Airbnb has claimed it will make a long-lasting slice in the amount of money it invests in advertising right after slashing its outlay by far more than half throughout the Covid-19 downturn and nevertheless generating 95% of the exact same on line targeted traffic as a year previously.
The online assets rentals organization is transferring its invest absent from efficiency marketing and into model internet marketing. It will also concentration more on public relations.
The over-all quantity that Airbnb invests in marketing and advertising as a share of income will “never” return to pre-pandemic stages, the organization reported.
Brian Chesky, co-founder and main executive, explained the change in tactic absent from general performance marketing as “very significant to the company story”, when he spoke at its once-a-year benefits presentation – the to start with since the business floated on the inventory sector in December 2020.
The yearly report showed Airbnb slashed its blended expend on model and overall performance marketing and advertising by 58% or $662 million from $1.14 billion in 2019 to $482 million in 2020.
The vast greater part of the $662 million decrease was in overall performance marketing, these kinds of as online bidding and look for advertising, which dropped by $541 million—more than four instances the cut in brand name marketing devote, such as Television set and sponsorship of the Olympic Video games, which fell by $121 million.
Advertising represented 14.2% of revenue in 2020, in contrast with 23.7% in 2019, as the enterprise reduce prices additional steeply than the drop in its revenue.
“We are under no circumstances likely to go back again to expending the very same total of cash on advertising and marketing as a percentage of profits as we did in 2019,” Chesky told CNBC in an job interview adhering to the yearly effects.
“What the pandemic showed is we can get internet marketing down to zero and nonetheless have 95% of the exact same traffic as the year right before. So we’re not likely to forget about that lesson.”
The annual report did not disclose the specific amounts that Airbnb put in on effectiveness and manufacturer marketing but it is probable that a important the vast majority of its $1.14 billion annual invest was invested in effectiveness ahead of the pandemic.
In 2019 Airbnb increased marketing spend by $474 million, which include $314 million on functionality advertising and $160 million on manufacturer marketing and advertising.
Airbnb explained the change in marketing and advertising strategy is substance, listing “the reduction in efficiency advertising and marketing shell out to aim on model marketing” in its yearly report as a person of a sequence of “forward-on the lookout statements” that carry “substantial threats and uncertainties” for the business.
Airbnb’s agencies involve Droga5 for resourceful and Essence for media.
Shifting devote into brand and PR
Other advertisers and companies will be observing Airbnb’s move intently, due to the fact general performance internet marketing has been a boom place in modern decades as makes, primarily online disruptors, have utilized knowledge-driven targeting on platforms these types of as Google, Facebook and Amazon to drive immediate profits development.
Chesky went into more element on Airbnb’s earnings contact about the move away from effectiveness advertising and marketing and said he wished to “take a move back” to reveal how the company’s approach experienced advanced more than various a long time.
“In 2019, we had elevated paying of efficiency marketing and advertising [as part of a 71% increase in total marketing spend from $666 million to $1.14 billion],” he reported.
“And then 2020 occurred, our business drops by 80% in eight months, and we pulled back again all marketing, like efficiency advertising and marketing.
“But one thing impressive occurred. Even prior to we began resuming our advertising invest, our targeted visitors degrees arrived back again to 95% of the visitors ranges of 2019 with out any promoting commit.
“And what this exposed is that our manufacturer is inherently potent. It is a noun and a verb in pop culture.
“And so we will not intend to ever yet again devote the amount of income as a share of profits on marketing in the long run as we did in 2019.”
Through the ultimate three months of 2020, “more than 90% of our visitors was immediate or unpaid, and we think that will proceed in the future”, he included.
“Our marketing and advertising plan, for that reason, our system is the next: a entire-funnel promoting strategy. The leading of the funnel is actually PR.
“We bought more than .5 million content in the final 12 months, in 2020, and we had as significantly share of voice as most of the other big vacation corporations put together
“And which is how we actually constructed the manufacturer of Airbnb – a lot more than everything, probably, is PR. Second is brand name marketing and advertising. We think of brand advertising and marketing as schooling and an financial investment.”
As component of its brand marketing and advertising drive, Airbnb released its most significant manufacturer campaign in 5 years, “Made probable by hosts”, at the begin of 2021.
It attributes Airbnb hosts and is designed to “inspire extra people” to lease out their homes as the coronavirus lockdowns relieve and customers begin travelling once more.
