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Comment by MichaelSalib | Hacker News Reader

Because there's a rather finite amount of money spent on air travel which means that the valuation of any one company in that sector will be well within Google's means?

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Perhaps. But in that case it's a much smaller market than I imagined. Also relevant is that ITA raised $100M in 2006, so their $700M exit is hardly a home run by VC standards. It doesn't seem to match the astonishingly strong technical and market position you (convincingly) describe.

http://www.itasoftware.com/news-events/press-release.html?id.... Note that the round included Sequoia who are known for caring only about big markets.

ITA raised all that money to build a reservation system to replace the old mainframe systems that are fabulously expensive to run. That would have been a market of the kind that required outside investement from a company that was already profitable (I think ITA had more people working on the reservation system than the search), and that a big VC would love to bet on.

From what I hear it worked technically, but failed commercially due to the badly timed recession. It seems like a fair bet that Google's offer wasn't putting a lot of value on the reservation system. Even if it could be made to work, it's not the kind of a business that Google is usually in.

The margins in air travel are also slim. Google did a very smart thing here. There business model can support the ITA purchase, not many other businesses could do this. The kicker is they also just hired a lot of talent.

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