Trivago blames profit drop on opting out of new Google Ads product

Trivago’s decision to opt out of Google’s new property promotion ads was a costly mistake, it seems.

Revenue was down 14% year-on-year, to $137 million, in the second quarter of 2023, following a decrease in website traffic, Trivago reported.

Meanwhile, revenue for Expedia, which opted to use Google’s new ad unit, reported a record second quarter with revenue up 6%.

A regretful data-led decision. Trivago decided against Google’s new ad product because it is part of Google hotel ads, which has historically failed to perform well for the company, Skift reported:

• “We did not participate in this ad format prior to this rollout, and when this got more visibility [at the expense of] traditional advert placements, we lost traffic volumes,” said Trivago Chief Financial Officer, Matthias Tillmann.

Yes, but. Property promotion ads are not “new.” Google announced the launch of property promotion ads in March 2021. So it’s an odd excuse.

Reversing course. Trivago started running property promotion ads in July and undoubtedly will be closely watching the performance.

Why we care. Trivago’s experience should act as a cautionary tale on the importance of being open to testing ad formats – especially if your rivals are doing so. It’s also a good reminder to diversify as much as possible because relying too heavily on one platform or channel (i.e., Google) can have a devastating financial impact.

Drop in ad spend. In its Q2 results, Trivago announced that its U.S. ad spend had decreased by 10% to $32.9 million, and 4% in Europe, year on year. A Trivago spokesperson said:

• “Our reliance on search engines, particularly Google, which promote their own product and
  services that compete directly with our accommodation search and may negatively impact our
  business, financial performance and prospects.”

Performance declines. Trivago addressed its Q2 results in a statement published on its website:

• “We observed increased volatility in the results of our performance marketing campaigns. As we continued to be disciplined with Return on Advertising Spend (ROAS) targets, we experienced significant declines in performance marketing traffic volumes coupled with decreases in profit contribution.”
• “Despite these headwinds, we ramped up our brand marketing investments as planned. While these expenditures had a negative impact on our profitability in the second quarter of 2023, we believe they will have a long-term positive impact on the volume of direct traffic to our platform and our financial performance.”

Deep dive. Read Trivago’s Q2 2023 Earnings Release statement in full for more information.