Google’s moves to cram the top of its search results with more and more advertising are hammering the online travel industry, one of the internet giant’s biggest customers.
Expedia Group Inc. and TripAdvisor Inc. reported dismal third-quarter results this week and laid the blame on Google. Their stocks dropped, as did shares of Booking Holdings Inc., whose brands include Kayak, Priceline and Booking.com. That wiped out a combined market value of more than $13 billion from the three online travel agents Thursday. The stocks regained only a little bit of that ground Friday.
Google dominates the online search market, holding at least three-quarters of it. People use the search engine to research trips, so for at least a decade online travel agents have refined their websites with trustworthy content and easy booking tools to show up high in Google results.
This search engine optimization, or SEO, worked well until about five years ago. Around that time, Google began placing more ads at the top of search results, pushing down the free listings. Google also built new travel search tools, which were mostly paid listings too. This means online travel agents now must pay billions of dollars each year to Google to ensure they show up high in search results and get clicks from travel planners.
The online travel industry has been concerned about Google’s changes since at least 2016. But the full effect was felt this week.
“Google has got more aggressive,” TripAdvisor Chief Executive Stephen Kaufer said during a conference call with analysts late Wednesday. “We’re not predicting that it’s going to turn around.”
Free traffic is “shrinking all the time,” Expedia CEO Mark Okerstrom said the same day. “Google does continue to push for more revenue per visitor. And I think it’s just the reality of where the world is.”
The industry has been trying other marketing channels, such as social media and more TV advertising. But Google’s search engine is so pervasive that online travel agents have to keep buying ads from the company to keep traffic coming to their sites.
D.A. Davidson analysts wrote that Expedia is exploring alternatives to mitigate its “reliance on search/Google,” but they see “no alternatives that will be able to efficiently ‘move the needle’ from a volume perspective anytime soon.”
Declines in the online travel industry come as antitrust scrutiny of Google is ramping up in the United States. State, federal and congressional probes are underway to determine whether the company violates competition law. One area of concern is vertical search, which entails Google using its main search engine to promote its own industry-specific products over those of other companies. Travel is one example where this is happening, along with local search, contractor marketplaces such as Angie’s List and shopping-comparison services.
Google has been a rising risk for the travel industry for a while, but executives generally have hesitated to blame it for poor results. The search giant is one of the most important sources of traffic and business for online travel agencies, so they have tried to maintain a good relationship. But this quarter, Google’s effect was so painful, industry executives and Wall Street analysts couldn’t avoid it.
“We see these Google changes as a potential headwind to [online travel agencies’] profitability,” Morgan Stanley analyst Brian Nowak said in a note to clients. People who want to invest in the online travel sector should do it through Google stock, he added.
Booking Holdings, the largest online travel agent, was peppered with questions about Google during a conference call with analysts Thursday.
CEO Glenn Fogel said Booking Holdings’ future success will rely on reaching people without Google getting in the way.
“What we know is most important is for us to get customers to come to us directly,” he said, adding that building brand strength and retaining customers better means the company “will not be as dependent on other sources of traffic.”
List your business, create your own digital store to sell goods and services, and share posts on social media. Promote your business on Google instantly! Should you need help with local digital marketing then view our new Google Marketing Platform and services Top4 Marketing
Get Found On Google Promote Your Website, Reach local customers today!
Engage A Social Media Agency For Only 1/3 The Cost Of Employing A Social Media Manager…LET’S TALK!