“Even though the Airbnb brand name is mainstream, the plan of web hosting is not,” the organization stated.
Chesky extra its past selection to place 9.2 million Airbnb shares in an endowment fund to reward hosts and enable them “share in our success” is also part of the company’s brand-creating tactic.
“We did feel of this as more like a manufacturer investment decision,” Chesky explained to CNBC.
Functionality marketing and advertising remains “an important lever”
Dave Stephenson, main financial officer of Airbnb, explained on the earnings contact that general performance advertising stays “absolutely an important lever”, conveying: “We’ll continue on to use efficiency advertising and marketing where it will make economic feeling to do so.”
He went on: “We’re just going to have a greater charge-of-return expectation on that effectiveness advertising commit and is not going to return to the levels that we observed in 2019.
“Our product sales and advertising expenses as a share of revenue in 2021 will be underneath that of 2019. The absolute pounds in 2021 will be underneath that of 2019.”
The model campaign suggests profits and marketing as a proportion of income will be bigger in the to start with half of this yr than in the next fifty percent.
The yearly report outlined how Airbnb sees the differences concerning model and effectiveness.
“Brand marketing and advertising will increase awareness amongst possible hosts and visitors, assisting them understand the rewards of internet hosting and scheduling stays and activities and what makes these stays and activities distinctly Airbnb,” the report reported.
“While functionality marketing and advertising drives extra targeted traffic from high-intent prospective visitors, the energy of the Airbnb model and our communications method lets us to be much less reliant on effectiveness marketing.”
Model marketing and advertising carries some hazards because it is “expensive and may possibly not be price-effective or successful”, the annual report warned.
“For case in point, in November 2019, we declared a partnership with the Worldwide Olympic Committee for 9 a long time to cover the subsequent five Olympic Game titles.
“The Covid-19 pandemic has delayed the 2020 Olympics, and the continued uncertainty close to Covid-19 and other geopolitical elements could undermine our capability to realise the value of the partnership.”
But functionality promoting also faces risks all-around info and privacy mainly because they are “increasingly topic to regulation” in a selection of countries about the globe, the yearly report mentioned, repeating a warning from its inventory market prospectus last year.
Airbnb additional it depends on “unpaid” lookup motor optimisation. “We believe that our Web optimization results have been adversely influenced by the launch of Google Journey and Google Holiday vacation Rental Advertisements, which decrease the prominence of our system in organic search benefits for vacation-associated phrases and placement on Google,” it mentioned.
Classes for other brands
Analysts have also been on the lookout at how Airbnb’s rivals, this kind of as Booking.com, have been adapting their advertising and marketing for the reason that of the pandemic.
Booking.com told traders it reduce promoting expenditure by 61% very last year but was reluctant to say no matter if it planned to alter the harmony in between general performance and manufacturer.
“I’m not likely to give absent the playbook,” Glenn Fogel, chief govt of Booking.com, mentioned on its Q4 earnings phone.
Brian Wieser, global president of organization intelligence at Team M, the media-buying arm of WPP, reported there was a rationale for Airbnb to change from efficiency internet marketing to model marketing and community relations.
“For a enterprise searching to define or redefine a classification at a substantial scale, there is a good deal of room for inventive means to travel a enterprise via marketing and advertising,” he explained. “That doesn’t always involve compensated media, and when it involves paid out media, there can be quite a few different ways to travel lucrative growth.”
Wieser additional: “I think there’s a larger lesson for other brand names, also: if the pandemic taught us everything, it is that we should not take something for granted, and we really should be conscious that people can adapt to new methods of undertaking factors.
“Marketers have a window of time to reassess how people will be inclined to engage with brands, simply because, as we go as a result of this time period of time forward of economies entirely reopening, new habits can be fashioned if buyers can be persuaded to undertake people new behaviors.
“Towards those people ends, typical media or promoting mixes really should not be taken as a offered, but need to also be reassessed to determine what can drive a enterprise forward.”
An government at a general performance company mentioned: “Competition for website traffic fell as all ‘travel’ advertisers manufactured a key slash in spend final 12 months, so there was overperformance in natural and organic listings.
“They could want to clearly show significant cuts in commit to Wall Street and this announcement, in tandem with their 1st set of results, is no coincidence.
“I would anticipate to see a modify in system when the market place lights up yet again and their targeted visitors stages will drop, which I believe they will.”