We know OTAs have been spending a fortune on Google AdWords for years. But with 20-30% of their online advertising budget allocated to metasearch, Trivago, Kayak and TripAdvisor today deliver a similar share than paid search for the OTAs, and it's growing.
In recent months there’s been considerable noise in the industry after Priceline Group Inc released its Form 10-K 2016 Annual Report detailing the unimaginable sums of money they spent in online advertising in 2016. It wasn’t only the $3.5B that impressed, but also the fact that it represented an increase of nearly 30% year on year. How could it happen that such a big group that already owns the largest market shares in most of the markets it operates in saw fit to increase its own online advertising spend by such a margin? What changed market dynamics so dramatically?
The reason why Priceline has kept putting - and indeed increasing - spend in online advertising is actually clearly stated in its Annual Report and is no secret. It is the exact same goal that every hotelier in the industry also faces:
Performances advertising expenses increased [...] primarily to generate increased gross bookings and gross profit
Generating bookings is the ultimate and definitive goal as this is the only road to profitability: and how the goal can be pursued in first instance looks very clear to Priceline: make a massive investment in online advertising.
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