Trivago’s new CEO is tweaking his advertising strategy

Trivago’s new CEO, Axel Hefer, wastes no time leaving his mark on the company, outlining the changes in relationships with advertisers. It was announced last month that CFO Hefer will replace co-founder and CEO Rolf Schrömgens from 2020.

At an investor conference Thursday, Hefer revealed a strategy for the accommodation price comparison search company that detailed changes to Trivago’s auctions for advertisers.

“The key learning of 2019 is really our shift to a much more collaborative approach with our big advertisers,” Hefer said in a question-and-answer session with analysts from a Morgan Stanley investor conference. “We are moving from a rules-based approach to a more collaborative one.

Trivago, backed by Expedia Group, said earlier this month that it had replaced a so-called “relevance assessment” it introduced in 2016 that upset Booking Holdings so much that it had slashed its advertising spending with the company. In July, Trivago had hinted that he would kill the controversial feature film.

The problem is what happens when a consumer clicks on an offer and Trivago hands the customer over to the advertiser, such as, to book accommodation. Trivago penalized companies in the way they presented ads on their sites and apps if they did not respect the search company’s preferences as to how it should happen. In short, didn’t like to be directed.

Hefer said the controversial feature was “a bit more confrontational.” The new approach aims to “remove transfer point friction” in a more collaborative way.

It is essential to mend its relationship with Booking Holdings as Trivago scrambles to increase its profitability. In the third quarter, Trivago’s net profit fell to about $ 333,280, from about $ 11.2 million a year earlier.

Tactical changes to its advertising auctions

Hefer detailed other changes to their ad auctions.

He said one of the most promising solutions is the way Trivago now allows, Expedia, Ctrip, Airbnb and other advertisers to refine their bids for the way they display their listings in its listings. research based on the time in advance that a consumer reserves. a trip and the length of the consumer’s stay.

“You have companies that are very competitive on same-day stays, for example,” Hefner said, possibly referring to brands like Hotel Tonight, owned by Airbnb. “That’s why they optimize their product, that’s what the brand stands for. “

“You have other companies that are actually very good at longer stays, larger group stays, vacation stays, etc.” So by not allowing any modifiers you are obliging everyone to compete on average, and that’s not optimal. “

The change has caused problems, and Trivago will no longer be making changes this year to give advertisers time to digest what happened.

“What’s interesting that it took some advertisers – I mean it took advertisers a dramatically different time to train their algorithms for the new environment,” Hefer said. “And I think it’s just something you have to come to terms with. And of course, we support where we can, but these things just take awhile. “

“I mean it looks like a small change, but it’s actually a really big change because we had to rebuild the whole backend to be able to deal with multiple dimensions,” Hefer said. “So now we have a very flexible system, and we can add more [auction bid] modifers, relatively speaking, easily.

Strategic vision

Expedia-backed Trivago is hoping Booking doesn’t want to hurt it as a strategic move to reduce the number of travelers who book through it.

Hefer argued that as long as it offers a more cost-effective way to acquire certain types of customers than other alternatives, and other players will eventually react rationally and use it as a means of increase their share. Hefer’s point of view is that within a couple of years or so, will respond to market dynamics as Ctrip, Airbnb and Expedia try to take shares by again using Trivago as a competitive tool.

“I would expect players like Airbnb to gain share by expanding their offering,” Hefer said.

As for Google, Hefer said he had seen no “drastic change” in his threat to Trivago. He said that Google’s price comparison service, Google Hotel Ads, is where Trivago participates and is “one of the main growing channels” and “where we still have some catching up potential.”

Hefer also said he doesn’t think Trivago is under increased pressure from Google.

“They have their own meta-product, Google Hotel Ads, and it’s got a lot better, I would say,” Hefer said. “We think our product is better, both technically and in terms of coverage. But clearly, they are both our biggest competitor and partner. … And you have to take into account both profitability indicators and strategic considerations. But I don’t see any significant change in the relationship.

Trivago sees a long-term opportunity in helping travelers choose between hotel and other accommodation. In the past year, it has doubled the number of rental listings it offers to 2.3 million units, although this remains a minority of the global inventory and many consumers do not. still started booking alternative accommodation through Trivago.

Trivago is best known for its TV commercials featuring a somewhat irritating spokesperson, which is traded for being culturally relevant in different countries.

Since the start of the year, it has been testing new concepts of advertising spots for so-called linear television (traditional broadcasting) and for video streaming services. The new ads represent a “more targeted” marketing approach than talking about the brand as a place to find low prices and a wide selection, although the company hasn’t elaborated.

“What we are seeing so far is quite encouraging,” said Matthias Tillmann, senior vice president and head of corporate finance and the company’s new CFO. “Now obviously the next step would be to adopt it in more countries next year.”

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