The Priceline Group's new emphasis on TV is unpleasant news for metasearch enterprises such as Trivago, Google, and TripAdvisor. The TV ads are an online travel agency version of a direct-booking campaign.
When the Priceline Group, including Booking.com, Priceline.com and Kayak, said it would rethink its digital advertising strategy and tilt more toward TV campaigns to increase the profile of its brands and establish closer ties with customers, the company meant it.
In the past four months — October 2017 through January 2018 — the Priceline Group’s U.S. national TV advertising jumped to $35.4 million, from $4.3 million in the same period a year earlier, according to an iSpot.tv estimate. [See chart below.]
The company’s percentage increases during this seasonally slow period are off the charts. Representatives did not immediately respond to questions about their spending spree.
For example, the Group’s largest brand, Booking.com, went from spending next to nothing in U.S. national TV advertising ($130,793) from October 2016 through the end of January 2017 to shelling out $24.3 million in the past four months, iSpot.tv found.
The scale of the increase was far larger — but from a smaller base — for the company’s namesake Priceline.com brand. Its spending shot up to $9.13 million over the past four months from roughly $2,000 during the same stretch a year ago, according to the estimate.
It looks like a small portion of the TV advertising jump came at the expense of Kayak, which saw its spend decrease 55.8 percent in the last four months compared with the year-earlier period, the TV advertising analytics company found.
The iSpot.tv numbers only cover U.S. national — excluding local — TV advertising, so the trajectory of the Priceline Group’s TV advertising spend in the 30 or so countries where Booking.com was expected to be on the air is difficult to gauge. In 2016, Booking.com was running TV ads in only about a dozen countries.
However, Chief Financial Officer Daniel Finnegan said last fall that the Priceline Group intended to hike its TV advertising spend “over the next few quarters” by 55 percent, a move that would put pressure on its return on investment and come at the expense of some digital advertising spend. Added expenses for advertising and technology costs drew investor concern, and Priceline’s stock price tumbled.
“However, we believe this spend represents an important long-term investment in the franchise and is the right thing to do at this time,” CEO Glenn Fogel said during the company’s third-quarter earnings call with analysts in November.
Kevin Kopelman, a Cowen analyst, said Tuesday he believes the TV spend is vital for the Priceline Group’s positioning in the market.
“We project Priceline will increase its brand ad spend by 60 percent in 2018 to $600 million, mostly on TV, making Priceline the largest TV advertiser globally in online travel,” Kopelman said. “While the investment will weigh on near-term profits, we see it as strategically important for Priceline’s long-term competitive position.”
However, PiperJaffray analyst Michael Olson argues that the Priceline Group will have to labor a bit to figure out the right mix of spend in various advertising channels.
“Priceline has indicated that its direct brand advertising strategy is showing signs of working and management expects to continue to push marketing dollars towards this initiative (and away from performance marketing such as metasearch),” Olson wrote. “While this is likely the right long-term strategy to drive higher repeat traffic rates and an improving overall advertising ROI, we expect some degree of ongoing negative impact on bookings in 2018 as the company ‘dials in’ the correct level and mix of spend.”
Priceline Group, which saw its Booking.com brand, in particular, grow massively in the last decade because of its expertise in digital advertising, feels that it was putting too much money into advertising through some third-party outlets ranging from Trivago to Google that then used the spend to compete against it.
The TV spend, the company feels, will engender direct relationships with customers, and would be advantageous over the long term.
Here is the estimated spend from iSpot.tv:
Priceline Group U.S. TV Advertising Spend October 2017 to January 2018*
|Brand||Oct. 2016-Jan. 2017||Oct. 2017-Jan. 2018||Percent Change|
|Kayak||$4.16 million||$1.84 million||(-55.8%)|
|Total||$4.3 million||$35.4 million||723.20%|
* The estimated spend is through January 28, 2018.
Booking.com’s Monster Truck commercial attracted the most TV advertising spend ($6.6 million) from the company over the last four months, according to iSpot.tv.
Photo credit: The Priceline Group is spending more on TV as a percentage of total advertising spend than it has in the past. Pictured is the Booking.com app on a smartphone. Bloomberg