Morgan Stanley analyst Brian Nowak said in a note to clients last week: "'People who want to invest in the online travel sector should do it through Google stock".
The obvious corollary to that statement is: "And not in stocks of OTAs like Expedia, TripAdvisor or Booking.com".
Because in 3Q2019 those 3 companies lost in aggregate more than $13B in market value.
Why does Nowak recommend investing in Google stock, and why are OTAs blaming Google for their losses?
- Google has a 93% share of US searches, and a 75% share of search ad spend.
- Increasingly, Google is pushing ads to the top of search results, reducing screen real estate available to organic search returns. And that makes SEO less effective, especially when consumers use small-screened mobile devices to search for travel products.
- Google has created new search tools for flights, hotels and more - and promotes these tools to consumers via Google Search.
- Accordingly, OTAs have little choice but to buy Google ads. And competition among advertisers pushes up the price of ads.
In September, the Attorneys General of 48 US states, Puerto Rico and the District of Columbia launched an antitrust investigation of Google. Their complaints about Google include:
- Google threatens competition, consumers and the continued growth of the Web.
- Google dominates buyer side, seller side, auctions and video.
- Google is trying to monopolize online ad sales.
- Google's ranking of search results is unfair because it favors businesses that can spend the most on SEO and search ads over the most competent businesses.
- Google doesn't protect users' personal information adequately.
How that investigation may ultimately turn out is anyone's guess.
But for now, I believe the best advice for anyone marketing a travel or tourism product is much the same as that which Brian Nowak recommended to investors: when it comes to search, spend your money with Google.
(FYI, Google doesn't compensate me in any ways for reviews like this. I just call them as I see them.)