We all know that Google dominates search with 72% of all online queries and 77% of the search advertising market, and according to Bloomberg Businessweek, more than 96 percent of Google’s sales come from search. Google’s expertise has been in horizontal search – wide-net searches that cull through the Web’s 182 million sites. But for Google to continue its growth and profitability, Jeffrey Rayport, Chairman of digital strategy practice Marketspace LLC explains in Bloomberg Businessweek, Google needs to execute a serious shift in strategy toward conquering search verticals like travel.
As he explains it, “[v]ertical search wins share and earns dollars. Horizontal search protects share, but earns little…The problem is that this kind of [horizontal] search is a loss leader. Real value lies in attracting users who search with serious and focused purchase intent. That’s where the money is made.”
Did someone say money!?
He goes on to explain the imperative for Google: “horizontal search may prove steadily less compelling than vertical search—at least for the kinds of search advertisers will bid against and the kinds of queries that result in sales. If that’s the case, Google must find ways to verticalize big search categories fast.”
So, since the search giant already dominates general search online, it must look to create additional income streams – and all of a sudden the motivation behind Google’s bid for ITA makes sense, Google needs to continue expanding its general search dominance by finding and asserting control over more niche vertical areas of search to continue feeding its money making machine.
And, in fact, Rayport addresses this specifically. “Recently, Google has been making a further bid to control a vertical search category. In mid-2010, Google got serious about travel. Given that over half of travel sales are consummated online, Google wasted no time with DIY solutions. It went shopping and bid $700 million in cash to buy ITA Software, a Cambridge (Mass.)-based travel software company that was founded in 1996 by scientists at MIT to provide search services for airlines and other travel operators.”
As we know, Google’s has its aim set on the travel industry now – and the Justice Department can step in to prevent Google from combining its monopoly power in general search with ITA Software’s dominance in online flight search – but there’s no telling what Google will try to gobble up next.