Airbnb roughly halved its performance marketing spend in the first three months of 2021 as the impact of its ongoing shift towards brand marketing takes effect.
The online vacation rental and property company said in a stock market filing that it had cut its total marketing spend, which includes both brand and performance marketing, by $98.6 million ($70 million sterling) – or 45% – to $119.2 million in the first quarter, while revenue rose 5% to $887 million.
The drop in spending was “driven by a reduction in performance marketing, partially offset by an increase in brand marketing”, as Airbnb launched “Made possible by hosts”, its largest global advertising campaign in five years.
https://www.youtube.com/watch?v=BrgvxO1tFOc
This suggests that the reduction in performance marketing spend topped $100 million in the first quarter.
Brian Chesky, chief executive and co-founder, and Dave Stephenson, chief financial officer, told investors on the earnings call that Airbnb is having “great success with our marketing strategy” and is “very encouraged by the results.” as it generated “similar levels of traffic” to 2019 despite the reduction in spending.
“Our strategy is to increase brand marketing and use the strength of our brand to attract more guests through direct or non-paying channels,” Airbnb added in a letter to shareholders.
90% of Airbnb’s traffic was “unpaid or direct” in the first quarter of 2021, according to Chesky.
“We believe that if you have a unique and different product, the role of marketing is not to buy customers and the role of marketing is not to sizzle. The role of marketing is education,” he said, explaining the importance of his new brand campaign in attracting more guests and more hosts.
Before the pandemic, Airbnb was spending heavily on performance marketing, like paid search and affiliate marketing, to drive traffic, but the company changed its strategy last year and cut its annual marketing spend by $1. .14 billion to $482 million.
Chesky told investors during its annual results in February how he would “never” spend as much on marketing as a percentage of his revenue as he did in 2019, as he found that during the pandemic he drove 95% of online traffic, despite his performance marketing being reduced to zero.
Stephenson revealed during the first-quarter earnings call that the company “actually started changing” its marketing strategy “pre-Covid” and “consolidated” the change during the pandemic.
Airbnb made a point of telling investors that it is taking a “disciplined” approach to marketing investments, having been introduced to the US stock market in late 2020, and plans to “significantly increase our marketing effectiveness” over the remainder of 2021.
Droga5 manages creative and Essence manages media for Airbnb, which launched “Made possible by hosts” on TV and digital channels in five of its biggest markets, the US, UK, France, Canada and Australia.
Airbnb said it has seen renewed interest as consumers eagerly await the easing of lockdowns and the return of travel.
Booking, a major competitor, also said it reduced marketing costs relative to revenue by driving more direct traffic and improving paid channel ROI in the first quarter.
“There are many factors” that affect return on investment, according to David Goulden, chief financial officer of Booking, citing cost per click and conversion rates as examples and there is always what he described as a “strong volatility” in the digital advertising market, given the continued uncertainty due to the pandemic.
Comments are closed.