Trivago gets critiqued for spending heavily on TV brand marketing. But Managing Director Johannes Thomas says it's part of a sustainable plan. We now tend to agree.
Trivago, the hotel price comparison platform, stands out for its business model: It spends much more on TV marketing to build brand awareness — think those “Trivago Guy” ads in the U.S. and elsewhere — than any of its metasearch or online travel agency peers do, as a proportion of overall revenue.
The model enabled Trivago to grow rapidly. But it has opened the company to criticism, especially from rivals, that the model is unsustainable and if it shuts off its marketing, the business would fall apart.
That’s a silly argument, says managing director of Trivago Johannes Thomas. “Trivago has as many engineers as it has marketers,” he tells Skift Editor-in-Chief Jason Clampet during an onstage interview today in London at the first Skift Forum Europe. Trivago’s marketers and engineers are equally key to the company’s success, says Thomas.
“You need data to learn, so you need to get users to use your product to make it something that can scale,” Thomas adds. He says it’s smart to lead with marketing spend, as long as you match it with engineers analyzing and responding to user behavior. “You can’t get enough of data. It lets you learn faster. It will tell you quickly what works well…”
Thomas says that Trivago will eventually be able to ramp down its marketing spend. Users will develop entrenched habits and Trivago will benefit from its first-mover advantage as a dedicated hotel metasearch.
It will also benefit from the demand generation because its product will have been perfected through the early user testing that the traffic volume makes possible. Thomas believes that the company’s brand awareness will be self-sustaining and will eventually create a virtuous cycle of viral, organic word-of-mouth.
Thomas joined the Düsseldorf-based Trivago in 2011 as global head of search engine marketing and has served as a managing director since June 2015. He says that Trivago didn’t know in advance that TV advertising would work so well for it at first in Germany seven years ago. “We backed into TV as just one of the channels, but it had a good response.”
To prepare for future customer expectations, Trivago has created a team in Amsterdam focused on next-generation technologies and using machine learning and other tools to build the architecture that will let the company serve customers over new channels like voice-based internet.
Out of its 1,100 employees, the company has 200 focused on this effort, Thomas says.
The Amsterdam-based team, in particular, is profiling users anonymously to better understand how people shop for different types of trips (such as leisure or business), and to profile hotels to understand what makes a hotel more appealing than others.
“Our team is doing a lot of semantic analysis of content on the internet to figure, for each hotel, what is it really good at, what are its key strengths? …The goal is to have the database and the algorithm so we can get down to a handful of choices for consumers and only return results that are most relevant.”
Thomas says in the future voice search will be critical. “I might do a voice search for a trip to Rome with my family and dog and say I want to see the Vatican Museum. We need to have the data to plot hotels near the Vatican and that are family- and pet-friendly. That’s what our AI and semantic experts are trying to understand, trying to understand queries and understand concepts and create profiles of users and hotels that pull and match information relevantly. We are building a foundation to be able to handle the user expectations of tomorrow.”
Managing growth at that pace is a challenge, though having fresh capital after the company’s December 2016 initial public offering helps. (The company remains part-owned by Expedia.)
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Photo credit: On April 4, 2017 at Tobacco Dock in London, the first Skift Forum Europe included an onstage interview of Trivago Managing Director Johannes Thomas by Skift Editor-in-Chief Jason Clampet. Russell Harper / Skift