Google (NASDAQ:GOOG) announced that it is acquiring Frommer’s, a producer of travel guidebooks, from John Wiley & Sons.  We think that this deal is an interesting acquisition for Google as it will be able to integrate Frommer’s database with its search engine. This data gives the search giant the opportunity to strengthen its content offerings and the opportunity to break into the online travel market. Google primarily competes with firms such as Yahoo! (NASDAQ: YHOO), Microsoft (NASDAQ: MSFT), and AOL (NYSE:AOL) in the search and content space.
Opportunity in Online Travel
The U.S. online travel industry is expected to reach approximately $120 billion in sales in 2012, according to eMarketer. With the recent purchase of Zagat and now Frommer’s, Google can become a one-stop shop for users researching potential travel destinations. Users that are engaged on the search platform for Frommer’s and Zagat content can be leveraged by Google if it decides to get into the online travel space. If successful, it can add another revenue source to its business.
Opportunity in Search
Even if Google decides not to compete on the travel front directly, this acquisition could help it increase its search engine revenues by providing more targeted advertising for firms in the online travel industry. For example, if a user searches for a country, Google will be able to charge more for the ads that pertain to flight and hotel bookings within the country. This would consequently increase Google’s revenue per click on its search engine, and thereby result in an upside to the Trefis price estimate.
With a string of buyouts in the content space, Google is attempting to become a one-stop shop for users. Regardless of the way Google decides to leverage Frommer’s content, we think that this acquisition provides an opportunity for Google to increase its presence in the growing online travel market.
We currently have a $661 price estimate for Google, which is approximately 3% above the current market price.Notes: