Flying under the radar on August 13 was the news Google (Nasdaq:GOOG) was buying Frommer's, the well-known travel guide currently owned by John Wiley & Sons (NYSE:JW.A). According to The New York Times, Google paid $23 million to acquire the brand. So why is it bothering with such a tiny acquisition? Because it wants to go up against the likes of TripAdvisor (Nasdaq:TRIP) and other travel-related websites; Frommer's gives it additional content. How long it's able to avoid the scrutiny of the Federal Trade Commission is another subject altogether. In the meantime, I'll examine what this means for some of the parties involved.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.


In April 2011 Google acquired ITA Software for $700 million. ITA provides travel companies with technology platforms to operate in the ultra-competitive world of online travel sales, a $119 billion business (annually) in the U.S. Five months later it acquired Zagat Survey, the eponymous restaurant and hotel review site for $151 million. Now it's adding Frommer's to the mix in an effort to compete in the online travel business. Companies like Yelp (NYSE:YELP) and TripAdvisor are now directly in the crosshairs of Google, whose aspirations to marry content and commerce appear large.

SEE: 5 Surprising Companies Google Owns

As Lorraine Shanley, president of publishing consultant Market Partners International, explains, "When Google buys Frommer's, they're not really buying a book publisher or imprint, they're buying a database with both content and photography." Wiley didn't want the company any more as it's focusing on its textbook business, so Google was likely able to negotiate an attractive deal. Now Google has a trio of businesses that will allow it to compete effectively in both travel and local search. Where this ultimately leads is anybody's guess, but you can bet Google wouldn't have done the Frommer's deal without some sort of commitment to this segment of its business.

SEE: Acquire A Career In Mergers


This company generated $637 million in revenue in 2011, about two-thirds of which was unrelated to Expedia (Nasdaq:EXPE), its former parent. Regardless of where the revenue came from, its business is extremely profitable and growing rapidly. With Google's addition of Frommer's, its ability to grow its revenues in the future is somewhat threatened, causing its stock to drop by 4.5% on Monday. However, without knowing how Google will use the trio of companies in its travel group, investors are being presumptuous. Until we shave specifics of where this is going, TripAdvisor shareholders are best advised to hang on to their stock. It's got a good business model, and I doubt the addition of Frommer's will erode that overnight. Hang tight, and the urgency to do something will pass.

SEE: Patience Is A Trader's Virtue

Bottom Line

Google generates somewhere in the neighborhood of $2 billion to $3 billion each year from travel-related ads on its search engine as well as its travel-booking site. I find it hard to believe it would jeopardize those revenues and healthy margins simply to become more vertically integrated - at least not in the short-term. Eventually, it will have to figure out how it successfully navigates the fine line between content and commerce. If it doesn't, the FTC will decide for it, and I can assure you it won't be nearly as favorable a result.

At the time of writing, Will Ashworth did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  2. Stock Analysis

    The Biggest Risks of Investing in Amazon Stock

    Find out which risks are most important to Amazon's shareholders. Learn which operational risks impact share prices and which financial risks affect investors.
  3. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  4. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  5. Stock Analysis

    2 Oil Stocks to Buy Right Now (PSX,TSO)

    Can these two oil stocks buck the trend?
  6. Investing News

    What Alcoa’s (AA) Breakup Means for Investors

    Alcoa plans to split into two companies. Is this a bullish catalyst for investors?
  7. Stock Analysis

    Top 3 Stocks for the Coming Holiday Season

    If you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
  8. Investing News

    Could a Rate Hike Send Stocks Higher?

    A rate hike would certainly alter the investment scene, but would it be for the better or worse?
  9. Fundamental Analysis

    What's eBay Without PayPal?

    In July 2015, eBay completed its spinoff of PayPal and sold its Enterprise segment. We take a look at eBay's remaining lines of business.
  10. Investing Basics

    These Industries Have The Most Illiquid Stocks

    U.S. equity markets are vast and highly liquid, but a few sectors have failed to attract substantial capital.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!