Trivago is considering spending more money with Google to diversify its advertising spend.

Huh?

Axel Hefer, Trivago’s chief financial officer, told Skift the company is testing advertising in Google Hotels, a competitor to Trivago’s own hotel-price comparison service, in the Netherlands and Germany now that Google has lifted a ban and is allowing referral sites to participate.

And, he’s not a fan of some of the recent changes Google has made to its hotel product. He believes the new interface, which make low hotel prices harder to find, is part of Google’s strategy “to maximize the value they can extract out of their user base,” even though the consumer clearly doesn’t benefit.

“Google is shifting more traffic into that product [Google Hotels] and away from AdWords,” Hefer said. “This doesn’t mean there is more user choice in deciding to use that product, but it’s more automatic.”

In an interview in Skift’s Manhattan offices earlier this week, Hefer explained that “historically we have not been able to participate in that channel,” meaning Google Hotels.

If you are new to the travel industry — or even if you have worked in travel for 20 years — these dynamics might seem confusing, so let’s back up a bit.

Started TV Advertising In Its Early Days

Trivago’s co-founders launched the hotel search site in 2005 in Dusseldorf, Germany, and they quickly started spending a lot of money on TV advertising because they didn’t want to be too dependent on Google. You’ve likely seen the Trivago TV commercials every time you turn on the television.

Today, Trivago’s two largest advertising outlets are TV and Google AdWords, which enables companies to bid with Google on keywords to show their text ads higher up among the sponsored links in the Google search engine.

Google Hotels debuted several years ago. If you search for New York hotels, for example, in Google search, instead of choosing from sponsored or free links in search results, Google places its own hotel product high up on the page, and then users navigate to ads from a varying mix of four online travel agencies.

Many in the travel industry argue that Google is unfairly hurting competitors such as Trivago, TripAdvisor, Kayak, and even Expedia and Booking.com because Google is unfairly using its search-engine dominance and giving its own hotel search product preference over those of competitors.

As Skift pointed out in its Travel Megatrend 2018: Google’s Product-Led Vision Is Bearing Fruit, and as Hefer of Trivago confirmed, Google is shifting travelers looking for hotels from classic Google search to its own hotels business.

Until last year, Google barred advertisers such as Trivago, which didn’t offer booking capabilities and merely referred users to its advertisers to complete their bookings, from participating in Google Hotels. If you occasionally saw Kayak and TripAdvisor, which are mostly metasearch/advertising sites like Trivago, showing up in Google Hotels, it was because they were touting hotels that they could complete the bookings for themselves.

A Google spokesperson confirmed that previously, metasearch companies were only allowed to participate in Google Hotels if they had pricing and available rooms that could be booked on their sites.

But Hefer said Google changed its policy last year roughly around the time that the European Commission fined the search giant $2.7 billion for anticompetitive practices in comparison shopping. The fine didn’t relate to Google’s travel business, but seems to have had an impact nonetheless.

A Google spokesperson said the timing of the changes to its Google Hotels participation policies and the European fine were a coincidence.

Trivago views google hotels Participation as an ‘opportunity’

Trivago had a rough 2017, which saw its stock price tumble and its losses grow, largely because of changes it made to its platform, and the decision by its largest advertiser, Booking Holdings, to dramatically reduce its ad spend in Trivago in the second half of the year when compared with the first six months.

Hefer said Trivago’s largest advertiser — it’s no secret that it was Booking Holdings — accounted for about the mid-40 percentage range of total revenue throughout 2016, increased it substantially in the first half of 2017, and reduced it to just 33 percent of the company’s total revenue in the fourth quarter. In the interim, Expedia, which has a majority stake in publicly traded Trivago, increased its percentage of Trivago’s total revenue, and smaller regional advertisers have picked up some of the slack.

Trivago hopes to diversify its overall advertising spend by testing and eventually participating on a larger scale in Google Hotels, which it views as a different channel than Google AdWords, Hefer said.

“So we are in a testing phase” in the Netherlands and Germany in Google Hotels, he said. For years, when Trivago wasn’t allowed to participate in Google Hotels, it had a negative impact because Google was pushing traffic out of AdWords and into Google Hotels.

“When you think about it, for years we had the negative effect of more traffic being pushed into a competing product,” Hefer said. “The positive effect of being able to compete in a performance market that is now quite sizable, we didn’t have. So, ironically, for us today it is an opportunity for sure.”

After being barred, along with other referral sites, from participating in Google Hotels, once Trivago catches up it can then debate internally whether it is a net positive or negative to be spending heavily in Google Hotels, which is a competitor, Hefer said.

Is There Value in Alternative Accommodations Metasearch?

On other issues, In terms of mergers and acquisitions, Hefer said Trivago hired someone full-time to analyze its opportunities. That person is in touch with Trivago’s product teams and looks for companies that might accelerate the company’s growth rather than having a consolidation motive.

Hefer said alternative accommodations metasearch sites, such as Tripping and HomeToGo, wouldn’t be of interest for their brands or search technology. But he added companies like these might be noteworthy for their “matching technology” and for their advertising clients if their roster is very large.

“There is potentially some value,” Hefer said. “That would fit the criteria of something that is naturally on our roadmap. Then it really depends on the player.”

Photo Credit: Trivago CFO Axel Hefer considers advertising in Google Hotels a huge opportunity after being barred from participating for several years. Trivago