Google to buy travel data giant ITA for $700 million

NEW YORK (CNNMoney.com) -- Google on Thursday announced it will buy online travel software company ITA Software for $700 million cash, a move the search giant hopes will boost its visibility in the highly competitive airfare market.

Boston-based ITA specializes in organizing airline data, including flight times, availability and prices. Its data is used on a host of websites like Kayak, Orbitz, Expedia.com, TripAdvisor and Microsoft's (MSFT, Fortune 500) Bing, as well as a number of airlines' websites. Nearly half of airline tickets are now bought online, according to Google.

But Google CEO Eric Schmidt painted a picture of the online travel landscape as one of mass confusion, with thousands of options and unclear ticket pricing and availability. With Google's purchase of ITA, Schmidt said he hopes his company can provide a more innovative and streamlined approach to online travel.

"We believe we can help solve the online travel problem and help improve the online travel ecosystem," Schmidt said on a conference call with analysts and reporters. "We think we can drive even more business to airlines and do something quite different than what's out there."

Schmidt noted that his company has no plans to sell airline tickets, but it would likely direct consumers to sites on which they can buy tickets. Google's users already come to the site for travel searches, but find it difficult to express flight queries through the current search tools, Schmidt added.

Marissa Mayer, Google's user experience head, said she envisions using ITA's software to field more advanced searches, like "Where can I travel for $700?"

"We think there's a lot we can do to improve online travel," said Jeremy Wertheimer, CEO of ITA, on the call. "With Google, we can have access to scale to take this to the next level."

Google's purchase of ITA has been the subject of rumors for months, and the companies that rely on ITA's services have reportedly tried to co-opt the buyout. Kayak, with backing from Expedia.com, offered to buy ITA to prevent Google from purchasing it, according to Reuters.

Google rival Bing has advertised flight information as a point of differentiation between it and the search leader. On Bing, users can enter domestic flight queries, and the engine will predict when it is best for users to buy a ticket.

Schmidt said Google's intention is to continue to honor all of ITA's current contracts. Still, he said the deal will likely face "significant" regulatory scrutiny -- even though the companies are not competitors, Google is by far the largest search site, and ITA is the biggest airline search software company.

Shares of Google (GOOG, Fortune 500), which were down 1% on Thursday, were flat in after-hours trading.