Earnings as it is
Q4 2019 Brian Fitzgerald Analyst, Wells Fargo Thanks, guys. In the letter, you mentioned leveraging some of the learnings from your brand campaigns in the Americas. What do you see working there? Is it some of the recent Mr. trivago creative? Anything else you can call out? With the shift in messaging towards this value prop of price comparison, how has that been resonating through, and what are you seeing in terms of impact to traffic and conversion? Thanks. Axel Hefer CEO and Managing Director, trivago Thanks, Brian. In Americas, we really started to focus more on our key value proposition early last year, in Q2. That's when we tested a slightly more focused message. Then we rolled that out over our peak season in Q3, and there we have seen very positive results. If you watch those commercials, they are still with the Mr. trivago, so in the same concept. I would say, the key difference is that we are just more focusing and trying to basically show what our key value proposition is. How we compare. As we have said before, given the success, we are planning to adopt those also for other regions, and we have actually started early this year. Similar spots are running right now in Europe and in rest of the world. At this point, it's a bit too early to tell if they're equally successful. The plan is really to get the insight and data now to be ready for the peak season in Q3.
Brian Nowak Analyst, Morgan Stanley Thanks for taking my question. I have two. The first one, it's a little bit going back to Lloyd's question of sort of the IPO versus where we are now. I guess, actually, I'd be curious to hear your perspective as you look back over the last few years on user growth. Talk to us about some of the biggest learnings you have on what has worked well in driving users and where you still face challenges in bringing more users to the platform. As you look over the course of the next year to two, what do you think is the key to really driving faster, sustained user growth over the next couple of years? The second one, just to get a little more into the 2020 guide so we can understand the puts and takes. Talk to us about the expected total spend on marketing and advertising internally. Is that directionally going to be up, down, stable? How are you thinking about marketing investment through the 2020 year? Matthias Tillmann CFO, trivago Yeah, sure. What has worked well in attracting users, and what hasn't? That's a very interesting question. I think if we just don't go back to the IPO, but even a bit further, the core differentiator that we've had in the market was always our TV advertisement. By going very, very early, very aggressively into TV advertisements, I think we had a unique opportunity to build a brand, even as a relatively speaking, small player, with a unique positioning. I continue to believe that that is really absolute core of our marketing communication. When you then look at the times of really rapid growth, we saw a big opportunity and also significantly invested into performance marketing. Since the IPO, and we've talked about this many times, we have seen this traffic mix of roughly 50/50, as optimal. To be perfectly honest there, one of the reasons why we are now conducting these tests is that we are not sure that in the current market environment, this mix is still the right mix. We want to challenge our view there and see whether it is actually better to change that mix going forward. If we wouldn't have a hypothesis there, obviously we wouldn't do a large-scale test. We do think there is a good chance that the 50/50 is not the right approach for the future. Again, as on a lot of the other points that we've discussed, we are very test and learn-driven. We will only do things where we see positive results from our test. It is too early to be very, very certain about the direction, but we have a clear hypothesis there.
Q1 2023 Kevin Kopelman Managing Director, Senior Equity Research Analyst, TD Cowen Great. Thanks a lot. Can you give us more color on the consumer reaction you're seeing so far from the investment in brand advertising and maybe how that's compared to brand campaigns you've launched in the past? Thanks. Matthias Tillmann CFO and Managing Director, trivago Yeah, sure. Thanks, Kevin. We talked about the change in messaging before and what did we change. The core message is the price comparison, obviously. We said in the current environment with high inflation, everybody is focusing on saving money, and it's on everybody's mind, top of mind, so to speak. That's why we try to sharpen this message a little bit more even. It's not only the brand message, but it's also the combination with product features. We launched price alerts. We focus on that in our email marketing, et cetera. It's really a holistic approach, and I think that's showing effects. Where can we see that? So A, in the brand traffic we see on our platform, that's visible. It's also visible in the response, in the direct response we see from our in particular TV campaigns. There when we compare our current campaign and, I mean, obviously we are now as we are in May, we start to ramp up. The exciting time is only starting now. If I compare that to last year and the year before, we do see that the response is greater than what we have seen before. That makes us confident that we should scale up and ramp up our investment, and that is what we are planning. That is why the guidance on ROAS ad spend and EBITDA is what it is because we think it's an opportunity for us.
Hi , thanks. This is Chris on for Lloyd. Maybe two, if I can. In the shareholder letter, you talk about leaning back into brand marketing to take some market share. Can you just unpack that comment and address taking share? Was this comment directed at taking share from other meta channels, or is this more directed at capturing traffic back that was going direct or directly to the OTAs? Second question here. Looks like American referral volumes recovered more than RPQR. Is it fair to say that the U.S. market showed that much stronger demand dynamics, or was there something else at play that we need to be thinking about here? Thanks.
Yeah, sure. Let me start with your first question, first. How are we thinking about brand marketing
and gaining share? I think there are two points in the shareholder letter as well. One is on
innovation. We absolutely believe in the value proposition of meta. I noted that meta underindexed
in the recovery so far, and there are various reasons for that or potential reasons for that.
One is, I think one key driver we talked about a lot is the underperformance of city trips, which we
believe will come back and that will be or would be a tailwind for us.
