From my analyst’s perch I see that we are in for some interesting times. Combining the news that Google has lost its antitrust case to the Department of Justice and the emergence of Search enhancements via Gen AI, provide a fertile ground for speculation. And let’s not forget Google’s huge but very recent climb down on getting rid of Cookies. So, in this blog piece I will provide a reasoned argument for both issues’ impact on Airlines and Travel Companies. I will endeavor to answer some very key questions. According to Phocuswire the four biggest online travel agencies spent a combined $16.8 billion on sales and marketing last year . That’s Expedia, Booking, AirBnB and Trip. Not just the direct cost but management and dealing with nasties like click fraud. The vast majority of it on Google. What does this all mean? Strap in let’s find out.
* Q1 Will expenditure on search increase or decrease?
* Q2 Who are the winners and losers as a result of these 2 trends? Consider competition and impact on users.
* Q3. Ultimately will this benefit the consumer or will this do little to change the supplier/seller behaviour and the customer behaviour.
Let’s start with the money.
As they say, always follow the money. Let’s look at the arguments for increased spending.
1. We can see that there is already a transition going on to AI-Enhanced (some say powered) Search. As OpenAI enters search and Google integrates AI into its search algorithms, travel companies need to invest in AI optimization strategies to maintain visibility. This could involve hiring AI specialists, creating new content tailored for AI-driven search engines, and purchasing AI tools to stay competitive. IMHO Travel companies will need to adapt quickly to AI-driven search technologies to remain competitive. The investment in AI optimization is not just beneficial; it’s essential. For sure you cannot ignore it, thus some spend is required.
2. Competition: Increased (maybe), different – for sure. With Google's market power potentially reduced, other search engines may gain market share. Travel companies might need to spread their advertising budgets across multiple platforms, potentially increasing overall expenditure. Diversifying your ad spend across multiple platforms could initially raise costs, but it's a necessary strategy to ensure you are reaching potential travelers wherever they are searching.
3. Enhanced Personalization, some are calling it hyper-personalization – I am a little more skeptical. AI-driven search capabilities can offer highly personalized results, but they can also go right off the rails. How far and when can we have some assurance you are going to get acceptable answers in real time? All great questions. Travel companies must invest more in understanding user data and preferences to create targeted campaigns and content, likely driving up costs. The era of one-size-fits-all travel ads is over (it died decades ago but some still clung onto them. To capture the modern traveler, we all need to harness AI to deliver personalized experiences. But can mass tourism and generic search and offers still have a place? Yes – er – maybe?
Let’s look at it differently.
Is there an argument for decreased expenditure on Search? If you talk to the big boys, they have been griping about it for ages. I would also ask, are there new options for search?
1. Diversification of Platforms: If Google's dominance wanes, travel companies might find cost-effective advertising opportunities on emerging search engines or platforms that offer competitive pricing. I believe that the opening up of the search market is a golden opportunity for smaller search engines to offer competitive rates and attract new advertisers. But do I think they will? We have Bing who has been pretty bad at Travel. Then others even more so. But then there are new players like OpenAI SearchGPT.
2. Efficiency of AI: AI can potentially streamline advertising by better targeting the most relevant users, leading to higher conversion rates and potentially lower overall spend as companies get more value for their money. But there are still so many challenges. I believe AI has the POTENTIAL for us to be much more precise with our targeting, making our ad spend more efficient and potentially reducing costs, but do I believe that really?
3. Direct User Engagement: Enhanced AI search might shift user behavior towards more direct engagement with travel companies' websites or apps, reducing reliance on paid search ads. That could even be a byproduct of maturing markets and its twin – reduced choice in product and supply. Could AI from the customer’s own device allow users to bypass Search?
Who will be the winners and Losers of these trends?
I am reminded about John Wanamaker (1838-1922) who was a United States merchant, religious leader and political figure, considered by some to be a “pioneer in marketing”. He opened one of the first and most successful department stores in the United States, which grew to 16 stores and eventually became part of Macy’s. He is credited with coining the phrase “Half the money I spend on advertising is wasted; the trouble is I don’t know which half”.
Winners
1. Consumers: They could benefit from more personalized search results and potentially lower prices as competition increases among travel companies to attract customers.
The consumer probably stands to gain the most from a diversified search landscape and AI-enhanced personalization. But will that result in lazy consumers who don't bother (even today) moving beyond the first screen?
2. Emerging Search Engines: They may gain traction as Google’s antitrust loss opens up the market, allowing them to attract more advertisers and users. But this is going to take a long time. There are issues of appeals and impacts of the final ruling. It is quite possible this ruling could level the playing field and give emerging search engines a chance to innovate and grow. But I will be a wee bit skeptical.
3. Small and Medium-Sized Travel Companies could this level the playing field for the participants? The “have nots” might benefit from more affordable and diverse advertising options, leveling the playing field against larger competitors. I would love for the smaller folk to be able to say: We finally have a shot at competing on equal footing with the giants, thanks to more competitive advertising platforms." But here again my skepticism niggles. Do they have the skills and the wherewithal not just the cash (which most don’t) to do this?
And the losers?
I will say it could also be consumers who have become used to the simplicity of Googles search engine. But let’s look at the big losers:
1. Google – duh yes! The antitrust loss could likely lead to a decrease in market share and advertising revenue. If it doesn’t then the process would have been for naught. “This ruling is a significant blow to our business model, but we are committed to complying with the decision and continuing to innovate." — Sundar Pichai, CEO of Google
2. Travel Companies with heavy reliance on Google, let’s face it Google’s holistic model has made it easier to manage for all levels of the marketplace. But companies that have invested heavily in Google-specific strategies may face challenges adapting to a more fragmented search landscape. Well, that’s good for the likes of me as an analyst and Consultant.
