Why Google is forcing travel sites to pivot or die

This article summarizes an episode of Web in Travel’s video series featuring the CEO of Venture Republic, the co-founder of Skyscanner, and the CEO of Wego.

Google / Photo credit: Tada Images / Shutterstock

According to Venture Republic CEO Kei Shibata, the “meta-search” or price comparison model is “almost broken.” He, Skyscanner co-founder Gareth Williams, and Wego CEO Ross Veitch analyzed the model’s struggles, their forced pivots, their reliance on Google, and how AI might be key to their relevance.

Google’s power creates a need to rely on them

The group first addressed the model’s biggest threat, which is its reliance on Google. They argue their business models are forced into a risky relationship with a platform that is also their biggest competitor.

Why Google’s power is an accepted reality
Williams from Skyscanner observes, “I kind of view [Google and Meta] as great profit extraction engines of the rest of the world… they’ve got huge power and it’s because they’ve done things right and they’re outside of travel. So, they’ve got daily use cases.”

The reliance is like world politics
The relationship is so lopsided that it resembles international politics, where smaller nations must align with a superpower.

Shibata from Venture Republic says, “Google is a little bit like President Trump. It’s a superpower whether you like him or not. You really have to depend on it. It’s like Canada or Mexico, they can’t live without the US economy. And then if he doesn’t like us, you’re screwed.”

Small profits make the Google risk bigger

The way meta-search companies earn money is what makes the Google risk dangerous. Their business model operates on thin profits, which dictates their entire strategy for finding new customers.

Meta-search profits are limited
“We can actually take only a small size of slice,” Shibata says. “We make money out of online travel agencies’ (OTAs) transactions and OTAs actually make like 15-20% of the margin. We get only maybe a few percent.”

This limits spending on ads
Shibata continues, “so that means we have a limitation to actually to make an investment on user acquisition by spending money on advertisement. So I think the free traffic is so important.”

Mixed models are a necessary plan
Because this Google-dependent model is so high-risk, the group discussed how they are forced to change. Ross Veitch from Wego says his company now runs a traditional marketplace alongside a direct booking business, making his business more like an OTA.

He explains, “actually, [our business] is pretty balanced. We still run a very active marketplace as we call it. But the fastest part of the business that’s growing the fastest is the OTA side… we think they work quite nicely side by side.”

The goal is controlling the whole customer experience
By combining search and booking, companies can guide a traveler from initial idea to final purchase.

Veitch argues, “I think by being able to help the user all the way through the journey, we can add more value. We want to be good at shopping and search, but we also want to be great at booking and post-booking and in-trip.”

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