THE GOOGLE INVESTOR: Google Copying Bing's Vertical Search With ITA Purchase

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GOOG Rebounding
After experiencing 11 days of straight losses, GOOG is up strong today as investors head into the short week. Potential catalysts include upcoming second quarter results to be announced on Thursday, July 15 at 4:30pm EST; Android and mobile adoption; the release of Chrome operating system this fall; as well as traction in other newer (and numerous) initiatives. The stock trades at approximately 16x 2010 EPS and 13x Enterprise Value / EBIT, inexpensive relative to historical trading levels and the broader Internet group.

Google’s Shift In Strategy Going For More customised Search Experiences, Like Bing (Seeking Alpha)
The Google / ITA deal signals a subtle and profound strategy shift for Google toward more customised search experiences in different categories. In other words, it is moving in the same direction as Bing, which has built numerous search verticals. If this is the strategy the company is pursuing, search results will look a lot less uniform than they do today. Those much-maligned “blue links” aren’t cutting it anymore.

Analysts Applaud ITA Software Acquisition (Fortune)
Wall Street believes the acquisition is an overall positive, however the deal will be met with regulatory scrutiny.

  • Mark Mahaney at Citigroup believes the acquisition is a win, win. Searchers get a better overall experience on Google (potentially boosting query market share); end providers will continue to get high quality leads, and Google will capture more of the economics.
  • Susquehanna analyst Marianne Wolk believes the deal might not close until the first half of 2011. Near-term, the deal is a negative for Kayak and Orbitz, longer-term troubles for Expedia and Priceline. Google gains incremental advertising dollars through increased consumer traffic and increasingly targeted lead generation.
  • Deutsche Bank analyst Jeetil Patel believes the deal is all about mobile and improving the travel booking experience for mobile users. Other benefits include additional pageviews for targeted advertising and the possibility of creating a Hotel bidding exchange in the future.
  • Justin Post at Merrill Lynch sees significant regulatory issues because Kayak and Expedia were interested in buying ITA, which owns two-thirds of the market. Also, it puts Google squarely in the travel sector.

What Search Vertical Is Next For Google To Overhaul? (paidContent)
Google could be going after Microsoft’s Bing verticals which include shopping, travel, health, local, and entertainment. Google has also been vocal about real estate search; expanding real estate listings in Maps and is (or was) said to be in talks to buy real estate search engine Trulia.

Google Has Shot Itself In The Foot In China (Forbes)
Google is still awaiting approval for its Internet licence in China. The smart move by the Chinese government would be to delay making any decision until the issue dies down again in the press and let the status quo continue, which it seems to be doing. The real change in information flow in China needs to come from domestic Chinese Internet firms, not from foreign companies. From a competitive standpoint, Google has basically shot itself in the foot.

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