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When one of the world’s biggest spenders on digital advertising says a service isn’t delivering, other advertisers start to take a closer look at their spend, too.
Priceline Group Inc. spends feverishly on Google Inc. advertisements to grab users searching for a hotel in New York or Paris — and because ads on Facebook Inc. and Twitter Inc. have failed to deliver results, Chief Executive Officer Darren Huston said.
“For Facebook and Twitter, we have endless amounts of money,” Huston said today in an interview at Bloomberg’s New York headquarters. “But we haven’t found anything there.”
The comments by the chief of one of the biggest spenders on online advertising are set to stoke debate over which forms of digital marketing are most effective. Facebook and Twitter have grappled with questions of whether their social media ads provide a substantial return on investment for marketers, particularly at travel and e-commerce companies.
Priceline’s online marketing costs surged 41 percent last year to $1.8 billion, outpacing sales growth of 29 percent. Online travel agents need consumers to book through their sites to generate revenue, and Google, as the best source for delivering that traffic, eats up about 90 percent of Priceline’s digital ad spending, according to Mark Mahaney, an analyst at RBC Capital Markets in San Francisco, who has the equivalent of a buy rating on the stock.
Google’s search ads are based on keywords and often capture consumers looking for a specific vacation or hotel, thus leading to reservations. While Facebook and Twitter social ads can help companies communicate with their fans and can be used to target individuals based on characteristics like location and who they follow, they haven’t resulted in significant bookings for Norwalk, Connecticut-based Priceline, Huston said.
He is seeking to diversify the company’s ad spending, tapping review site TripAdvisor Inc., its own Kayak travel search engine and search site Trivago.
Bloomberg interviews Priceline CEO:
“You never want to be overly reliant,” said Huston. “But Google has been a great thing.” He declined to say if spending on Google is decreasing as a percentage of the company’s ad budget.
Jim Prosser, a spokesman at Twitter, declined to comment, citing the company’s quiet period ahead of earnings later this month. Rob Shilkin, a spokesman for Google, didn’t immediately return a call for comment. Adam Isserlis, a spokesman for Facebook, didn’t have an immediate comment.
Huston, 48, took over as CEO on Jan. 1, replacing Jeffery Boyd, who generated a 100-fold increase in Priceline shares during an 11-year run. Huston, a former Microsoft Corp. executive, joined Priceline in 2011 as head of the company’s Amsterdam-based Booking.com unit, which accounts for the bulk of its revenue.
Priceline is also investing in mobile as more consumers book last-minute travel from smartphones and as users opt for tablets over personal computers. Mobile bookings at Booking.com increased to $8 billion last year from $3 billion in 2012 and $1 billion in 2011, Huston said.
Even as Google attracts more of Priceline’s ad dollars, the search engine is becoming a bigger competitor. The Mountain View, California-based company owns online flight service ITA Software Inc., has a service called Hotel Finder that scans prices from numerous online travel agents, and last week said that it’s licensing hotel-booking software from startup Room 77 Inc. Huston said he isn’t concerned.
“Google of course respects us as an advertiser,” said Huston, whose company accounts for about 3 percent of Google’s ad revenue. “They’d like to get more of my money.”
With assistance from Emily Chang in San Francisco. To contact the reporter on this story: Ari Levy in San Francisco at email@example.com. To contact the editors responsible for this story: Pui-Wing Tam at firstname.lastname@example.org.