From Business Listing to InstantBooking: The explosion of MetaSearchs
As the content searched in the web becomes more complex and heterogeneous (music, video, books, services, personal profiles, etc.), quite obviously the traditional organisation of the results given by search engines in the form of simple links to web pages proves to be completely inadequate.
This article was written with Aldo Polledro, Head of Advertising & Partnerships in WIHP
Hence the rising, in the course of the history of the internet, of two well-defined trends:
1. The development of sites designed for vertical search, i.e. search which is circumscribed within a specific sector or category of goods or services (for more details please refer to the chapter Understanding the Change);
2. The attempt of search engines (uncertain in the beginning, then more and more successful) to always improve the matching of the experience and the results in the category searched. Within the hospitality business this trend is at the basis of the birth of products like Google Maps (2004) and of the gradual integration within Google SERPs of Hotel Finder (2011) and Google Carousel (2012).
In sectors that are characterised by a large dispersion of information (as is, indeed, the case of hospitality) MetaSearch engines respond to a manifest need and, therefore, they find fertile ground to thrive in.
Twenty Years of MetaSearch Engines
Although metasearch engines are, vox populi, passed off as the Next Big Thing, in reality their birth can be traced back to the '90s; the significant heterogeneity in the results of the various search engines in use at the time had, in fact, generated the need for dedicated interfaces that could display the results of several search engines simultaneously (see for example MetaCrawler, BigSearcher, or lxquck or Vivissimo).
Subsequent developments in the market, which saw the refinement of search engine algorithms, the domination of SERP natural results by big companies and the global success of Google's authority (challenged only occasionally by other local sub -monopolies such asYandex, Baidu, Seznan, Naver, Yahoo Japan, etc.), made this comparison less and less needed. Metasearch engines, however, remain extraordinarily relevant in those areas where information is very fragmented, as happens, for instance, in the distribution of hotel rates. And that is why new platforms such as Kayak, Trivago and Qunar, well known to insiders (and not only to them), joined the more-than-crowded pre-existing ecosystem. The purpose of metasearch engines is to associate the main benefit of the general search (you can find, by querying a single source, all the relevant information) with the extreme segmentation and practicality of information itself.
Thanks to this important plus, metasearch engines have become increasingly successful, especially in the segment of the demographically young and very young (18-35 years, the so-called Generation Y or Millennials), who are more digitized and aware of the factors search speed / usability and price. According to a report issued by PhocusWright at ITB 2014, 36% of American travelers, 42% of the German ones and as many as 54% of the Chinese regularly use a metasearch engine to compare flight and hotel prices.
Towards the Final Meta
The extreme competitiveness in the travel business is leading vertical and metasearch platforms (although they were born in different ways and to respond to different original needs) to converge towards an increasingly homogeneous model. The reason is simple, almost Darwinian. The model that will prove to be the most efficient one in terms of scalability and internal efficiency for the end customer is bound to prevail and, with equal Darwinian simplicity, we can say that more and more such model will be handled by a small number of big players. Let's analyse the data that lead to this line of interpretation by examining the various ways in which this convergence is taking place. In 2011, the world’s leading search engine (Google) launched two important new features:
1. Hotel Finder: the Google platform that allows searching and comparing hotels and their rates;
2. Hotel Price Ads (HPA): the advertising program that allows the dissemination and integration of fares and availability throughout the Big G suite, thus extending the reach not only to Hotel Finder, but also to Maps, Places, Google and SERP (Google Local Universal).
Due to the technical complexities underlying the connection of rates and availability with Google HPA, the access to this new advertising product was initially limited to a small number of selected partners and then gradually expanded to smaller players. During an event held in Berlin in March 2014, Nicola Simionato, Google Travel General Manager for APAC and EMEA countries , explained how this step, seemingly radical, is actually a natural evolution of the philosophy and of the core business of the company based in Mountain View: "The perfect search engine should understand exactly what you mean and give you exactly what you need" as Larry Page has always said, very clearly. Therefore, the integration of a vertical search meta platform is fully consistent with this view. Google does not see in HPA a mere business diversification, but a vehicle to create the best possible search experience across all its products and their desktop and mobile declinations. According to Tom Mulders, HPA Senior Product Manager , Google will gradually and increasingly highlight HPA placements at the expense of traditional natural search and paid results). Even if, by Google's own admission, the traffic volumes generated by HPA are but a small fraction when compared to those of AdWords, the percentage is likely to increase significantly and it is reasonable to expect that within a few years HPA will become one the main metasearch engines in this sector.
Not Only Google: the Other Metasearch Engines
Google is not the the only player in the search sector to have entered the metasearch world: in China, for example, the giant Baidu acquired the majority stake of Qunar for 306 million dollars in 2011. The same group has recently been joined also by the main slant-eyed OTA : Ctrip.
OTAs have been farsighted too: in March 2013 Expedia too became a majority shareholder of Trivago, the biggest hotel price comparison website in Europe (with 632 million dollars of transactions). A few months earlier, in November 2012, Priceline had done the same with Kayak, the stars-and-stripes response to Trivago (one billion and 800 million dollars of operations). In both cases, the independence of metasarch engines was (at least formally and for the time being) preserved. These acquisitions seem more understandable when looked at from the perspective of risk diversification and know-how acquisition and experience.