3. A return of the more traditional advertising channels? No, they have been dead for a long time. As AI-enhanced search becomes more effective, there may be a further shift away from traditional advertising methods, affecting those channels. The shift to AI-driven digital engagement (aka advertising) is accelerating, and traditional channels will need to innovate to stay relevant. I don’t think the question is if they will do it – rather the question is will they do it fast enough?
Impact on Consumer and Supplier/Behavior
Let’s turn our attention now to the behaviour of the product owners and of course the consumers. These changes will take time. Some will be subtle others not so. GenAI as expressed by ChatGPT and Gemini exploded into our consciousness less than 2 years ago. Have we seen actual changes? The answer is yes. But the guff that gets put out both BY and ABOUT GenAI fills my feeds and inbox daily. A lot of it just that… guff. But let’s dive in. Let’s start with the consumer.
Benefits to Consumers
1. Improved Search Experiences: AI can offer more accurate and personalized search results, making it easier for consumers to find relevant travel options. I am highly skeptical about this.
Some are saying “AI is revolutionizing search by making it more intuitive and tailored to individual needs, greatly enhancing user experience." Horsepoop! Yes, it can, but is it? The change is driven by consumer behaviour. Remember when Google taught us all to accept fast rather than accurate. That learned behaviour will enable AI to achieve greater importance and mind share. Most people will accept AI’s outputs as gospel. (Hmmm and we marvel at Fake News!) Seriously though, I do see that AI has the ability and we are just starting to see it to sift through so much material faster that in of itself is improving search. Just look at Google’s recent changes to the first search page.
2. Increased Competition: More search engines and competitive pricing strategies may lead to better deals and lower prices for consumers. See above but I am skeptical. Where I do see there will be improvement is that a levelling of the playing field will make features such as improved search a contributing factor to improved competition.
3. Transparency and Choice: Antitrust actions could lead to more transparent search practices and a broader range of visible options. This is more obvious, but I think that the Biden Administration has definitely brought focus on breaking up monopolistic practices. I have had a quiet chuckle to myself when I see the dominance that Google had in search and then look at the years and years that Microsoft fought the battle of the browser. Where is MS now in that battle? Around 6% behind Safari. And the leader? Google with 65%.
Changes in Seller/Brand behaviour.
I need to be clear that Seller action means both Supplier and Intermediary Behaviour. So, there will be some differences between the two but let’s lump them together. I have been concerned for a very long time about the lack of Travel brands in the top global brands. Strategy of Travel product owners – particularly airlines – has been to ignore the demand side and control things from the supply side. (Don’t believe me, look this up!!!) But I digress. So, let’s dive in.
Adaptation vs Transformation : Seller behaviour.
1. While travel companies may adapt to new search dynamics, their core strategies of competing on price, quality, and service are likely to remain unchanged. Indeed, I have a big fear that AI is not free and that paying for it has been largely ignored in the feeding frenzy. There is a quote floating around on Reddit that goes like this: “AI Prompts Consume as Much Water as a 16-ounce Bottle Every 5-50 Interactions.” I do believe that Travel companies will adapt their digital strategies, but their fundamental approaches to competition will stay the same, as the external forces such as supply constraint are not going away. That said, I do believe that bold transformational steps need to be taken. There will be quite a few who will be taking the revolution rather than evolution paths.
2. The big players might consolidate their resources to dominate new search platforms, potentially limiting the impact of increased competition. Looking at the power that the big intermediaries have they have exercised it well. And as we have seen they are mighty PO’d at Google’s search dominance. I think that these large players will leverage their resources to maintain dominance across multiple platforms, possibly stifling smaller competitors. Since the GDSs don’t play here – they won’t have any impact. But for the large OTAs, TMCs and product category players – this represents a chance for change.
Adaptation Rather vs Transformation: Consumer behaviour.
1. Any changes in consumer behavior driven by search enhancements might be incremental at the start rather than revolutionary, with users gradually shifting to new patterns over time. But there is a big risk. Consumers have been abused for so long by the supply side. They might be punch drunk, but they are not impotent. Traditionally, consumer behavior evolves slowly, and while AI will drive change, it will be a gradual process.
2. The changes, in my view, will not just come from the UX (user experience) but rather more broadly. The entire customer experience at all touch points has been an exercise moving the onus from true provided service to self-service, but masked inside a mantra of fake customer centricity and trying to demonstrate choice and options
Conclusion
The integration of AI in search and the potential decrease in Google's dominance could lead to increased or decreased expenditure on search for travel companies, depending on how Google itself adapts. Competition for search engines is not cheap to develop. This will limit who can play. Many years ago, a good friend Ram Badrinathan, argued passionately that video would take over from text-based searches. I did not agree with him then nor now. But he made a point that text is a single sense for comprehension. As those of us who have seen their sentiments misunderstood in text messages due to the lack of context, so I think AI has the ability to bring context to our searches. Breaking Google’s monopoly will accelerate changes.
Consumers are likely to benefit from more personalized and competitive offerings. However, the fundamental dynamics of supplier behavior may only see incremental changes as companies adapt to new search environments while maintaining core competitive strategies.
Like I said… it’s going to be a bit of a wild ride.
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