Choosing how much to advertise with Google, and where and when, can have significant financial implications. Trivago didn't jump into a new Google ad format, and got burned.
Three key Trivago executives rejoined the company in May just as Google was launching a new advertising unit to attract hotel bookings. Trivago didn’t advertise in the new product, unlike brands such as Booking.com, Priceline, Expedia and Homewood Suites, and Trivago’s absence negatively impacted its second quarter financial results.
If anyone doubts the power of Google advertising to impact travel businesses one way or another, this is a case in point.
Chief Financial Officer Matthias Tillmann told financial analysts Wednesday that the company had decided not to advertise in Google’s new property promotion ads (see an image below) because they are part of Google hotel ads, which didn’t perform well for Trivago.
But it turned out that the property promotion ads took share from Trivago’s advertising on Google.com. Trivago is a hotel metasearch site. It advertises on Google to attract site visitors, who click online travel agency and hotel ads on Trivago, and then in turn they can navigate to those sites to book a stay.
“We did not participate in this ad format prior to this rollout, and when this got more visibility [at the expense of] traditional advert placements, we lost traffic volumes,” said Tillmann, referring to the property promotion ads.
However, Trivago started participating in the property promotion ads in July, and will see how they perform, he said.
The Trivago Band Is Back
All of this took place as three Trivago alums returned to the company in May after departing in 2020. They are CEO Johannes Thomas, Chief Marketing Officer Jasmine Ezz, and Chief Product Officer Andrej Lehnert. Now former-CEO Axel Hefer, who joined the company as chief financial officer seven months before the December 2016 IPO, were among those leaving the company in May.
Trivago has experienced a rough few years since it went public in 2016 at a roughly $4 billion valuation. That has dipped to around $406 million today. Over the years, Trivago has faced increased competition, including from Google, intermittently had spats with one of its largest advertisers, Booking Holdings, and has to deal with a decline in traditional TV as an advertising channel. Expedia Group holds a majority stake in Trivago.
Germany-based Trivago built its brand largely on the basis of omnipresent TV advertising, particularly in Europe and the U.S., and plans to redouble that effort under the new management team, although the company concedes this will take some time.
Speaking during his first earnings call as CEO and since rejoining Trivago after a three-year absence, Thomas said he, Tillmann, Ezz, and Lehnert “have been part of the leadership team that scaled Trivago across the globe. With our deep understanding of the company and the relevant know-how in marketing, product and technology, we feel confident to guide the company’s future.”
These Things Hurt Trivago’s Second Quarter Performance
“Lower monetization, shorter length of users’ booked stays and foreign exchange rate effects, all negatively impacted our financial performance, more than offsetting the positive impact of increased average booking values, mainly driven by higher average daily hotel rates and increased booking conversion,” the company’s second quarter announcement stated Wednesday.
Another significant factor in Trivago’s disappointing financial performance was that Booking Holdings, one of Trivago’s largest advertisers along with Expedia Group. reduced its advertising spend in Trivago by 34%, BTIG reported in a research note.
Tillmann said average daily rates were at “high levels,” and travel demand was stable despite the shorter lengths of stay.
Trivago notched net income of 5.8 million euros ($6.34 million ) in the second quarter compared with a net loss of 59.8 million euros ($65.4 million ) a year earlier. Impairment charges of 84.2 million euros ($92.1 million) in 2022 contributed to the large net loss a year earlier.
Trivago’s revenue in the second quarter fell 14% to 124.4 million euros ($137 million).
Note: This story was updated to reflect the fact that Booking Holdings reduced its advertising spend by 34% in the second quarter.
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Photo credit: A screenshot from a Trivago video with Chelsea footballer Ben Chilwell. Trivago is a sponsor of English Premier League's Chelsea Football Club. Source: Trivago