Collateral damage: Google cannibalizing its own PPC revenues?

Google has been rattling the cages of travel for years now, constantly threatening as a perceived enemy with product releases like Hotel Finder and Flight Search.

The entrenched interests push back against the intrusions into their sacred territory – especially given that Google is the beneficiary of billions of dollars of ad spend each year.

For the first time, there’s ample empirical evidence that Google may actually be cannibalizing its PPC revenues in the travel vertical.

The analysis comes from AdGooroo, who did an in-depth look into the 2013 trends of AdWords spending in travel. Overall ad spending on Pay-Per-Click (PPC) in 1Q 2013 dropped 19% from the same period in 2012 – a drop of $57 million.

The longer-term trend since 2010 points drastically downward, with a $75 million reduction compared with the same period in 2010.

Two potential explanations are that travel advertisers have pulled back from search (which is not supported by the data – there are more travel advertisers this quarter than last, 228 now vs 217 a year ago), or that travel websites are more well-designed and thus more sticky. With an improved user experience, users are more likely to be loyal and simply directly enter the preferred website into a browser.

Another, more intriguing, explanation is that Google’s entry into the travel space has decreased the amount of available PPC traffic by encouraging organic clicks to their own products, which they’ve prioritized in search results.

Google HotelFinder and FlightSearch were launched in August and September 2011, respectively, and provide a direct search experience for users seeking to book flights and hotels.

Of course, Google now offers advertising products within each of these services, which don’t appear as a keyword targeted ad buy (for example, paid placement of hotel bookings into HotelFinder results).

Regardless, the organic placement of an interactive tool for hotels and flights within the search experience is clearly having an impact on user click behavior.

The drop in paid clicks in favor of organic clicks may or may not be of concern to Google – notoriously tight lipped on the travel front – although there is plenty to be said about the shifting landscape. From the import of Priceline-Kayak to the changing SEO realities of Google’s travel plays to the newly minted Instant Buy feature, Google is at the center of an industry tempest.

The research continues to the most popular keywords, as represented by this word cloud of both generic and navigational searches.

While Google enthusiastically discourages bidding on navigational searches, or searches aimed at navigating to a specific brand, the bidding is fierce on the generic travel keywords like “cheap flights” and “hotels.”

Of these keywords, Adgooroo highlights the most popular 25 travel keywords by clicks during the first 3 months of 2013:

Perhaps a factor of the Star Trek film, or perhaps due to the difficulty to spell correctly, “enterprise” enjoyed the number 1 spot on travel keyword clickthroughs. Research showed that the “enterprise” keyword had a 12.1% CTR, while the category leader was Expedia, which 1 out of every 4 users presented with a paid ad clicked on said ad (25.9% CTR).

Beyond the click-through rates of ads, the Adgooroo team also gleaned some perspective from the Top 100 most clicked terms:

• The growing popularity of the keyword “vrbo” (vacation rental by owner), which rose to position 51 in 2013 from 78 in 2012, may indicate a new trend in consumer travel habits and a threat to the hotel business

• Average clickthrough rate was 8.1%, with navigational terms posting much higher rates and generic terms yielding much lower clickthroughs (“flight” was lowest at 1.4%)

• Queries on “Airlines” yielded the most paid ads: 10.6 per SERP, while searches on “Greyhound” yielded less than 1, on average

• “Hyatt” got the highest ad coverage (appearing 95.2% of the time) while “United Airlines” got the lowest (37.7%)

• “Vacation packages” was the term with the most bidders, with 259 advertisers gaining first SERP impressions during the first quarter of the year. “Greyhound” had the fewest bidders (4).

Of the top spenders in the travel category on AdWords, Priceline and Kayak dominate – pointing out perhaps one of the most compelling reasons for the linkup: the ability to act as a counterweight to Google’s movements into travel, given that they both rely on Google for so much of their paid traffic.

1. kayak.com – 883 million impressions
2. priceline.com – 699 million impressions
3. orbitz.com – 670 million impressions
4. tripadvisor.com – 663 million impressions
5. cheapoair.com – 629 million impressions
6. expedia.com – 595 million impressions
7. booking.com – 538 million impressions
8. travelzoo.com – 469 million impressions
9. bookingbuddy.com – 353 million impressions
10. hotels.com – 349 million impressions

Google has most certainly done a cost/benefit analysis, given that the value of capturing more travel queries for their owned and operated products – and then selling access to that targeted traffic most likely at a higher rate – is much more compelling than losing PPC revenues.

In addition, as can be seen with other products like Google Product Listing Ads, Google seems to believe that the PPC ad model is not one of the future – but contextual ads within user-facing interfaces are.

Google declined to comment on this story.

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Nick Vivion

About the Writer :: Nick Vivion

Nick helps brands blog better at Ghost Works, a boutique blog management service. Nick was previously the Director of Content for tnooz, where he oversaw the editorial and commercial content as well as producing/hosting tnoozLIVE.

