Ben Thompson's characteristically excellent article this week focuses on how Google has forced online travel agencies (like Expedia) to pay for traffic by prioritizing ads and pushing organic results further down the page. Part of this is clear product improvements, like a paid-inclusion hotel module that's useful to users while generating revenue for Google. But some of it is just increased ad load. Certain search terms have seen the number of ads before the first organic result double, from two to four, over the last several years.
Ben glosses over why users haven't resisted this and says that the ads are easy to ignore. I think the reality is more interesting and more complex. Simply put, Google's paid results for certain commercial terms just aren't that much worse than the organic results. That's because the signals Google uses for organic search aren't that useful in context (and companies are spend millions of dollars to improve those signals), so the signal a site sends by paying for placement is arguably just as useful.
I don't have any experience working with OTAs, but I used to work in a vertical (online apartment listings) where providers are also reliant on Google for both paid and organic traffic. I'm not an expert on search engines, but my experience gave some insight into why Google has been able to increase ad load so aggressively without ruining user experience.
Let's review how Google sorts results for a search term. There are many factors, but at a high level, Google will prioritize pages based on two factors: a) relevant content and b) inbound links from high-quality sites.
This works great when you search for "make my cat stop stealing my food" and get a top result that is a) a long essay on the subject and b) gets lots of links from other sites because, after all, it is the seminal work on thwarting feline food theft. Crucially, you're searching for text, and Google can do a pretty good job of figuring out if a page contains the text you're looking for.
With a term like "apartments in washington dc", though, things fall apart. The content you're looking for isn't an essay; it's apartment listings. And while Google can do a decent job of understanding if text is relevant, it has no way evaluate the quality of those listings. And even if Google could evaluate the quality of listings, all of the big apartment websites have listings for the exact same professionally managed buildings. (The same is true with OTAs: booking.com has roughly the same hotels as hotels.com.) So Google ordering results based on content is basically a no-go.
If the content half of Google's formula doesn't work for apartment listings, what about the inbound link half? Well, websites work really hard to get links to pages they care about. This is a key part of the practice known as search engine optimization (SEO). For instance, at my old job, we'd reach out to universities in Washington, DC and ask them to link to our DC page on their housing guide. Or we'd write a report on rent trends in DC, put it on our listing page, and then email reporters in the hope that they'd link to that page. In either case, getting the inbound link was only vaguely related to actually having high-quality listings on our page.
Despite these flaws, Google's organic results for "apartments in washington dc" are pretty accurate. That's because SEO has a meaningful signaling component. The links we got to our Washington, DC page had little to do with the quality of the listings, but they did show Google that we were a competent organization with a significant budget available to invest in SEO and a particular interest in promoting our DC page. All of those attributes were (loosely) correlated with having good listings on that. In our case, we had just signed new partners in the DC area and were eager to drive traffic to the new buildings.
Of course, if you're a competent organization that's willing to spend a lot of money to promote a particular page (and SEO does cost a lot of money) then perhaps Google should simply collect that money from you directly. "We'll pay Google a million dollars a year for traffic" is just as compelling a signal as "we'll spend a million dollars a year on our SEO team." You do occasionally get wildly irrelevant ads, mostly when some small site messes up their targeting, but search ads are expensive and advertisers care a lot about only showing their ads on relevant searches.
To go back to our example term of "apartments in washington dc", three of the four ads are totally interchangeable with the top four organic results. (Indeed, apartments.com is currently both the top organic result and the top ad.) The fourth is an ad for a company that provides furnished apartments in DC. That ad is less relevant to the average searcher, but it's not offensively so, and in some cases it may be even more relevant.
To return to Ben's article, he writes, "the SEO channel is free, the hotel module isn’t." That's incorrect. SEO amounts to paying an army of freelance writers, link builders, and marketing experts to drive traffic to you on Google. Once you realize that, it's natural for Google to just collect the money directly.
Disclosure: I worked as a software engineer at Google after I worked in the apartment industry. However, I didn't work in the search division, and I have no insider knowledge about the search algorithm.