Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Think Nice Things or Suffer a Bad $TRIP

It’s a lovely thought but revenue in this area has stagnated and declined throughout TripAdvisor’s attempts to close that gap. Revenue in Expedia and Booking Holdings Inc (NASDAQ:BKNG) is growing but their marketing spends are also rising in line with it, almost one for one. The marginal gain of a new dollar spent on marketing for them is currently flat or negative for the bottom line. I believe this is due to the increased competition levels as the market is saturating. TripAdvisor has been taking a more calculated and tactical approach to its marketing spend which was down 10% yoy. This is more efficient profit but they are losing further market share as a result and the size of their marketing spend is dwarfed by the size and spend of Booking and Expedia. TripAdvisor spend about a sixth of Expedia and Booking Holdings, and these websites get a large portion of their users direct. It is also worth noting that a large portion of each OTA’s advertising spend is for online presence which is paid to Alphabet Inc (NASDAQ: GOOGL), who are now competing in the space. One could imagine then that the marginal gain on each dollar of marketing spend is going to reduce further. Google being a competitor now will make life more difficult for incumbents by putting their OTA infrastructure directly in the search results of other OTA’s, per below:

Picture 1: Recent screenshot of search for hotel in London

Hotel London

Hotel London 2

If you are a customer who is looking for hotels in London, why would you bother clicking the ads when on the search page Google gives you date options, pictures, reviews, locations and prices. Some people will look into multiple providers to compare the prices but if, after two or three times of realising the Google prices are as competitive as the paid ad entities then users will not bother going to that effort to compare them. A key element for Google here is if the profits from the endeavour are greater than those from the ads. This will only be clear in time.

Follow Booking Holdings Inc. (NASDAQ:BKNG)
Trade (NASDAQ:BKNG) Now!

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.