TripAdvisor had some bright spots, such as higher-than-expected revenue growth (31 percent) in its attractions, restaurants and vacation rentals segment in the second quarter, but one thing to watch in upcoming quarters is whether the company’s largest customers such as the Priceline Group and Expedia begin to shift some of their marketing spend away from TripAdvisor.

That’s because the company on Tuesday said that in July, which is the start of the third quarter, TripAdvisor saw softer cost-per-click pricing in its hotel auction. In other words, online travel agencies or hotels seeking to place their links and rates in TripAdvisor’s hotel pages and higher in the listings weren’t bidding as much as they had in the past.

This softness in pricing in TripAdvisor’s hotel auction, along with a greater-than expected shift of consumers perusing hotels to mobile devices, which monetize lower than desktop levels, led TripAdvisor to lower its click-based and transaction revenue growth expectations for 2017 to the mid-single digits versus the previous double-digit guidance. Consolidated revenue growth is forecast to be “slightly better” than click-based and transaction revenue growth.”

What Does It Mean

The softness in pricing, which TripAdvisor characterized as a recent “trend,” is certainly something to watch. That’s because over the last three years, TripAdvisor’s largest advertising partners were Expedia and Priceline, and the two partners/competitors contributed 46 percent of TripAdvisor’s total revenue each year.

If Expedia, which owns TripAdvisor rival Trivago, and Priceline start shifting significant marketing spend away from TripAdvisor’s hotel auctions, and this contributes to less-competitive bidding, then that could portend a nagging problem for TripAdvisor. They could perhaps spend more with Trivago, Google, Facebook or Kayak, for example.

In theory, other advertisers could step into the void and take advantage on TripAdvisor but a diminished role for Priceline or Expedia could hurt the competitiveness of TripAdvisor’s auction.

Even TripAdvisor officials don’t know exactly how to interpret the softness in the July hotel auctions, which can have some volatility — or they aren’t extensively elaborating and naming advertisers.

Asked whether the softness was TripAdvisor-specific or might be related to wider trends, CEO Steven Kaufer said the company doesn’t have insights into individual companies’ marketing-spend decisions, adding that he doesn’t believe the wrinkle was purely a TripAdvisor phenomenon.

He said TripAdvisor saw the softness in cost-per-click bidding globally — so not in one specific market or region — and that it wasn’t a consistent trend among a broad swath of clients. Kaufer said it is very possible that the weaker bidding might reverse itself.

“Our ongoing focus is squarely on driving growth through our revamped hotel shopping experience as well as our brand advertising campaign, growth that may partly manifest in 2017 but we believe will have a more significant positive impact on our business in the years to come,” the company said in prepared remarks.

Photo Credit: TripAdvisor reported that its advertisers' cost-per-click bids were soft in July. Pictured is the Taj Lake Palace Udaipur in Udaipur, India. TripAdvisor