Travel industry digital ad spending is heavily skewed toward driving transactions because online travel agencies, which are primarily interested in converting lookers into bookers, are calling the shots.
Researcher eMarketer has just released a report on U.S. trends in digital advertising spending, but one thing isn’t changing in 2014: the Priceline Group will indisputably be the largest spender, and Expedia Inc. won’t be too far behind.
In other words, In U.S. travel industry digital advertising spending, there is Priceline, Expedia — and everyone else.
That’s the conclusion you can reach from the latest eMarketer report, “The U.S. Travel Industry 2014: Digital Ad Spending Forecast and Trends.”
The report notes that the Priceline Group, including Booking.com, Priceline, Agoda, Kayak and rentalcars.com, shelled out $1.8 billion on digital advertising spending globally in 2013, according to a Securities and Exchange Commissiion filing, “representing more than half of the U.S. travel industry’s digital ad spending for the year.”
eMarketer forecasts that the U.S. travel industry’s 2014 spending on digital advertising, meaning all advertising on desktops, tablets and smartphones, will rise 21.3% to $4.15 billion, up from $3.42 billion a year earlier. In 2018, that number would hit $6.4 billion.
Of course, with the U.S. travel industry focusing on direct-response advertising to drive transactions, rather than branding advertising, Google AdWords picks up most of the paid search dollars.
As noted in the eMarketer report, Mark Mahaney of RBC Capital Markets has estimated that the Priceline Group will spend $1.5 billion with Google globally in 2014, and Expedia Inc., with brands including Expedia,.com, Hotwire, hotels.com, Trivago and others, will chip in $1 billion.
Despite the fact that Google has more than 1 million advertising clients, Priceline and Expedia’s digital ad spend would equate to nearly 5% of all of Google’s advertising revenue in 2014, according to Mahaney’s estimates.
“Unfortunately neither Priceline nor any of the other category players break out their ad spending on a country-by-country basis,” says Jeremy Kressmann, eMarketer travel analyst, who wrote the eMarketer report. “That $1.8 billion is a global number and it comes directly from Priceline’s 2013 annual report. “We didn’t come across a similar 2013 Expedia digital marketing figure.”
“The larger takeaways here are that advertising by the two biggest spending online travel companies, Expedia and Priceline, and their subsidiary brands, is a dominant factor in category activity, and the majority of their spending as companies is going to search-advertising tactics,” Kressmann says. “Taking into account these two companies’ advertising tendencies influenced our estimates for a heavy skew towards direct response in the travel category as a whole.”
The eMarketer report stated that “a handful of online travel agencies” dominate the U.S. travel industry’s digital ad spending, and that nearly three-quarters of it in 2014 “will be devoted to direct-response objectives, as opposed to branding efforts.”
That emphasis on a no-nonsense push to turn lookers into bookers rather than branding advertising helps to explain why Priceline Group CEO Darren Huston is unimpressed with the results the company gets from advertising on Facebook and Twitter, and why TripAdvisor CEO Stephen Kaufer shares some of the same sentiments.
Kressmann believes that Google’s ambitions in travel, including its development of Google Flights and Google Hotel Finder, will one day collide with Priceline’s and Expedia’s positions as extremely important Google advertisers.
“Given Google’s moves to launch their own flight and hotel finders, perhaps a more relevant question is if Google wants to rely on Priceline and Expedia ad spending or if it actually wants to become the replacement for Priceline and Expedia,” Kressmann says. “At some point those ambitions will come into conflict.”
That potential conflagration, though, is not inevitable (few things are).
For now, at least, it can be argued that Google is fine being irrelevant when it comes to its own flight-search tools.
There is too much of that Priceline and Expedia digital ad spend at stake.
Photo credit: Larry Page, Google's co-founder and chief executive, speaks during the keynote presentation at Google I/O 2013 in San Francisco, Wednesday, May 15, 2013. Jeff Chiu / Associated Press