Google’s “have your cake and eat it too” approach to business – selling ads to companies while operating competing products – has been blamed by two leading online travel companies, Trivago and TripAdvisor, for significant revenue drops.
Both companies said current industry dynamics, including increased competition from new player Trip.com and Airbnb, have flowed through to 2020, which has got off to a sluggish start.
TripAdvisor CEO Steve Kaufer said its hotel auction results had been hardest hit as Google diverts high quality hotel traffic to its own sales channels with weakness flowing through to 2020.
“We noted stronger-than-expected SEO channel headwinds in our Q2 and Q3 earnings commentary, as Google continues to siphon off
high quality traffic that would otherwise have visited Tripadvisor,” Kaufer advised shareholders.
“Hotel auction revenue declined by double digits year-over-year in Q3 and Q4, which was softer than trends observed in early
2019 and second half 2018.
“As a result, Tripadvisor-branded hotels revenue decreased -9% in Q4, despite double-digit hotel B2B revenue growth.
“Hotel auction softness has continued into 2020.
“Thus far in Q1, Tripadvisor-branded hotels revenue year-over-year performance has decelerated compared to Q4, which we believe is partly due to a continuation of these second half 2019 trends, but also could be due to a softer travel spending environment.”
TripAdvisor’s 2019 revenue dropped -3% over 2018; a -6% drop in hotel revenue the primary reason.
Meanwhile, Trivago’s 2019 revenue fell -8% year on year, the company revealed.
Trivago cited Google’s competitive activity as a significant factor in addition to reduced metasearch ad spending from Expedia and Booking.com.
“Google has invested into its own hotel metasearch product, trying to capture more of the value in the industry and grow its profit base,” Trivago said in a shareholder letter.
“The large online travel agencies (OTAs), such as Booking Holdings and Expedia Group, have moderated their performance marketing spend and put more focus on branded advertisement and direct traffic acquisition.
“More recently, new players, such as AirBnB and Trip.com, have increased their activities across Western markets, which has further intensified competition.
“Trivago and other metasearch players have been negatively impacted by the slowdown in industry growth, growing
competition, and the reduced spend of their large OTA advertisers.
“We believe that the slowed industry growth has led to a lower share of first-time users of online travel websites, reducing the value of metasearch leads to the large OTA advertisers.”
And these trends are entrenched, Trivago said
“We do not expect the industry dynamics to change significantly.
“Google is likely to continue to try to increase its share of total industry profit while large OTAs are likely to continue optimizing their advertising spend and other expenses.”