 

Comments

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  1. Tarandeep Singh

    As a revenue leader I understand the need of PPC and advertising. However I also feel why not let the consumer get to see and decide purely in terms of merit. That could be on reviews or on organic search. It’s like going to watch an IPL Cricket match, enjoy the match cheering for your favourite team and realising later that the match was fixed.
    Why does my decision to book a room has to be based on the placement of ads on the search engine. Sounds strange but just a different perspective. I need a search engine where in I can search hotels with best sleep experience and I should be able to see results not based on hotel claims but by consumer experience

     
    • John Pope

      Tarandeep,

      Well spotted. My sentiment exactly.

      Today’s current version of search engines display results based on who is willing to pay the highest CPC rate (the heaviest weighted signal, along with CTR – click-trough-rate), rather than a customer focused solution that presents results based on what’s best for the user/guest/traveler.

      Meaning, the results (SERPs) are anything but personalized.

      “The times, they will be a changin”… very soon.

       
    • Nick Vivion

      Nick Vivion

      Although how would said search engine make money? Simply by providing the data in a different skin and then benefiting when the consumer books the best hotel for them? Hipmunk is already doing this to some extent.

      It seems to me that even the best intentions could be quickly usurped as the company tries to optimize for conversions – and muddy the experience.

      I do believe that companies who provide the best user experience, and deliver what the consumer is looking for quickly, will win over the long-term. We’re all wiser now, and simply gaming the placement of ads is having less impact. Quality content is essential, and that’s the driver of Hotel Finder and Flight Search: effective UX for travel inventory.

      N

       
  2. David Urmann

    When I look at key word trends on Google search I see a lot of them are also declining in volume. Less travel related searches could account for the same. Nonetheless, some interesting data. Thanks

     
    • Nick Vivion

      Nick Vivion

      That’s also a good point – as I mentioned, many consumers could be heading straight to their favorite sites, especially as branding campaigns for OTAs and metas have been thrown into overdrive over the past few years.

      Also, the efforts of hotels to gain marketshare via direct bookings could also be having some positive impact on that.

      N

       
  3. Jason Price

    More than thirty years ago David Oglivy said “It is better to lose market share to yourself, than to your competitors.” Assuming the data in the article is correct then Google is playing exactly in this realm with their new travel products. Growth in Adword spend may level off at some point and if so at the expense of Hotel Finder then this is a champagne problem. In reality Google is boasting a 3x return on the ad spend on Hotel Finder. We are seeing similar numbers on Hotel Finder and not at 3x the cost per click either. We all need more time and volume but at the moment, competing players in the CPC model like TripAdvisor are 3x the CPC and are not showing an equivalent 3x return. So the likelihood for adoption to other CPC models may be likely as the entire CPC movement continues to take off. We anticipate the companies in the CPC space will do very well and further impact OTA viability in the next 12 to 18 months. The OTA landscape by this time next year could be a bit thinner.

     
    • John Pope

      Jason,

      Just to clarify; is what you’re seeing with your clients, for every $1 spent on Hotel Finder, they’re generating $3 in revenue?

      If so, that’s equivalent to a 33% commission rate – or a substantial number of percentage points higher than hotels currently pay to OTAs, or other 3rd party distribution channels.

      Surely, that won’t lead to a “thinner” OTA landscape next year, will it?

       
  4. Nick Vivion

    Nick Vivion

    When you click on “Why These Hotels?” this is what comes up:

    “Hotels that match your query. Google is compensated by these merchants. Payment is one of several factors used to rank these results.”

    So they are using payment as a ranking factor – not only making SEO more difficult, but forcing an investment in paid advertising over content merely to get listed.

    Given the number of listings in Hotel Finder, there are also more units available for purchase. Rather than just 1-2 at the top of the listings, and the sidebar, each of the booking companies can purchase a spot – this increasing income and likely more than offsetting lost PPC revenue.

    I would argue that this is exactly what Google wants, as it increase inventory while increasing user engagement with the product.

    N

     
  5. Oz Har Adir

    Very interesting data, and if the drop of 24% in revenue between Jan-Apr in the last 3 years is correct, its a significant figure. Assuming that Google makes this move in order to improve its revenues then one can assume that GHF gained more than the $75M PPC lost, which would put it at least in a 1:3 scale compared with PPC.

    What is interesting about GHF is two aspects: 1)who can’t participate in it – Kayak, Trivago etc. 2) What is the order of advertisers appearance. One might think its best price, but in fact its decided by Google based on unknown factors (which probably relate to commission and conversion). See for example this example in San Francisco, where Booking.com leads every listing despite the fact there is always a lower rate available.

    https://www.google.com/hotels/?gl=NL#search;l=San+Francisco,+California;q=hotels+in+san+francisco;d=2013-06-02;n=1;r=5;h=18191388083765148522;si=38ef818f;av=r

     
 
 

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