Trivago is a global hotel search platform. Unlike traditional OTAs such as Priceline (PCLN), Ctrip (CTRP), and Expedia (EXPE), Trivago does not allow users to book hotels through its website. For booking, users are redirected to these OTAs. This is similar to what TripAdvisor (TRIP) did before its instant booking rollout. Unlike TripAdvisor, Trivago doesn’t intend to utilize instant booking.
The company makes money by charging hotels and travel agents on a cost-per-click (or CPC) basis. CPC for each spot is determined through a bidding process that takes place on the Trivago marketplace. It also earns some subscription fees, which include fees paid by hotels for services provided by Trivago. However, this revenue is insignificant.
Trivago spends a great deal of money on its popular ads. Three of its ads rank among the top ten most-watched travel videos on YouTube for 2016.
Trivago’s Arabic ad, Find the Best Price on Trivago, is the most-watched travel video of 2016 on YouTube. It has garnered almost 17.2 million views. The ad emphasizes the ease and benefits of comparing prices across different sites at one online source.
Trivago’s Japanese ad, Happy Dance, ranks second among YouTube’s travel videos, with 11.5 million views.
Trivago’s English ad, Find Your Ideal Hotel at the Best Price, has gained 10.3 million views and is the fourth-ranked travel video on YouTube for 2016. This ad features actor Tim Williams.
This popularity has helped Trivago create wide brand awareness among users. We can understand now why Trivago intends to continue its huge ad spends.
Trivago is currently hiring accounting staff, which means that costs could rise and investors could have to wait until the company gains clarity with respect to its accounting practices.
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