ITA Software Bought by Google for $700M, Shifting Balance of Power in Travel Search

Score a big one for travel search. This deal was a long time in coming, but Cambridge, MA-based ITA Software is being acquired by Google for about $700 million in cash. There were rumors earlier, and the companies have now confirmed they have signed a definitive agreement.

ITA makes the behind-the-scenes software that organizes data on flight itineraries and prices, and powers the ticket shopping sites for big airlines like Alaska, American, Continental, United, and US Airways, as well as comparison-shopping search sites like Orbitz, Farecast (Bing Travel), and Kayak. TripAdvisor and Hotwire are also ITA customers. As Wade wrote about in an in-depth profile in December 2008, ITA makes money on each transaction that goes through on these sites. It also has been developing new reservation systems for airlines that let them do things like try out different pricing models that give consumers more flexibility in their travel plans.

Jeremy Wertheimer, ITA’s co-founder, CEO, and president, said in a statement that his team is “looking forward to continuing and expanding” its efforts as part of Google.

The Mountain View, CA-based search giant (NASDAQ: GOOG) seems pretty jazzed by ITA’s business (see some info here about the coming integration). In a way, it’s surprising it took Google this long to make a big investment in travel search—but now it’s in a position to reap the rewards at a very fundamental level in the value chain. “Their technology opens exciting possibilities for us to create new ways for users to more easily find flight information online,” said Google CEO Eric Schmidt, in a company statement.

ITA was founded in 1996 by a group of MIT computer scientists, including Wertheimer and Dave Baggett. In the company’s early years, it worked on problems like flight and gate logistics for airports and air traffic controllers. With the rise of the Internet and travel search, the company made some smart moves in terms of the problems it chose to solve. In 2006, ITA raised $100 million from a venture capital syndicate that included Battery Ventures, General Catalyst, Spectrum Equity, PAR Investment Partners, and Sequoia Capital. The company grew to about 500 employees by the end of 2008.

Sequoia, of course, was an early investor in Google, and also invested in Connecticut-based Kayak, the travel metasearch company. General Catalyst also backed Kayak and is involved with other online travel startups. It will be interesting to see how this move by Google affects the travel search space (especially sites like Kayak and Bing)—and whether we will all be going to Google to book our flights soon.

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