Airbnb's decision to permanently cut its performance marketing spend and focus on brand marketing and public relations has brought the efficacy of performance into the spotlight.
The move from the holiday rentals company came after it revealed last week that it had slashed its performance marketing spend by US$541 million in 2020—part of a broader marketing cull during Covid-19—but still generated 95% of the same online traffic as a year earlier.
Brian Chesky, co-founder and chief executive, said the company would "never going to go back to spending the same amount of money on marketing as a percentage of revenue as we did in 2019". Marketing represented 14.2% of revenue in 2020, compared with 23.7% in 2019.
In particular, the company said that the strength of the Airbnb brand and its communications strategy "allows us to be less reliant on performance marketing", with Chesky noting that Airbnb has become known as a noun and a verb in pop culture.
Instead, the company will focus on leveraging PR ("that's how we really built the brand of Airbnb", Chesky said) and brand marketing. As part of its brand marketing push, Airbnb launched its biggest brand campaign in five years, 'Made possible by hosts', at the start of 2021.
The company acknowledged in its annual report that brand marketing carries some risks because it is “expensive and may not be cost-effective or successful”. But performance marketing also faces risks around data and privacy, the company said, especially as countries around the world enforce stricter regulation in these areas.
Airbnb is not the first brand to choose to place greater emphasis on brand in its marketing mix, but its decision has sparked renewed interest in understanding the value of performance. This is especially top of mind in Asia-Pacific, a region which is believed to be more performance-heavy than others due to the growth of mobile and high volume of digital native companies.
Campaign asked five Asia-Pacific performance marketers to explain how Airbnb witnessed little material impact when it turned its performance tap off, to address concerns around data privacy and the impact on performance, and to contextualise the situation in Asia-Pacific.
This story calls into question whether performance delivers results. How do you respond to this?
Monica Chia, APAC regional SEO director, Reprise:
"When we start a performance marketing campaign, we need to clearly define the results intended. The article mentioned that the launch of Google Travel has massively reduced Airbnb’s own organic search visibility. Using that context, competing for paid search visibility in the travel search results, alongside performance marketing focused travel aggregators, and Google’s travel product will no doubt have been a factor affecting their performance marketing efficacy and results.
"Reviewing the overall competitive landscape regularly could have helped Airbnb adjust their performance marketing activities and understand whether it was driving value, or simply wasting clicks due to fierce competition. So I don’t think this is as much related to whether or not performance marketing delivers results, instead, we should question whether or not their performance marketing tactics matched expected results.
"The move to focus on brand marketing now is a good move for Airbnb, as the Covid-19 pandemic shapes what the next decade of travel looks like, this is something that will continue to build top of mind awareness, outside of any advertising or bidding platforms."
Kabeer Chaudhary, managing director APAC, M&C Saatchi Performance:
"All travel and hospitality brands understandably slashed their marketing budgets in 2020. The objective for a number of brands was to stay top of mind, such that when travel returns they are top of the consideration hierarchy. Hence, it is understandable that such companies would invest a majority of their budgets on brand marketing and PR.
"The fact that Airbnb were able to generate ‘95% of 2019 traffic’ without any spends on performance marketing isn’t enough information to question the efficacy of performance marketing itself.
"Firstly, I am very surprised to learn that Airbnb uses performance marketing to ‘generate website traffic’ as a primary goal. To be honest with you, this is very 2010. I would expect a company the size and complexity of Airbnb to look at deeper metrics such as revenue, transactions, and so on to judge the efficiency of their marketing spends.
"There are a number of technical implementations such as incrementality testing which can help brands determine the real value of performance marketing. However, it would almost be impossible for a hospitality brand like Airbnb to conduct effective incrementality tests in such a dynamic environment when business parameters are constantly evolving as a result of the pandemic."
Nathalie Pellegrini, chief performance officer, Mindshare Asia-Pacific:
"The effectiveness of performance marketing largely depends on the strategy built behind the campaign and how it is fine-tuned. The win-win opportunity for brands to unlock success in performance marketing is running a combination of brand marketing linked with lower funnel paid advertising, which is then ruthlessly optimised to drive the desired results."
Martin Davie, head of international platform, Publicis Media Singapore & general manager Performics:
"I see this a little differently. It seems to be less of a broad question on whether performance delivers results and more of a question on the role of performance—and broader marketing initiatives—for Airbnb currently. Airbnb are taking a similar step to a lot of advertisers and aiming to take a holistic view of their marketing expenditure. There is no one-size fits all answer to this: All advertisers need to evaluate their own data points and understand the value different initiatives are driving for their business. Understanding attribution and the role of channels/activities has never been more important.
"There’s always a balance to find for brands when it comes to investment strategies—while the growth in performance marketing has led to a reliance on short-term metrics, being able to balance the short-term with the long-term value for your brand is critical moving forward."
