Expedia In Google's Crosshairs

| About: Alphabet Inc. (GOOG)

One thing about Google (NASDAQ:GOOG) getting serious about monetization: The comparisons between it and Microsoft (NASDAQ:MSFT) circa 1995 are only going to grow.

Consider travel, for instance. Google launched its airline travel tool, Google Flight Search, in September, five months after buying ITA Software.

Already, Expedia (NASDAQ:EXPE) and Orbitz (NYSE:OWW) are starting to scream antitrust. This despite the fact that the ITA acquisition was pre-cleared by antitrust authorities, and searches using Google Flight Search still prominently highlight travel re-sellers like Kayak.com.

All of which makes one wonder just how much shareholder value was unlocked when Expedia spun-out Trip Advisor (NASDAQ:TRIP) as a public company last week, as we reported.

The real problem is not ad placement, but the tool itself. It's really good. And results of fare searches lead you directly to airline web sites for purchasing.

But so far it's not all-inclusive. It doesn't include Southwest (SWA), which doesn't cooperate with any third-party sellers. This means that while Google Flight Search currently shows the cheapest round-trip in late February between Atlanta and San Antonio at $287.40 round-trip. It doesn't show Southwest's $133 web-only fare.

It's not that simple of course. That Southwest fare is one-way. The total price, including taxes, of a Southwest round-trip is $305.80. But the $287.40 price, in this case through Delta (NYSE:DAL), isn't all-inclusive either. If you're taking a single bag each way the real price is $337.

It's still not known how much Google is paying airlines to run people directly to their Web sites. When you use Expedia you're booking through the third-party. In theory airlines save money booking flights themselves. The point is this is a direct threat to the third-parties, to EXPE and TRIP, which must change their business models or die, and very likely it's a boon to travelers, who will get the benefits of squeezed-out commissions.

Google will also be able to go up-the-stack on this, adding hotels, car rentals and trip planning tools over the next year. Remember all those stories about how the Web destroyed the travel agent industry? Turns out that wasn't the last chapter after all.

The investor's tell on this, the point at which you need to aggressively sell companies like Expedia, will come if Southwest decides Google's price is good enough to allow its own flights to be listed on Flight Advisor. That would tell us all we need to know about Google's pricing, and market power, in this new niche.

Disclosure: I am long GOOG.