Fierce Rivalry in the Online Travel Industry Is Playing Into Google's Hands
According to FairSearch, more than half of the world's travel sales are consummated online. For online search giant Google , travel ads by online travel agencies, or OTAs, are a good source of revenue. Google accounts for approximately 67% of all U.S. online searches.
Online travel companies such as Priceline , Expedia , and TripAdvisor have been competing fiercely to establish themselves as the travel agencies of choice for customers. To catch the eyes of prospective customers, these companies have been spending massively on sales and marketing, particularly on online ads. Priceline spent $1.8 billion on online ads in fiscal 2013, while Expedia spent $1.2 billion. TripAdvisor spent $236.5 million on ads last year. Their top lines have also continued to grow impressively.
Online ad spending for the three companies has been growing at an even faster clip than their revenues. Priceline has more than tripled its online ad spending in the last three years. About 90% of that money ends up in Google's coffers.
Expedia spent 46% of its revenue on sales and marketing expenses (of which online advertising takes the lion's share) in fiscal 2013, up from 42.8% in the previous year. TripAdvisor spent 39% of its fiscal 2013 revenue on sales and marketing compared to 32.8% the year before.
Google has been the biggest beneficiary of the cutthroat competition in the industry. Although it's rather difficult to get the actual figures for the share of online ad spending by Expedia and TripAdvisor that Google gobbles up, they are probably in the neighborhood of Priceline's -- about 90%. Quite likely, the trend pervades the entire industry. Little wonder that Google's revenue has been expanding exponentially over the last few years.