Why the Coronavirus May Significantly, and Unexpectedly, Hurt Google Stock
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Why the Coronavirus May Significantly, and Unexpectedly, Hurt Google Stock

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Everyone knows Google as the premier search engine of the world. But did you know Google’s efforts in the travel business are estimated to be worth over $100 billion? With global travel already affected significantly, the coronavirus could have a major — yet largely unforeseen — impact on Google stock.


How Google Is Actually a Giant Travel Company

When you start thinking about your vacation or need to figure out travel details for your next work trip, where you go? Odds are that you first go to Google even if you later tell your friends that you used an “actual” travel company like Kayak or Expedia. Google, in fact, is arguably the biggest travel business in the world, even if it doesn’t directly deal with travel arrangements most of the time.

While many pundits are currently discussing how the coronavirus will affect travel companies and the industry at large, the biggest victim to the entire fiasco could be Google itself.

In earlier years, travel agents were the resources you used to figure out your vacations. Doing it yourself wasn’t really viable before the advent of the Internet. But as Google and the Internet at large rose to prominence, Google itself became one of the biggest travel companies almost accidentally.

Think about it. Whenever you want to find where the best beach resorts are, what resource do you use? According to available data, chances are it’s Google.

The unofficial Internet home page is where most people start their vacation resource searching. Travel companies like Expedia and Booking.com know this all too well, which is why they pay Google billions of dollars every year to artificially inflate their advertising efforts and make sure that your eyes see those ad campaigns when you’re looking for your next vacation hotspot.

People don’t have lots of time to browse through the literally thousands of options available for travel bookings. So whoever gets in front of a potential customer’s eyes first — often also gets the business. Google’s ranking, in this way, can dramatically affect the performance of the business, especially for a luxury like vacationing.

However, you also have to consider how travel companies work successfully. Most of them essentially network different hotel and flight data centers together to provide you with easy access to itineraries and ready-made vacation packages. It’s a lot easier than netting together the different elements of a vacation together piece by piece: first the plane, then the hotel, then food, and so on.

Yet although travel companies spend lots of time and money networking those connections together, Google has collected just as much, if not more information because of everyone using them as an information service. It’s no stretch to say that Google’s real commodity is information; the data they gather would surely dwarf the collection of any other organization in the world.

Google Travel — Bracing for Impact from Coronavirus?

This mobile app made significant splashes even though it was only out for a few weeks between September 19 and August 5 in 2019. It let users plan for upcoming trips by summarizing info from their destination and required the use of a Google account.

But its functionality isn’t the real threat to travel agencies or businesses; it’s the fact that Google would obviously put their own application at the top of the search page results if they decided to bring it back.

This development, along with the implication that Google will continue to push into the travel sphere, means that Google is likely going to be the premier travel/vacation company of the future.

How Much is Google’s Travel Business Worth?

It’s tough to estimate just how much money Google makes when people query about travel arrangements, use their search engine to find travel accommodation providers, or use Google’s own travel services. Skift recently performed research which estimated that Google’s travel business contributes to about 15% of the $650 billion market cap for the industry. This totals about $100 billion: no ‘chump change’ by any measure.

Of course, Google also makes money from its other services. But just because Google doesn’t draw a majority of its income from travel and related services doesn’t mean that they never will.

Coronavirus and Its Effects on the Travel Industry

Since the coronavirus has taken hold both of the public imagination and the economy, it’s already disrupted the travel industry more than many others. The travel industry traditionally brings in about $5.7 trillion in revenue and is responsible for about 1/10 of the jobs across the world.

Travel isn’t just about vacationing when you have some time off. It’s also the industry that allows a big part of the global economy to function. Businessmen and women fly to different countries every day and many people commute from their hometown or country for seasonal work in other parts of the world.

Consider China, whose nationals have become some of the most frequent travelers regardless of destination. Almost 180 million Chinese citizens have passports compared to 147 million Americans. Of course, the coronavirus has hit China worst of all as the origin point of the crisis.

As a result of the virus, travel to and from China has practically halted. It doesn’t take much hard data to imagine the effect that this can have on the global economy, especially since the Chinese market affects every other world market just as much as America’s does (if not more).

How the Coronavirus will Affect Google Stock

 Google, along with four other major corporations, controls a huge proportion of the stock market at large. It’s no surprise to see that Google’s stock is currently falling along with other tech giants like Facebook and Apple.

But when you consider how Google already has huge fingers in the travel industry pie, the potential for their stock to plummet gets even more serious. Google, for instance, has banned travel to China and employs several people in the Chinese region. Beyond that, many people are canceling their vacations or work trips, which results in lost revenue every day that advertising dollars aren’t brought in and people don’t click on the top results of the search page.

Altogether, Google and its other tech competitors lost about $238 billion in the recent stock market crash. When you consider that Google brought in about $100 billion of revenue from their travel industry advertising efforts alone, it’s easy to see a direct correlation between the travel restrictions unanimously spreading across the world and Google’s losses.

The Future of the Coronavirus and Google stock

Ultimately, it’s difficult to say what will happen for Google stock and for the rest of the world, especially the travel industry. It’ll likely take some time for the industry to regain its former glory, especially as people continue to catch the coronavirus and recover. Additionally, many aspects of the recovery period are dependent on how virulent the virus ends up actually being and the effect it may have on the economy as people become sick and heal over time.

Google’s stock will likely continue to fall in conjunction with the other tech companies’ for the foreseeable future, both because of the impacts on the travel industry in conjunction with coronavirus ripples. However, Google still maintains a solid grip on the search engine and advertising spheres on the internet as a whole.

This indicates Google can pick up its travel industry endeavors once things return to normal. But when will that happen? Looking at the impact of previous epidemics on the stock market could provide some orientation.

It may yet be possible for Google to capitalize on its market dominance and become the travel industry giant it may one day want to become, even if it’s been delayed for the time being.

What do you think about the potential impact the coronavirus could have on Google stock? Let us know what you think in the comments section below.


Image courtesy of Bloomberg.

March 12, 2020

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Tim Fries Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firms specializing in sensing, protection and control solutions (IoT).