Trivago is considering adding free links like Google did

Will Trivago, a Germany-based hotel price comparison site, add free online hotel and travel agency links as Google did in 2021? CEO Axel Heffer has hinted that such a scenario could loom.

In an interview with Skift on Wednesday, Hefer said Trivago would consider adding free links on Trivago to supplement paid links for advertisers, but declined to comment on whether such plans are in the works. In theory, he said, the broader inclusiveness that free links could generate would be particularly useful in Europe, where independent hotels, rather than chains, dominate.

The free links can attract more travelers who use Trivago to purchase offers.

Booking Holdings and Expedia Group, the largest shareholder in Trivago, are Trivago’s dominant advertisers. About 81% of Trivago’s benchmark revenue for the second quarter came from the Booking Holdings (52%) and Expedia Group (29%) brands.

On so-called metasearch sites like Google Hotels, Kayak, and Trivago, travelers search for hotels and click through a range of links to book their stay with a travel agency or hotel online. Metasearch sites make their money when advertisers bid in auctions to place their links higher or lower in a hotel ad, and they pay to metasearch when travelers click on those links.

But Google supplemented these paid links from advertisers with free links from online travel agencies and hotels from 2021 to lure more booking sites and hotels to participate — and to satisfy antitrust watchdogs and show that its participating suppliers weren’t just huge travel companies.

For example, in this screenshot of Google Hotels, the top box labeled “Featured Ads/Options” contains links from four paid advertisers (Hotel website, Booking brands, Expedia), and the links in the bottom box labeled “All options” are Paid and includes links from lesser known companies like Bluepillow and BusinessHotels.

In Trivago’s second-quarter earnings call on Wednesday, Hefer described Google’s introduction of free links as “really exciting,” adding that when Trivago has free links on Google hotels, Trivago “really capitalizes on that traffic.” Free. So, for us, it’s a net positive from our point of view. »

More competitive environment

Matthias Tillmann, Trivago’s chief financial officer, said the company sees a more competitive environment in both Google’s hotel auctions, where companies bid to place their own booking links, as well as in Google’s private auction. Trivago, which results in a higher CPC versus advertisers on both. This means more earnings per click for Google and Trivago respectively.

Tillman concluded that due to the relatively high costs, Trivago had limited its participation in the Google auction.

“We have decided to maintain our profitability targets and maybe sacrifice some volume, but focus on traffic that is directly profitable for us or where we expect positive returns in the long run, but we don’t offer to traffic where we have low belief that it will give us a good return over a period of time. time.”, he said.

Trivago has summer brand campaigns running on TV and online in all of its major geographies, and Hefer said these ad campaigns outperform paid digital marketing efforts (on platforms like Google).

Trivago is ending its efforts to spend the weekend

Officials said Trivago was seeing strong summer demand, but argued that inflation and the subsequent impact on travelers’ disposable income could reduce travel demand later this year and possibly beyond.

Due to this new set of circumstances, Trivago has announced that it will discontinue its efforts to sell weekends and increase its on-screen advertising activities to focus on its core hotel price comparison business.

Trivago acquired in 2021 for €7.4 million ($7.6 million at current exchange rates) with the goal of starting to conduct its own travel transactions rather than simply referring travelers to other travel agencies for reservations.

But that business model experiment is over for now.

Trivago is abandoning that effort to focus on basic price comparison offerings, which it says will become more valuable to travelers as inflationary pressures push them to look for deals.

Shortage costs resulting from net loss

Trivago posted an impairment charge of €84.2 million ($86.1 million) due to a changing “macroeconomic environment,” the company said, and the impairment was the deciding factor in its net loss of €59.8 million ($61.1 million) in the second quarter. Total revenue for the quarter increased 166% to €101.6 million ($104.9 million)

Trivago’s adjusted profit (earnings before interest, tax, depreciation and amortization) was €30.3 million ($31.3 million), the highest figure in Trivago’s history, in the second quarter. That compares with just 4.3 million euros ($4.4 million) in adjusted earnings a year earlier, when Europe’s travel recovery was just beginning.

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