July 2, 2010 1:36 am

Google in $700m travel search deal

Google threatened to ruffle feathers in the online travel world while opening a new front in its battle with Microsoft as it announced a $700m acquisition of travel technology group ITA Software.

The deal, announced on Thursday, is among the biggest acquisitions the search company has attempted and is set to give it influence in one of the most important areas of online commerce.

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Travel was the biggest e-commerce market, with air travel – the area in which ITA operates – the largest part of that, said Henry Harteveldt, an analyst at Forrester Research.

Eric Schmidt, Google’s chief executive, said he expected antitrust regulators to take “a fair amount of time” to review the deal, but added: “We expect this will go through.”

A plan to move into mobile advertising through its last big purchase, the $750m acquisition of AdMob, was held up by a regulatory review, though the deal was completed in May.

Microsoft’s own relative success in travel search could help Google clear the antitrust process, according to two industry observers.

One of the areas of focus for Microsoft’s Bing search engine, it had become a rare case where the software company had succeeded in carving out a solid position, these people said.

ITA, a private company founded by scientists from MIT in 1996, is known for software that is used by airlines to maximise the yield from sales of seats, and by online travel agents to find suitable flights.

It makes most of its money by selling its technology, though Google is expected to use its airline seat information to attract more travel searchers and related advertising.

The deal would put Google in direct competition with “meta-search” engines such as Kayak.

Reports that Google was pursuing a purchase of ITA have caused consternation in the travel world.

Mr Schmidt passed up a chance to put those concerns to rest on Thursday, refusing to rule out the possibility that Google would sell airline tickets itself, though he called that “less likely”.

Regulators were likely to extract concessions from Google before allowing the purchase of ITA, said Ted Henneberry, a partner with legal firm Orrick. “This is a fairly critical software tool for other search sites.”

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