Trivago, which is majority-owned by Expedia, along with 7 other companies wants Google to stop trying to collect on first quarter ad spending. These companies bought advertising, sold travel, but in many cases the trips didn’t happen – so they aren’t seeing revenue from those sales.
Skift‘s Dennis Schaal who my impression is always seems to write negative stories about Google and bolster Expedia, asks “If Google’s advertising partners had to hand out tons of refunds to consumers for coronavirus-tinged trips that never happened, shouldn’t Google, with its deep pockets, share in the pain?”
The answer here is simple: no. The company paid for the eyeballs, Google delivered the eyeballs.
- If Google was selling ads on an affiliate model where they shared in the sales from their ads, then their deal would likely include giving back commissions on trips that weren’t taken.
- But when travel companies bought ads on Google they were generally buying the ad and once the customer clicked Google had fulfilled its end of the bargain.
The eight companies would have generated about $80 million in advertising revenue for Google in the first quarter, Miele wrote.
However, since Google usually receives advertising payment monthly, it’s believed to be about $40 million in advertisement payments that are in question for March. That month would see the heaviest advertising of the first quarter as companies were poised to gear up for the suddenly disrupted summer travel season.
These companies are looking to the German government for bailouts, and want a bailout from Google as well because these companies would otherwise “be forced to use government loans to pay their debts.” German taxpayers would, in effect, be sending money to Google.
Oddly the argument seems to be Google should forego what it’s owed, rather than the German government should be skeptical of a bailout!
For its part, Google says they’re now offering a pay-per-stay advertising model where they take the risk that consumers complete bookings.
No doubt that the largest advertisers would be in a stronger position to negotiate on past-due receivables. With Expedia and Priceline spending over $5 billion a year combine with Google, you could imagine either of them being in a position, owing enough money to Google, that they might agree to settle the debt (or they might wind up in court). When you owe the bank $1 million you have a problem, but when you owe the bank $1 billion they have a problem.
By the way this isn’t the first time the Trivago Guy has found himself in trouble.
Trivago doesn’t deserve jack. The reason why is that they had Google and others put up super intrusive ads that covered other content, followed your page scrolling and other crap. It was so bad for a while I swore I’d never do business with them.
>For its part, Google says they’re now offering a pay-per-stay advertising model where they take the risk that consumers complete bookings.
This is 0% altruism and 100% capitalism. Google would love nothing more than to switch from a CPA (cost-per-action or “pay-per-stay” as they call it) vs. a CPC (cost-per-click) model. Why? Because ultimately they will structure it so that they will make more money via CPA vs. CPC.
Sure there will be a bit more risk, but by the time this gets implemented, most of this crisis will blow over and it may be years or decades before the next pandemic, and during all of that time, Google will reap the benefits of the more favorable financial terms.
Even if there is another pandemic 5 years down the road (unlikely) and they have to take a load of bookings on the chin, the delta between CPA and CPC will have paid for itself of the last 5 years and they’ll still be way better off.
The big OTAs are not stupid. They know how to run the risk models. This is akin to making a deal with the devil. Google’s offer is disingenuous at best and more likely predatory.
I meant to say “switch to a CPA (cost-per-action or “pay-per-stay” as they call it) from a CPC (cost-per-click) model”.
Serves Trivago right. I’ve never understood the value they provide to customers beyond low rates.
When things go wrong they have next to no customer service available to help.