Expedia Media Solutions, the advertising agency, is only a small unit of the online travel giant Expedia Inc., with about 55 employees at its Bellevue, Wash., offices, according to Tnooz estimates.
But the division is growing steadily, with a recent stream of job postings.
Since 2012, it has seen annual revenue growth of roughly 25% a year, according to Tnooz estimates, based on financial filings. (The company declined to provide its own numbers.)
While Expedia Media Solutions is small, it represents a broader shift in the parent company’s overall strategy — namely, a move from being a pure e-commerce company, with an emphasis on transactions, to adopting a broader media mindset around marketing.
This is a dynamic being encouraged from the very top. Expedia Inc chief executive Dara Khosrowshahi told Tnooz:
“We’re not going to have as many clear lines between pure transaction and/or media anymore….
“If we look at the audience that we're bringing in, and how we're able to serve that audience, and how ultimately, we're able to monetize that audience, from a long-term perspective, a higher and higher percentage of our revenue is going to come from revenue streams that look more like media revenue….”
“What we're very careful to do is make sure that our advertising campaigns are fully optimized for the customer, and that we’re recognizing the nuanced needs of a partner. We're moving from a 'one-style-only' way of working with partners to multiple touch points….”
“When we have a chain hotel partner with whom we've got the traditional touch points, we also want to become a media partner and a customer-acquisition partner for them.
We find that that really deepens all of the relationships mutually. Our understanding of each one adds to our understanding of the whole puzzle. That dynamic, long-term, is a great economic opportunity.”
(As a side note: Khosrowshahi said that, last year, he joined the board of directors at the New York Times Company, to further develop his interest in media approaches, among other reasons.)
Mandate from above
The OTA giant's media mindset began to gell after 2011, soon after Noah Tratt, global senior vice president, took the helm of Expedia Media Solutions. That time coincided with a company-wide effort to become something more than just a technology company.
The media approach didn’t come naturally. Expedia Inc prioritized e-commerce transactions above all else.
One effect of this emphasis was that many of its employees were instinctively skeptical of banner ad and other display media.
Tratt recalled in an interview that his team might work with a four-star hotel chain to create a display ad campaign to run on Expedia’s sites, but there would be internal resistance to displaying the campaigns.
“People would say,’Dude, I don’t want to have an ad product touting a mid-tier property appearing in the purchase path. The customer might say to themselves, ‘Maybe that five-star property I was looking at isn’t the right one for us on this trip. Maybe we should go for the four-star property instead.’’”
“In other words, the transactionally-minded staff worried that a hotel’s branding message might create doubt in the consumer’s mind, which would interfere with the actual transaction the company was driving toward....
"Advertising was an easy victim in that scenario.”
New products
In recent years, the company has used a test-and-learn philosophy to discard those old ways of thinking. Expedia runs hundreds of tests on any given day and its ad agency arm is able to tap into a portion of those tests. The data is helping to drive the creation of new products.
In July 2015, it launched TravelAds Direct product on the flagship Expedia brand, in beta.
Like a typical sponsored listing for a hotel within the search results, it shows users the hotel's information page within Expedia's site. Yet unlike the usual sponsored listings, it also opens up a new tab that links off to the hotel’s own site.
A supplier-direct product like that would have been unthinkable for Expedia three years ago, said Matthew Reichek, senior director of product and analytics. The worry would have been that the product would merely shift where conversion took place.
Reichek said the data has shown that the new product is instead actually boosting overall revenue for clients. For instance, a hotel might see meaningful returns in room-night growth during a campaign.
Despite the appeal of the new product, Reichek expects its traditional TravelAds that solely link-in to Expedia sites will still remain a decent chunk of its mix because such ads are "a cost-effective way for clients to get transactional performance data across Expedia’s branded sites and compare it with their competitive set’s performance data."
Learning to love data
Expedia's ad agency arm benefited from a company-wide, multi-year adoption of a "test-and-learn" philosophy by creating a monthly meeting called Product Review, adopting a concept pioneered and championed by TripAdvisor and other technology companies.
At each meeting, product developers walk through all of the tests that have gone on, debate the meaning of the results, and decide how to refine upcoming tests.
At the Bellevue headquarters, the product review is done on the tenth floor, where half the floor is a conference room with retracting walls.
This and similar company-wide practices have had a side benefit of helping the Expedia Media Solutions team flourish, Tratt said.
“We don’t have to have a religious argument anymore about whether any given advertising product is bad or good for the purchase path. Instead the data is shared at a meeting that everyone is encouraged to attend -- product, marketing, sales, and suits like me.”
“There’s an open debate. If a campaign works, the proof is in the data.”
Media is its middle name
But data without a strategy is useless. And Expedia Media Solutions seem to be adopting the strategy of acting like a publisher.
During Tnooz’s interviews, its executives often used the word “publisher” to describe their operation.
For instance, here is its boss, Tratt, talking to us about strategy:
“If you're a marketer planning an awareness campaign for your destination, you’re indifferent about whether that comes from a traditional publisher like a newspaper or if it comes through Expedia. You're just looking for efficacy that you can prove with data-based results.”
