Trivago’s decision to opt out of Google’s new property promotion ads reportedly took a signifiant toll on its profits.
Revenue was down 14% year-on-year to $137 million in the second quarter of 2023, following a decrease in organic traffic to its website.
Meanwhile, revenue for Expedia, which did advertise with on the search engine’s new ad unit, reported a record second quarter with revenue up 6%.
A regretful data-led decision. Trivago’s Chief Financial Officer Matthias Tillmann explained that Trivago did not to advertise with Google’s new ad product because it is part of Google hotel ads – which historically hasn’t performed very well for the company, reports Skift. . However, this soon became a decision the team would come to regret. He said:
- “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 Tilman.
Why we care. When new ad products are launched, particularly by industry giants like Google, brands should make sure they are paying close attention and not be so quick to dismiss the possible potential. If financial risk is a concern, perhaps it may make more sense to trial a new product on a smaller scale rather than to disregard it all together. It’s also important that marketers ensure they are constantly monitoring the performance of their websites and campaigns. If you have noticed a drop in traffic, address it sooner rather than later to control financial losses.
Drop in ad spend. In its Q2 results, Trivago also announced that ad spend in the US had decreased by 10% to $32.9 million. The company spent 4% less on advertising in Europe, compared to the same period in 2022, as well. Commenting on the results, a company spokesperson said:
- “Our reliance on search engines, particularly Google, which promote their own product and
services that compete directly with our accommodation search and may negatively impact our
business, financial performance and prospects.”
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What has else Trivago said? Trivago addressed its Q2 results in a statement published on its website. A spokesperson said:
- “We observed increased volatility in the results of our performance marketing campaigns. As we continued to be disciplined with Return on Advertising Spend (ROAS) targets, we experienced significant declines in performance marketing traffic volumes coupled with decreases in profit contribution.”
- “Despite these headwinds, we ramped up our brand marketing investments as planned. While these expenditures had a negative impact on our profitability in the second quarter of 2023, we believe they will have a long-term positive impact on the volume of direct traffic to our platform and our financial performance.”
Deep dive. Read Trivago’s Q2 2023 Earnings Release statement in full for more information.