Airbnb says focus on brand marketing over search is working

Airbnb Inc.

said its strategy of cutting advertising spend, investing in brand marketing and reducing its reliance on search engine marketing continues to pay off. Its marketing spend is now low enough not to anticipate drastic cuts even if economic headwinds worsen next year, he said.

The home-sharing company made the remarks on Tuesday as it announced its most profitable quarter yet, suggesting that travel demand is strong despite the challenges of inflation.

Airbnb has made major changes to its marketing strategy in recent years. In 2019, the company began trying to rely less on search advertising and rely more on extensive marketing and PR campaigns designed to build its brand.

The company focused on public relations practices to generate media coverage of its business, as well as advertising campaigns broadcast on channels such as television.

It also made deep cuts to its overall marketing spend. In the first quarter of 2021, sales and marketing spend fell 28% from the prior year quarter to $229 million, citing a decrease in performance marketing spend — which refers to campaigns that directly generate consumer action – and an intention to use the strength of its brand to attract customers.

During Airbnb’s earnings call on Tuesday, Chief Financial Officer Dave Stephenson said the company was happy with the return on investment it’s seeing with the different approach to advertising. The company spent $383 million on sales and marketing in the three months ended September 30.

“Our brand marketing results are showing great results overall with a strong return rate, and it’s been so successful that we’re actually expanding to more countries,” he said.

Asked by analysts whether the company would cut ad spend in a potentially tougher economy or continue to invest in such an environment to educate consumers about new offerings, Airbnb executives said they’re looking forward to it. expected marketing as a percentage of revenue next year to remain at similar levels to where it is now.

“We’ve kind of hit this new kind of lower headline rate already,” Stephenson said. “Granted, we can moderate that over time, but we’re already so low that I wouldn’t expect us to drop it dramatically in the face of substantial headwinds with overall growth.”

“We believe performance marketing is more of a way to balance supply and demand rather than just buying a large number of customers.”

– CEO Brian Chesky

Airbnb doesn’t see marketing as a way to “buy” customers because more than 90% of traffic to its platform comes directly, without the help of search advertising, the CEO of Airbnb added. Airbnb, Brian Chesky, on the call. Instead, its strategy now is to use advertising to publicize Airbnb categories, a way to search for accommodations based on factors such as style or proximity to an activity such as surfing or skiing, and AirCover, a policy to help travelers who encounter issues such as inaccurate listings or hosts canceling reservations on short notice. The company also offers an AirCover policy for its guests, which includes liability insurance and damage protection.

“We think performance marketing is more of a way to balance supply and demand rather than just buying a lot of customers,” Chesky said.

Airbnb is a good example for direct-to-consumer brands that want to move from a performance marketing model to one that incorporates brand marketing, said Mat Zucker, senior partner and co-head of global practice at marketing and sales at the consulting firm Prophet. .

“They don’t seem to have those two competing priorities. They are actively integrating the two,” Zucker said. Part of that could be because Airbnb has a relatively light operation and is a newer company than the traditional hotel chains it competes with, he added. “They don’t have the burden of inherited structures from competing groups, departments and people, so maybe that’s part of why they can do it seemingly so easily,” he said.

But the brand could be tested if competitors increased spending during a downturn, Zucker said.

“I don’t know if flat is enough to maintain a share of voice,” he said. “If hotel marketing returns and spending starts to rise in travel and hospitality, will they be able to retain a share of voice as hotels come back strong?”

Write to Megan Graham at [email protected]

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