Similarly, at another point, Tratt said:
“When it comes to driving strong direct response from travelers, MeSo [to use the company's shorthand for the division] offers demographic targeting parameters that are otherwise rather rare. For instance, you generally can't target origination and destination through any other publisher.”
He added that his division is ahead of much of the industry in creating native, integrated content that works well across all device screens. He said:
“This is even true of our large, inspirational multimedia ads that drive intent and awareness, much like any publisher would do.”
Differing from its rivals
The publisher mindset at Expedia Media Solutions stands in contrast with the business models of the parent company’s rivals. Tratt said:
“If you look at our comp set, from a media business perspective, obviously there are some companies like TripAdvisor that are more like publishers than we have been. The overwhelming majority of their revenue has come from media. I would think of TripAdvisor as a publisher."
"In another category you have Priceline or Amazon, which are e-commerce companies at heart, but which also have rich media businesses.…”
That said, few of Expedia Inc’s rivals have raced to create analogous business units.
For instance, Tnooz asked Booking.com chief operating officer Gillian Tans if her brand would consider developing advertising media as a service.
“That hasn't really been our model… We will always measure what's in the best interest of customers, and so far we haven't been able to make that work, because it's an advertising approach towards customers….”
“Advertising is not always what customers are looking for. We keep measuring these things, but at this moment it's not something that we are actively doing.”
Lists as research
It is commonplace for e-commerce companies to do a lot of advertising, but it’s less commonplace for travel e-commerce ones to do it.
Expedia Media Solutions has bet that travelers use online travel agencies to help make choices about where to travel — not just to transact bookings after they’ve already made up their mind. Director of product management Wendy Olson Killion said:
“The way that people research and shop for aspirational, large-ticket items, whether its Cadillacs or Cancun vacations, involve questions like, ‘how much can I afford?’ and ‘how well-rated is one option compared with another?’”
Expedia Media Solutions also believes it can do more to woo and sway customers who are at this decision-making stage.
Custom ad agency storytelling
Dovetailing with its new publisher mindset, it has drafted together a small team that, for the past couple of years, has worked on making storytelling campaigns on behalf of clients.
Angelique Miller is the London-based director of the effort, called creative partnerships. She said:
“My job is to really bridge that gap and it's to be able to create concepts and partnerships with our clients that enable them to do all of those things that they could've done with the Lonely Planets or the National Geographics historically but that they can now invest and partner with us instead and actually see their work through to actual conversion.”
A personality quiz called “The Great British Afternoon Tea” -- which included a chance to win a trip to the United Kingdom -- had an email conversion rate of 79% in Australia and 66% in New Zealand, with more than 80,000 people worldwide opting-in to receive emails after playing it.
The test-and-learn philosophy is applied to these campaigns, too, in a way many other publishers haven’t yet adopted, according to Miller.
A case in point: A campaign just-ended for VisitDenmark had as its centerpiece a video of a traveler exploring the city’s gems by bicycle.
But Expedia noticed that users were dropping off after a minute or so, so it shortened the video’s length until user engagement no longer dropped off. It made other optimizations, such as to how many interactive prompts it should give a user, based on its early data.
Being responsive
Another practical application of test-and-learn has been in the rollout of responsive design, a set of technical practices that ensure that ad positioning will work well regardless of the device a consumer views it on.
While responsive design is not a new concept and wasn’t pioneered by Expedia, many DMOs, airlines, hotels, and other clients are still new to seeing their how campaigns perform better when presented via responsive design.
Responsive design implies better-targeted marketing, said Killion.
Expedia Media Solutions might use display ads (such as its TravelAds, or sponsored hotel listing, product) with different messaging to someone who is using a mobile device than someone who is on a desktop. It might do so by making inferences about the state of mind and typical behaviors of people who use each type of device.
Such practices put it at the front of the pack in the travel marketing industry, Killion said.
One critique of Expedia Media Solutions has been that, if it sees itself as a publisher, it needs to execute more quickly.
The recent launch of Expedia Switzerland was an illustration of a time lag in putting the campaign products and approaches in place to help advertisers see results in the Swiss market rapidly — and to convert visitors once they were on the site. Tratt said:
“There's a lot of investment going on across Expedia Inc [EI] in new markets and in growing existing markets. We see our growth as riding in EI’s wake, and our goal is to be faster and more innovative in our effort....
"Advertising tends to lag behind because nobody wants to buy a publication that only reaches relatively few readers.”
A growth trajectory
Supporting global launches is a long way from where Expedia Media Solutions started as a unit, born eight years ago as a tiny offshoot. The division grew in a meandering way, without the C-suite seemingly giving much conscious thought about it, said Tratt.
The steady growth of Expedia Media Solutions partly reflects secular growth in online travel sales, a sector that continues to grow faster than the overall economy, and steady growth in online advertising, which is also growing faster, on average, than many other sectors.
In the past three years, the parent company has made a significant investment in it, as the opportunity has become clearer and larger. The largest customers of Expedia Media Solutions are generally the parent brand’s largest suppliers, and lots of information is shared across divisions, said Tratt.
Perhaps most of all, Expedia's ad agency growth reflects Khosrowshahi's bet that its parent can be agile as an advertiser by thinking like a publisher, and not just as an e-commerce company.
EARLIER: Up-close with Expedia’s fast-growing ad agency