Here's an unorthodox thought in business: TripAdvisor CEO Steve Kaufer knows that the company's value proposition for its customers can remain strong even when the financials face difficulties every once in a while. That's a truism that sometimes gets lost when pundits focus merely on stock price variations.
Does travel metasearch face an existential crisis because a handful of large advertising partners, including Booking Holdings and Expedia Group, can send comparison-shopping sites into a nosedive if they decide to curtail their marketing spending?
TripAdvisor co-founder and CEO Steve Kaufer shrugs off what he characterized as “a hiccup” and “a blip” that occurred last year when some major advertisers — most likely including Booking and Expedia — cut back their advertising spending on TripAdvisor metasearch.
“Some of the raw economics, because there are only a couple of big global OTA (online travel agency) players, are driven by how much those OTA players are interested in investing in paid search,” Kaufer told Skift recently. “But the category is fine. The category, to my prediction, will live for a long, long time.”
In an interview, Kaufer also spoke about why TripAdvisor, in the second quarter, for example, reduced its direct-advertising spending. The idea, he said, was to be able to fund more TV and other brand advertising, which he views as more effective than advertising on Google as a means to inform travelers that TripAdvisor is a place to compare hotel rates and book an entire trip — and not just a site to read user reviews.
Skift will talk with Kaufer about these and a host of other issues at Skift Global Forum in New York City September 27. We did an interview with Kaufer recently as an intro to some of the topics he will address at the Skift Global Forum.
The interview follows:
Skift: A lot of people ask about metasearch: Do the metasearch players control their own destinies these days? Or do a few major advertisers largely control their fate?
Steve Kaufer: Consumers like metasearch. That’s a given. I don’t think anyone can seriously deny that. So consumers, obviously — hundreds of millions of them — flock to TripAdvisor’s metasearch. There are other players out there doing very similar stuff. But there’s no question in my mind that consumer value exists in the category. They want to compare prices, want to do it on 12 different sites, so you let a metasearch engine do that for you. Bingo. Some of the raw economics, because there are only a couple of big global OTA (online travel agency) players, are driven by how much those OTA players are interested in investing in paid search.
But the category is fine. The category, to my prediction, will live for a long, long time.
Skift: Regardless of the ups and downs of a particular advertiser here and there?
Kaufer: I mean take a look at TripAdvisor as an example, and take a look at the actions of some large advertisers last year. And we’re here. We have a massive meta-engine; we have all the rest of our community; we have all of our in-destination experiences. It caused a hiccup in some of our financials, but it didn’t actually meaningfully change TripAdvisor as a value proposition for hundreds of millions of travelers. So, and, look: We’re blessed to be quite profitable. So a hiccup in demand behavior of a client or two isn’t causing us massive heartache. It’s called a blip.
Skift: Along the same lines, TripAdvisor, along with other companies, have as of late really been trying to make paid marketing more efficient. And it seems like a lot of this happened all at once, over the last year, I would say. So what do you think is really driving this change, not only for TripAdvisor but it seem industrywide among online travel agencies?
Kaufer: I’m not sure I can speak for the OTA’s, and I’m sure every company has slightly different reasons. For us, we built the world’s largest travel site on the basis of we built the world’s largest travel site on the basis of people looking for other people’s advice. We really wanted to get out a message that you can also use TripAdvisor to find great prices. To help book the hotel. And the experience and the restaurant, and everything else. And paid search is just not an effective channel to change people’s impressions of a site.
Paid search is a great way to draw qualified users to your site, and that’s why we buy on Google, and that’s why all of our clients buy on us. They’re buying the qualified user. TripAdvisor wants to show people that we compare prices. We help you throughout the trip. And our television advertising is able to do that. That’s why we’re excited, that’s why we’ve grown our TV spend. And in order to fund that marketing expense, we pulled back on some of the paid search because we think we’ve got a much better longer-term value to the brand spend than pure performance spend.
Skift: So I was wondering about user reviews. Since so many companies are doing user reviews nowadays, is that still a competitive advantage for TripAdvisor or has that eroded over time?
Kaufer: Oh, it’s still a massive competitive advantage. Because so many people know us as the place to go to get the real scoop. And it’s completely true that a lot of other sites have a lot of reviews, but part of the wonderful branding of our community is that people still globally inherently trust what users on TripAdvisor have to say. Now, of course, we’ve added to that competitive advantage with the price comparison, and the full trip. We’re really helping you on the trip, not just getting there, not just where to stay. So, we’ve added a lot more to it. But the short answer is yes, the community’s still a massive advantage for us.
Skift: Your experiences business, or tours and activities, has been a recent bright spot. Are you thinking of operating any and/or branding some as TripAdvisor tours? Why or why not?
Kaufer: Right now, we’re strengthening the foundations of our business to ensure our leadership position for the long term. We’re working to solve a fairly existential challenge for the industry: increasing online penetration beyond its current 20 percent or so. This means simplifying online distribution for suppliers of all sizes, and creating an experience that changes how travelers shop for tours and activities. These are large bodies of work and while we’ve made some incredible progress, we have a long way to go. Branded tours aren’t at the top of our priority list while we focus on these things, but we do have some, and we haven’t made any decisions about the future of this program.
Skift: Is offering multi-day tours on TripAdvisor in the works?
Kaufer: We offer just about every type of product in the tours, attractions and experiences space, including multi-day tours. We currently have over 7,000 multi-day products, and demand for this category grew 22 percent year-over-year*. It’s one of many product areas of focus for us, and over the next few quarters we’ll build customizations into our platform for these suppliers. Loading these products will become easier, and they’ll display in a more compelling way to travelers.
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Photo credit: TripAdvisor CEO Steve Kaufer spoke at Skift Global Forum in New York City in September 2017. Skift