Was Google’s $25 million deal worth all the press?

When Google Inc. announced it would buy travel guide Frommer’s for about $25 million from publisher John Wiley & Sons, the stories about it were numerous and detailed.

But was all the attention worth it for such a small deal? Similar-sized deals made by other companies rarely receive more than a brief. And Google has a market capitalization of nearly $220 billion, making this deal akin to spending pocket change for the world’s most popular search engine. In addition, the average deal last year was around $75 million, or three times the value of this deal.

Here’s why the deal merited the coverage:

The Wall Street Journal points to the strategy behind the deal, and not the price, as being most significant for the company. Google could possibly sell travel-related ads, provide booking tools and incorporate the content with that of Zagat Survey, which they acquired in 2011, the Journal said.

Robert Cyran writes for Reuters that the content deal could help Google on several fronts. He points out that more than half of Americans now have smart phones, but advertisers are slow to catch on as the number of clicks on ads rose, while revenue per click fell according to Google’s results last quarter.

Google’s small, but calculated move could pay off if integrated properly, Cyran said. From his story:

Google figures offering more and better information will make both advertiser and searcher happier. For example, if a user types in sushi, it lists all the local restaurants and plots them on a map. Moreover, it provides Zagat’s vetted reviews, and user comments from its social network, Google+. Buying Frommer’s offers a way for Google to plug reviews of everything from restaurants to hotels to nightclubs into this matrix. Frommer’s also fits nicely with flight and travel information Google provides through ITA Software. 

USA Today took the angle that Google was interested in owning the travel space, pointing out they have flight and hotel search tools which then point customers to other booking sites. From that story:

Google has said it’s not interested in entering any booking or transaction business, but its role as a traffic cop in travel planning could disrupt the fragmented travel search industry and threaten competitors such as Kayak.com and Bing Travel. U.S. travelers spent about $27 billion on travel activities, attractions, events and tours in 2009, finds travel research firm PhoCusWright.

That’s a lot of money to be gathered from advertisers in a variety of industries. And don’t forget the ability to offer its own mobile app complete with vetted content on its own Android platform.

The New York Times noted that this is a shift away from Google’s long-standing strategy of being a means to find content instead of a provider, citing a 2010 interview with now chairman Eric Schmidt. While this makes a lot of sense from a business standpoint, Google is still being watched closely by antitrust regulators, the Times noted. Providing Google-produced content before that of other sites could decrease competition. This is one of the central issues of a Federal Trade Commission antitrust review of the firm.

It’s this antitrust point that illustrates why the deal is important to cover. The move prompted the California-based Consumer Watchdog to put out a press release urging regulators to block the deal. The Washington Post quoted a lawyer as saying the purchase was likely to pass however since it was small and there is a lot of competition in the information travel industry.

But it does open the question of whether a brand known as an independent aggregator of content should be in the business of producing information. Long known for being neutral, the shift in strategy could damage Google’s reputation if consumers find it hard to get results from companies other than Google.

The potential damage to reputation is a calculated risk on Google’s part. The benefits of becoming the content provider of choice far out weigh any brand tarnish. Shoppers now research purchases extensively online before buying. They also tend to try and minimize time spent researching, according to an interview with Google’s Jim Lecinski, managing director of U.S. sales and service. The full interview, conducted in 2011 by University of Pennsylvania’s Wharton School is here.

By pulling their content into one, easy-to-use search, Google’s shift from presenting available information to aggregating it will help capture more eyes, increase advertising spend and help the company better compete. All that for a mere $25 million.

And according to Bloomberg, investors agree that Google’s small acquisition will have far reaching implications. On Aug. 13, 2012, when the deal was announced, Google shares rose 2.8 percent to $660.01 at the close in New York. The stock has gained 2.2 percent this year. Following the announcement, TripAdvisor declined 4.5 percent to $33.52, Yelp dropped 7.7 percent to $23.87, and Expedia Inc. fell 1.1 percent to $53.83.