By Martin Kelly, Editor, Travel Trends
EXPEDIA will spend more than US$1 billion on sales and marketing in 2008 as the global online travel giant moves to capitalise on the strong sales momentum it has generated over the past 18 months.
The company is now spending more than 40% of its revenue on sales and marketing – US$283.4m in the first quarter alone … 29% more than the previous year.
Sales and marketing is by far the major cost for Expedia – general and administrative costs come in at 11% of revenue while technology and content consumes 7%.
CEO Dara Khosrowshahi said Expedia – which has just reported a first quarter net profit of US$51.3m (up 48% year on year) – will continue turning up the marketing volume.
This will happen “as we continue to support our established brands and geographies, experience continued keyword inflation, invest in our global advertising and media businesses, and expand our various sales teams.
He said most of the sales and marketing budget is spent on “traffic generation costs from search engines, brand advertising (primarily television) our private label and affiliate programs” while around 22% goes on staff and other indirect costs.
One the flip side, Expedia has also experienced strong growth in advertising on its own sites like TripAdvisor.
In the first quarter Expedia websites generated $US$64m in advertising and media revenue, up 73% over the previous year.
“We have a ton of work left to do on the media side of the house … but we’re excited by the significant opportunity this area represents.
“While 50% of US travel is purchased online, just 8% of travel advertising is directed to the internet … we expect this gap to narrow over time.”
Travel Trends: May 13, 2008