If that happens, we want to invest into that in marketing to make sure to capture our share. Now,
if you look at, on the product side, we think there's headroom for innovation, for improving our
core product and, delivering even more value to our users. We are investing into that. By doing
that, we think we can gain market share from our competitors. Maybe related to that, we all know
that there is right now more regulatory scrutiny. The DMA is coming likely this year, which might
put some pressure on some of our biggest competitors and might slow them down. We think
that's a benefit to us.
If we deliver on our product roadmap, then we can reach that and gain market share. On the
second part of your question, Americas, the higher increase in qualified referrals versus RPQR.
That was your question, right?
Naved Khan Director and Senior Equity Research Analyst, Truist Yes, hi. Thank you a lot. A couple of questions. Maybe just on the outlook for this year. I know you're not guiding for a specific number, but should we expect EBITDA to be positive for the year, given that you're gonna be spending more into brand spending which you have not done in the last few years? You're not gonna be spending at the same level, you're gonna be spending at a higher level. The other question I had is just on the performance ad efficiency that you called out in your shareholder letter and versus 2019, I think you said you saw more efficiencies. What's the driver of that? Matthias Tillmann CFO and Managing Director, trivago Yeah, sure, Naved. On the outlook of EBITDA, yes, we do not give specific guidance. I mean, you have seen the strong EBITDA in Q1, which was similar to Q4. When you think about 2022, I would say our historical seasonality is a good starting point. There you have seen that normally EBITDA went down in the second and third quarter as we in the second quarter start to invest prior to the summer season. During Q3, the biggest quarter for us and everybody in the industry, we continue to push, in particular on the brand marketing side, and then cut back in Q4. That will not change. Our approach to that will not change. What I mentioned is, in Q1, if you just look at the EBITDA, it looks better than what you have seen historically relative to other quarters, because we did not invest significantly into brand. Given at the start of the year, we had the impact from Omicron in most European countries. Mid-quarter, we had the impact of the war in Europe. That's why we did not push our marketing activities to levels that we had anticipated before. Now, everything that I said on trends in April and what we expect for the summer, we see an improvement in Europe. We are back to pre-COVID levels, and we saw a continuous improvement in April. Now, with the summer in front of us, we plan to change that. In May, we will start with the first TV campaign in selective markets and then plan to ramp up our investment significantly. That will push down ROAS and EBITDA compared to Q1 in Q2 and Q3. You won't see the positive effect of that brand campaign immediately given the long-term nature of it. Obviously we do that because we do expect a positive long-term return from that. I hope that gives you a bit of an idea how we think about the cadence for the rest of the year. Then on your second question, what was driving the efficiency in marketing? There I would distinguish between performance and brand marketing. If I start with performance marketing, it always depends what you compare it to, right? If you look at 2019, that was a year where we were pushing more aggressively, pushing more for top line growth, and we're not as much focused on margins. What we have done now already last year in performance channels, actually, great teamwork from the performance marketing team over the past two years since the start of the pandemic, is looking for pockets, changing our way how we look at different segments and markets, finding high traffic quality and focus on that. That is paying off. When I say efficiency is higher, then if I look at the return on advertising spend numbers, that is up compared to 2019. I think that is in performance marketing because of the work that the team's putting in there. On the brand marketing side, we have some data points from summer last year when we ran first campaigns. I mean, in Q1, as I said, we didn't spend as much. The past two years again were very insightful for us in terms of learning, given that we had to cut back, then started in some countries to invest again, and that gave us valuable learnings in how we spend, what we spend and where we spend. Those learnings we will now take for the next couple of months and optimize our brand marketing campaigns. From that, we expect higher efficiency, obviously at a lower absolute level of spend compared to 2019. At higher ROAS efficiency than what we have seen before.
Speaker 9 Great. Thanks for taking my question. This is Heidi on for Doug. I have two. The first one, I mean you're able to drive strong improvement in margins over the years, and it seems further expansion in margins is possible given your comments around OpEx. With that said, could you share your thoughts on where margins could go from here in the near term? Is the 25% still the right long-term target? I have a follow-up. Matthias Tillmann CFO and Managing Director, trivago Yeah, sure, Heidi. We mentioned in the past that our long-term EBITDA margin goal is to reach at least 20%, and we did reach that in 2022. You know? Our goal is to grow the business sustainably from our post-pandemic revenue baseline, focusing on high quality and repeat traffic. That is more important to us than hitting 2019 revenue levels, and consequently, we will be disciplined with our marketing investments. However, if we do see opportunities to invest to accelerate our growth profitably at the expense of short-term contribution, we will do that even if it means that our margin will temporarily go down. For 2023, we do expect to increase our brand marketing investments as with the benefit of hindsight, we believe we could have invested more last year, in particular during the peak summer period, and also because our own auction was strong. Having said that, while we do plan to ramp up our investments, we do not expect to go back to 2019 margins level, which were below 10% EBITDA margin.
q1 2023 me bola CEO Yeah. On your second question, the focus on profitability versus growth or the balance between the two, I mean, if we go back 1 year, I mean, the vast majority of travel companies was focused on volume, on capturing the recovery, the returning traveler, and winning over the returning traveler as a customer. This year the sentiment is obviously a bit different. I mean, there is a lot more geopolitical instability. There is more economic instability, uncertainty. In times of uncertainty, I mean, some advertisers choose obviously to focus more on profit, but it's really a case-by-case decision. I mean, every partner is taking a different decision on the trade-off. Our expectation is with the general environment stabilizing, and uncertainty fading, that the balance will shift further to growth again.