In late Feb Airbnb released its first earnings report following its IPO. And it contained a chestnut that stuck in the craw of many a digital marketer.
Around this time last year, with the travel industry staring down the abyss, the company suspended all marketing activity with the aim of trimming costs by $800m.
As a digital-first play, the bulk of their spend went on performance marketing. And while flaky programmatic advertising doubtless consumed a chunk of that, a fair proportion went to the harder working aspects of performance, such as search.
So it was something of a bombshell when Brian Chesky, CEO and co-founder, told analysts on his earnings call that, despite the cutbacks, website traffic barely dipped and that their adjusted EBITDA for 2020 was slightly better than 2019’s.
Airbnb’s not the first brand to call out digital media. Back in 2017 Unilever and P&G slashed their online spend. In the latter’s case, the cuts not only added 1% to profit margin in the first quarter following the change but they also saw their overall market share climb by 2%.
Then we had Uber. They, too, trimmed their online advertising four years ago and saw no significant impact on app installs or driver registrations (the details of this only emerged late last year after Kevin Frisch, their head of performance and CRM, shifted jobs and gave an explosive interview on the Marketing Today podcast).
While the Uber, Unilever and P&G decisions centred around programmatic ad fraud - something which our industry is still seemingly unable to control - the Airbnb one is, at first glance, more troubling. GoogleAds and other SEM platforms generally deliver returns in bucket loads, so what happened? And if other advertisers follow their lead and cull their performance marketing, what outcomes are they likely to see?
The answer is actually quite obvious. Airbnb, like Uber, is a strong brand with huge name recall and it’s of endless interest to the news media. Companies like these can tinker with their performance levers and rely on their impressive brand equity to pick up the slack.
As Chesky revealed in his call, despite switching off all marketing, the company was mentioned in half a million articles last year and had as much share of voice as most other major travel companies combined. This coverage drove enough traffic to the website to compensate for the losses from digital media.
It underscores an important point that Les Binet and his praise singer Mark Ritson have been banging on about for years. Marketing must be viewed holistically (paywall). For the greatest impact, it should have short term tactics like performance and long term strategies (brand building). Meshed effectively, the two support each other creating one of those wondrous occurrences where the value of the whole becomes greater than the sum of its parts.
Airbnb’s marketing efforts prior to Covid had been almost entirely centred on performance. It was perhaps a stroke of good fortune that its hefty brand equity coupled to incessant news reporting around the on: off on-again IPO kept the business in the headlines, maintaining the top of funnel interest that so typifies the benefit of long term brand building.
Not surprisingly, Chesky acknowledged the importance of performance to the organisation’s long term plans and went on to tell investors that while they’ll be taking a more balanced approach in future, they view performance as a laser to help address imbalances where there’s a mismatch between guest and host numbers in key markets.
So the real takeout is that unless you’re a blockbuster brand with an impending IPO it’d be pretty foolish to switch off your GoogleAds campaigns.
Indeed, the savvy amongst us would be taking advantage of others’ cutbacks to ramp up our share of the market by doubling down on our marketing spend. Or at the very least reallocating programmatic budgets to harder working areas.
*This article originally appeared on MarkLives.com.
Need Assistance with Digital Strategy?
Rogerwilco’s team of strategists, business analysts and data scientists is here to help.