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Travel companies pulled back sharply on their marketing expenditure during the pandemic. But today many travel brands are slowly increasing their ad spending again, and a commission-based model for charging for ads may grow in popularity as the recovery blossoms.
Sojern, an ad-tech firm focused on the travel sector, was whipsawed by this year’s events. Looking ahead to a rebound, Sojern on Tuesday said it had added metasearch as a channel to others it already offered, such as display, native, video, connected TV, search, and social.
The move is partly a bet that once leisure travel demand builds up again, hotels, attractions, and destinations will try harder to reach consumers via metasearch brands like Google, Kayak, Skyscanner, Trivago, and Wego. Consumers visiting those sites tend to have decided they’re going to book a particular trip but still are up in the air about where they might stay.
Hoteliers may like metasearch as a way to draw more customers to book on their sites and apps rather than through third-parties.
Broad Move to a Pay-on-the-Stay Model
For hotels, Sojern offers a commission-based model for payments, rather than charging a monthly fee as is more common for metasearch and other digital display ad companies.
This move is in line with Google, which this year expanded its use of cost-per-booking and cost-per-guest-stay ways of charging for ad placements in its hotel metasearch, moving beyond its traditional cost-per-click model. The factors that propelled Google to be a digital advertising powerhouse in travel before the crisis are the same ones keeping advertisers spending in it now: a broad audience, effective targeting at scale, and products that tie marketing budgets to results.
Trivago also launched on October 1 a commission-based model. Hoteliers and other advertisers in its auctions can choose a cost-per-acquisition model instead of the traditional cost-per-click model.
“The appeal of the commission model is down to the measurability more than anything,” Rabe said. “If I’m a hotelier and I’m paying a 15 percent commission for a closed transaction for a hotel stay, then I can know I’m generating a roughly seven times return on investment on my marketing spend.”
Hotel marketers haven’t cut this type of performance-based advertising as deeply as they’ve cut other types of spending. Sojern has seen this year large hotel brands brutally slash their marketing spend on TV ads, billboards, and display ads. While marketing that helps build brand awareness can be measurable, executives treat it as a quick budget item to cut.
“The commission-based ad model is treated differently because it looks and feels like distribution,” Rabe said. “It feels like cost-of-goods sold rather than discretionary marketing spend.”
The commission model may prove especially popular among marketers at small and mid-sized hotel companies and chains with independent franchises managing individual properties. So Sojern expects to see a more aggressive offering of the commission model by other players in the ad tech market.
Sojern, which in 2018 raised $120 million in a Series D round of investment, started as a company focused on programmatic display ads in 2012 and 2013. It moved into search ads and then social media like Instagram. Metasearch is its last big channel to tackle.
It had to lay off about half its staff in response to the pandemic-related revenue crisis in travel. Out of its 8,000 or so travel customers who use it to help run digital advertising campaigns, Sojern lost about 2,500 in April and May. But the company has been recovering and it now has about 7,500 clients.
Sojern sees metasearch and the commission-based model more generally, which it offers on most of its products, as an accelerant to growth next year.
“Meta is a very efficient way to drive up occupancy,” Rabe said. “Those hotels that are not on meta today will change that very shortly. It’s a big mistake not to be on meta.”