’s recent purchase of AdMob, an ad provider for mobile-phone applications.
“We are pretty comfortable that because of the unique nature of travel search, that the deal is pro-competitive and pro-consumer,” Schmidt said.
The move may in part be an attempt to keep up with Microsoft’s Bing, which launched a little over a year ago with a dedicated travel-search section that also includes a feature that predicts when a fare will likely rise or fall in price.
The deal would not be finalized until federal regulators scrutinize its implications, in no small part because ITA is used by both Bing and Kayak, among others.
The company will honor all existing contracts and hopes to add more “partners to the ecosystem,” according to Schmidt.