Little more than six months ago, the one topic that kept travel executives awake at night was Google increasingly siphoning off industry profits by moving deeper and deeper into the travelers’ user funnel.
It took a once-in-a-lifetime pandemic to turn the entire industry dynamic upside down. With travel coming to a complete standstill during spring 2020, travel companies cut marketing spending down to literally zero.
But travel will eventually come back – although possibly not in the same shape and size – and previous crises in travel have shown that players that most aggressively captured Google’s search traffic during the recovery phase ended up on the winning side of history.
This begs the question: With travel companies having the unique opportunity to hit the marketing reset button, will they swing back to their old investment habits once travelers hit the road or will they throw away the old search marketing playbook and try to rewrite their user acquisition strategy from scratch?
Add to the mix the current roar of battle drums between the travel industry and Google due to the search giant’s inflexible stance on outstanding invoices despite the pandemic-driven cash crunch – could this be the proverbial drop that spills the glass triggering a change in paradigm?
A glimpse inside the mind of the largest travel ad spenders
Booking Holdings and Expedia Group shelled out a combined $11 billion in 2019, and search and other Google ad inventory (YouTube, remarketing, etc.) took the lion’s share of this budget. Going through public statements of these travel giants during these last months provides some hints on where the industry is heading.
Booking Holdings, possibly the e-commerce poster child in building an online empire on the back of Google, has been touting in its last quarterly earnings how more than 50% of its room nights are booked through “direct channels.” It remains unclear if direct channel includes branded paid search, where Google still earns its ad toll. This traffic can typically represent up to 30% of paid search marketing for well-known brands, but remains significantly more profitable than generic keywords thanks to lower CPCs and high conversion.
Booking’s CEO Glenn Fogel also states, “We also see things like an increasing percentage mix from our Genius customers this quarter as well. Certainly, we could have increased it perhaps if we were willing to spend a huge amount of money on brand marketing, but I made the point about why that would not be the most efficient use of our money.”
Booking Holdings’ direct sales strategy seems to be more focused on cross-pollinating traffic across its different travel services by building the so-called “connected trip” than increasing branding investment to unreasonable levels.
This may suggest that Booking Holdings will stick to the strategy that propelled it to first place: gobble in as much Google traffic as possible when demand is back. Booking’s boss phrases it as follows, “I’ll confine myself to saying, look, we’re always looking for high-quality traffic at the right price… And that’s what we’re going to continue to do.”
Expedia Group, led by its new boss Peter Kern, has been busy during the pandemic to better coordinate its search marketing investment across its portfolio of brands to optimize group investment. As Kern points out, “Our marketing teams will have a great opportunity to stop competing with each other and start optimizing for the group of brands instead of for a single brand against another.”
He also remarked in the company’s first quarter earnings call that, with marketing close to zero, “knowing what your brands can drive themselves without performance is an important part of this. So I think this low will give us more insight into that as we climb out.”
In May, asked about reducing further Google advertising, Kern acknowledged that Expedia doesn’t want to “cut off our nose to spite our face.”
So despite the old investment adage, “past performance is no guarantee of future results,” the two largest Google spenders in travel seem to signal that there is no way around the search gatekeeper to crank up their sales machine once travelers hit the road again.
Travelers marketers’ Groundhog Day?
A number of underlying dynamics can explain why travel companies have no alternative to again falling into the rabbit hole of Google’s marketing acquisition spiral:
- Back to the future – The pandemic-driven acceleration of a hyper-connected world allows the search giant to lock its users even deeper into its integrated travel ecosystem. Travel players will find little alternative in the digital landscape to capture pent-up demand during the recovery phase.
- No free lunch – Google’s ongoing shift to harvest free into paid search by increasing exposure to sponsored results seems to have no limits. If there is need for proof, look no further than to tours and activities, where organic traffic has been severely decimated last month with the integration in the top of Google’s Ad Box in similar fashion to hotel and vacation rental. Car rentals and the rest of travel verticals should hold their breath for future changes to come. This trend will force marketers to step up their search marketing budgets for years to come while free organic traffic gradually evaporates.
- The cookies Armageddon – Google Chrome is following Safari’s step in phasing out third-party cookies by the end of 2022, which will make it much harder to track users and serve targeted ads. The need to use first-party cookies collected via logged users will only increase the power of Google’s single loop ecosystem (Chrome, Gmail, YouTube, Android, etc.). Advertisers will need to rely on ad serving platforms to match collected email addresses with other trusted user data around the web. The leading market platform in the western world happens to be Google Search Ads 360.
- The quality score siren song – Search engine marketing is a scale game that has benefited the large travel players thanks to Google’s so-called Quality Score. The ad auction on keywords will accept lower winning bids from advertisers with large search budgets thanks to their higher quality score, earned through better click through rates (CTR) of established brands and ongoing optimization of ad messages and landing pages. Top OTAs will think twice before drastically reducing their search budgets and potentially breaking the virtuous cycle, letting new entrants climb up the ad ranks.
- The attribution conundrum – Pinpointing which marketing investment triggered the actual buying decision in complex purchases like a holiday trip has proven to be elusive to marketing science despite the wealth of available data. Most players in travel have stuck to the decade old “last-click attribution model,” assigning the sale to the last placement where the customer clicked before the booking. Search sitting at the final step of the customer journey allows Google to get most of the credit in the marketing mix. Booking com’s marketing boss Arjan Dijk recently noted that a distinction between brand and search engine marketing was “a bit old school,” but it remains a big question mark if attribution models in the travel sphere will fundamentally evolve in the years to come.
The OTAs’ prisoner’s dilemma
The travel industry in the post-pandemic recovery will be confronted with the paradox of the classical prisoner’s dilemma game, in which two parties acting in their own self-interest do not produce the optimal outcome.
Reinventing the marketing playbook to avoid falling once again under the iron grip of Google might be the right thing to do, but how do you keep newcomers away from eating your lunch and more importantly, how do you feed the growth machine in a Google-first world once travel demand is back?
Choosing the tried and tested search marketing path will certainly be the safer bet to jump back on the growth bandwagon, but “feeding the beast” might ultimately end up transforming OTAs and travel suppliers into mere low margin content providers or fulfillers of the Google travel ecosystem.
The potential silver bullet for the travel industry might come from the regulatory side. Antitrust authorities in the United States and Europe are increasing their scrutiny on tech giants and specifically in Google’s case, their search market and ad serving monopoly. How fast and decisive regulators will strike and to what extent it might change the industry dynamics remains an open question.
Travel executives sucked up in the current crisis might be hoping that soon the only reason for sleepless nights is how to walk the fine line of capturing as much growth as possible without being crushed by Google in the long run. Use this moment to get back to the drawing board and sketch a range of different scenarios and marketing mix strategies to enjoy some restful sleep once planes start crowding the sky again.
By Mario Gavira
Read the original article at TravelTourism.news