David Ketchum, head of Control v Exposed, Asia-Pacific:
"Let’s put the customer back into the conversation before we get on to media effectiveness. Airbnb already has a strong personality and presence, and there’s no doubt that brand marketing and public relations engage consumers at the discovery phase of their journeys. However, that brand awareness has to pull through to consideration; just because you are aware of something doesn’t mean you’re likely to buy it.
"Performance media plays an important role in the mid-funnel, matching consumer content and online behaviour choices with the advertiser’s value proposition. Well-targeted display ads with relevant calls to action work, from mobile QR code coupons, to online customer acquisition, to ecommerce sales. And paid search and paid social at the bottom of the funnel bring people from research mode into buying.
"Expedia, Booking.com and all the hotels will continue to spend billions on performance marketing in the accommodations sales 'arms race.' When Covid subsides, people will be hungry for new destinations and travel experiences. Airbnb will face competitive pressures by dropping out of the pack. The playing field is level: all players must respect data privacy, and compliantly adapt to the increasingly cookie-less world."
Airbnb cited concerns around data privacy and the impact on performance. Has this come up with clients in APAC? How are you communicating with clients around this, to convince them of the continued value of performance?
"This is an ongoing area of concern with clients, especially with Google’s recent announcement on third-party cookies. A question that clients may ask is how to ensure that we continue to reach the most relevant audience. One way of approaching this would be to develop credible content on your brand website which answers your audience’s queries on your brand and products all the way through the marketing funnel. Attracting these audiences to your website will then allow brands to collect valuable first-party data, which can continue to drive value and support performance marketing activities."
"Google inhibiting the use of the cookie (due next year) and Apple deprecating the IDFA (due early spring this year) are moves by these companies to enhance data privacy for users in the internet ecosystem. In effect, it will lead to inhibiting advertisers to behaviorally target users and deterministically measure performance of those campaigns. Overall, in the next few years digital marketing will become less efficient than it is today. However, it will always have much more data (contextual) and hence efficiency, than it’s weary step-cousin, traditional marketing."
"In the past few months, I’ve spent time catching up with clients and partners and the key area they are focussing on is privacy and how the technology platforms (Google, Apple, Facebook, TTD to name a few) are taking their own approach to privacy, which will impact personalisation and conversion tracking. At Mindshare, our teams are constantly evaluating some of these proposed workarounds to understand the potential impact for the brands as we have seen first-hand how these changes are affecting our client's ecosystem. An important step to ensure our clients are seeing a continued value of performance, we are providing them with constant updates/POV's as well as highlighting the importance of collecting data responsibly, building and updating our best practices of how to create and reach new audiences. We also deliver training for internal and external teams to be thoughtful about their analysis and take consumer consideration to the next level by building digital marketing practices that allows a positive consumer experience that’s useful and engaging."
"Data privacy is absolutely a key discussion point currently—at Publicis we have built a global community to provide auditing and education for our clients across the globe. In terms of the conversations with clients, we don’t see our role as convincing them on the value of performance—more understanding the role performance plays for them and working closely together to understand the true value being delivered across all activities."
In general, would you say APAC is a more or less performance-heavy region than other regions in the world, and why?
"Having worked in both Western Europe and APAC, I find APAC is a lot more focused on performance marketing. Some marketers in APAC still have a traditional mindset of using direct response marketing channels to deliver short-term results quickly. However, more APAC marketers could take a note from Airbnb’s example to reassess the channel mix and look for opportunities outside of performance marketing that will drive long-term, sustainable growth for their business."
"Markets that have healthy competition among growing digital native companies tend to have a heavier focus on performance marketing. Most of APAC, LATAM and MENA would fall under this category."
"Yes, the digital commerce market in APAC is set to increase two-fold to reach more than US$1.1 trillion by 2022, meaning the region will account for almost two-thirds of the global digital commerce market. While ecommerce was already crucial for brands pre-Covid-19, the pandemic caused a major shift in consumer behaviour, resulting in an influx of online shoppers. This shift is driven by existing online shoppers buying more, and also new online shoppers who were not comfortable being outside during the pandemic.
"When looking at the APAC app ecosystem, Southeast Asia accounts for one of the largest shares of downloaded applications in the world. The relationship between mobile users and apps has also fundamentally changed. This alone has created a massive opportunity for brands to expand their existing audiences on digital channels by leveraging and developing scalable marketing tools and capabilities to engage and retarget the most relevant consumer, ensuring an optimal consumer experience."
"I don’t feel APAC is more or less performance-heavy than other regions across the world, however, there are unique challenges to address in APAC versus some other regions. The unique nuance of individual markets across the region means that brands will inevitably face completely different challenges from one market to another—this means the role of media and the role of performance will inevitably shift considerably from one market, or brand, or vertical, to another. Working together with our clients, we need to find the right mix to achieve their objectives."