2020 was certainly not “another-day-in-the-office” type of year for the travel industry. But Airbnb deserves a section on its own in the annals of that cataclysmic year.
Like the proverbial Phoenix, the home-sharing startup managed to raise from a near-death during COVID-19’s first lockdown, followed by a triumphant IPO where its stock price quickly headed into the stratosphere, allowing it to reach the top rank of one of the most valuable companies in the travel industry.
A cornerstone of Airbnb’s thunderous success has been its capability to become a lifestyle brand for a new generation of travellers.
Airbnb’s IPO filing provided some precious marketing lessons on how the 13-year-old company challenged conventional wisdom by mostly shunning away from traditional performance marketing channels.
In stark contrast, Booking.com started to build its online empire years earlier, thanks to the flawless execution of a simple but extremely efficient formula: siphoning as much traffic as possible from performance channels and maximising conversion by A/B testing to death each pixel in the funnel.
It is a perfectly oiled and laser-focused marketing machine that outperformed the rest of the industry during the last decade and a half.
Marketing during travel’s recovery: branding or performance?
Green shoots of travel demand are popping up in the U.S. and we are finally seeing light at the end of the tunnel in some regions. But which one of the aforementioned contenders will ride the wave of recovery more successfully?
Travel tech expert Mauricio Prieto provides a compelling argument in his insightful piece comparing both players: “When it’s time again to push on all cylinders, Airbnb will need to push the performance marketing accelerator to drive growth, adding pressure to its already fragile bottom line...
"Performance marketing is a growth lever and an engine to bring in new customers who could become loyal in the future. Relying on direct traffic could be insufficient for businesses that need tremendous scale and constant growth."
One solid counterargument to his line of thought can be found in the Airbnb SEC filing: the platform attracted 14 million new active bookers during the first nine months of 2020, despite the significantly lower investment in performance marketing.
Add to it the company’s extremely loyal customer base, with 69% of total revenue in 2019 generated by repeat bookers and you get the picture: Airbnb powerful brand seems to be fuelling the growth flywheel without any need for performance marketing.
This strategy worked well during a pandemic that turbocharged travelers’ desire for less crowded accommodation alternatives, but will it work in the long term?
Airbnb CEO Brian Chesky seems to be confident it will, declaring in its debut earnings call: “We don’t intend to ever again spend the amount of money as a percentage of revenue on marketing in the future as we did in 2019. In Q4, more than 90% of traffic was direct or unpaid. And we think that will continue in the future.”
In a CNBC interview, he added: “What the pandemic showed is we can take marketing down to zero and still have 95% of the same traffic as the year before. So we’re not going to forget that lesson."
Not unsurprisingly, Booking.com, the unrivalled champion of search marketing, plans to stick to its successful formula, as CEO Glenn Fogel declared in Q3 2020 earnings call: “We’re always looking for high-quality traffic at the right price… And that’s what we’re going to continue to do.”
Walk the talk
SEMRush competitor intelligence data for the U.S. market for Booking.com estimates $5.1 million search engine marketing spending in the first 18 days of April, an investment that remains below pre-COVID levels but in an upward trend with travel demand bouncing back.
While Booking.com’s SEM strategy gravitates around non-branded keywords to capture new customers, Airbnb’s $1.2 million investment for the same period was mostly spent on brand keywords.
In parallel, Airbnb launched in March a massive global TV campaign of an estimated value of $9 million in its first week, according to iSpot.tv, signalling its determination to double down on the brand.
Balancing the short term with long term
A well-known research paper among marketers suggests allocating 60% spending on brand vs. 40% on sales-activation investment.
The paper warns of the “ROI Trap” that originated in the digital age, arguing that narrowing focus to digital performance channels sacrifices the brand-building that drives long-term growth.
The paper claims that the optimum effectiveness lies in the 60/40 rule, but the same researchers argued in a 2019 keynote: “In categories where there’s a great deal of online research – like, for example, holidays, where people will do their research on Google and TripAdvisor and Booking.com – activation is easy, so you can dial it down and tilt towards brand, more like 75/25.”
Facts tell, stories sell
But the channels where marketing dollars are being spent is only part of the equation. How your brand stands out from the pack and connects with customers is equally, if not more, important.
Put in the words of business guru Seth Godin: “Marketing is no longer about the stuff you make, but about the stories you tell”.
Airbnb’s brand has struck an emotional chord with new generations tapping into the Zeitgeist of sustainable and purposeful travel. This ability has been a wake-up call for the travel industry, resigned to the low frequency of travel consumption and its inherent challenges to building a truly loyal customer base.
Pre-COVID Booking.com has dipped its toes in branding waters to connect with customers on a more emotional level via TV ads and multimedia campaigns like Booking Hero.
But in 2019 its branding investment of $548 million represented a meagre 11% of its overall $4.97 billion marketing spending.
Be it the proportionally low share of spending on brand or the inability to convey an impactful message, Airbnb’s 90% direct traffic during the pandemic makes Booking.com's 50% looks rather pale.
Right vs. left brain
The long-lasting dilemma of marketing being a right-brained art or a left-brained science can be perfectly embodied in the Airbnb vs Booking.com marketing strategy.
On one side, we have the well-oiled, data-driven performance marketing machine of Booking.com, which will likely start firing on all cylinders once travel comes back. Previous crises provided them with a solid playbook to outgun competitors by aggressively capturing recovery demand via search marketing.
Conscious of future limitations in a 1st cookie-only world, the travel giant will meanwhile keep expanding its Genius rewards program to more products such as flights and restaurants to keep the customer locked into the brand ecosystem of the group.
On the other side, we have Airbnb, a textbook case for any business schools on how a well-crafted branding strategy, combined with a holistic design-led approach can profoundly disrupt a highly competitive industry like travel.
After successfully navigating the crisis by capitalizing on changes in travel behaviour, the sharing economy poster child has once again decided to “put all their investment eggs” into branding with its new global TV campaign.
Deliberately renouncing performance marketing, the most efficient channel to capture the rebound in travel demand sounds like a crazy, if not outright suicidal, business strategy for any travel company.
However, in the case of Airbnb, it feels like another counterintuitive but genius move in its march to some form of domination of travel accommodation bookings.
If Airbnb manages to pull this one off, brands elsewhere in the industry will likely be reviewing their own marketing playbook for the post-pandemic world.