The Owls Are Not What They Seem: TripAdvisor and Metasearch Engines
The acquisition of metasearch engines is not, however, the only way through which traditional players in this sector are entering the business: for example, the world's largest review site, TripAdvisor (150 million reviews and 260 million unique users per month), became itself a true metasearch engine in 2012, when its advertising system (originally a simple re-direction in pop-up windows) evolved to a better and more user-friendly rate-check system. The move also allowed the famous review site to further enhance its advertising space: by selling higher quality clicks to advertisers, Tripadvisor has increased its profits by fifty-three to sixty-seven million dollars within one single year.
Meta-Ota: Hybrid Metasearch Engines
Convergences do not end there: in many cases the same metasearch engines appear to be evolving in the direction of traditional OTAs, passing from pure CPC business models to other more hybrid ones, which require payment in cost per acquisition (CPA), a model that follows very closely that of the OTAs (in other words: a commission on the rooms booked instead of a cost per click). Several metasearch engines are even creating their own reservation platforms, especially in the mobile sector, where click redirection and the classic online payment systems are regarded as totally inadequate to ensure the navigator a fully enjoyable experience. The two most interesting examples of this are, again, the experiences of Google and TripAdvisor: in the USA mobile version of Hotel Finder, Google allows you to pay for your reservation through Google Wallet, a virtual wallet launched by Google in 2011 to simplify the online shopping experience, particularly suitable for purchases from mobile devices. Instead of redirecting clicks to the booking system of the supplier, the user sees the Buy With Google button displayed next to each of the partners who support payment via Wallet. Thanks to the partnership with MasterCard, bookings processed via Wallet are forwarded to the supplier's booking engine as would happen with a regular MasterCard credit card, but without actually transferring the user's information (a process not dissimilar to PayPal payments).
TripAdvisor, instead, launched a few months ago a project called Instant Booking, with the aim of “providing a more efficient booking system to travelers and allowing hotels and partner agencies to access to a greater amount of bookings and to a better tracking system of the same” (Words of Adram Medros, Senior Vice President, Global Product). Interestingly, the Priceline group has disassociated itself from TripAdvisor's Instant Booking project (even if politely and without manifest controversies). The reason, according to CEO Darren Houston, is that the feature could be potentially confusing for the customer, who might not understand with which agency he is actually booking his stay (Booking.com or TripAdvisor?). Therefore, fearing a brand dilution, Priceline has decided (for the moment at least) to wait on the sidelines.
Metasearch or Not Metasearch? Should You Invest in Metasearch Engines?
The scenario described above seems to open interesting opportunities, but the true question that arises throughout the industry is whether or not it is convenient to invest in metasearch engines and enter a direct competition with OTAs. The main argument in favor of this is based on the theory of brandjacking: when the metasearch engine page refers to the hotel, the commission paid to the online agency to make your hotel popular and traceable loses its meaning, because the navigator has already found the property on the metasearch engine. The OTA, then, turns from being a partner who is able to actively promote the hotel in its portal, into a mere intermediary, perhaps even an unwanted one, in the monetization of the property's already acquired reputation. Still, this direct monetization is hampered by several factors of opposite sign. Let's take a look at them in detail:
Connection, Technology and Know-how
Independent hotels (but also medium and large chains) do not generally have the technological capabilities to participate directly in the advertising programs of metasearch engines. Nevertheless, the situation has somewhat changed since 2011, when WIHP, for the first time, allowed its customers to participate in TripAdvisor's redirection system (the ancestor of today's TripConnect) and enrolled (as webagency) in Google's program Hotel Price Ads. The market's interest in a direct participation, after some time, led several reservation systems for hotels, agencies and channel managers to follow the trend and to provide their customers with connection and monitoring systems for these campaigns. Aware of the growing interest of the market, TripAdvisor and Trivago decided to launch advertising programs specifically directed to the independent hotel industry. Hence, TripConnect was born in October 2013 and Trivago Direct Connect was born in February 2014 . Even metasearch engines which have not yet developed in-house platforms that allow the management of advertising campaigns now offer this service to hotels, working with next-generation platforms such as Meta I / O (another innovative product by Wihp) or MetaSearch Engine Manager, by the Chinese company DerbySoft. Platforms such as Meta I / O and MetaSearch Engine, because they allow you to manage all of these campaigns from a single interface and provide you with a unified tracking system, also allow the management complexity of the campaigns themselves to be leveled down. These products are a sign of major innovation in this field and they show how necessary it is that all the subjects operating in meta-advertising get out of their self-limiting sectionalism and fill the gap against other advertising systems that are more advanced in terms of control and targeting possibilities (because they are not tied to a specific field), such as search and display. Our advice to an independent hotel is to rely on strong and professional organisations that are able to provide fast and stable connections as well as evolved tracking systems. Booking.com and Expedia have a very strong know-how in web marketing and their departments are highly structured and able to regularly analyze and optimize their campaigns: the same cannot be said of independent hotels. The market is very competitive, and improvising can be very risky, especially considering the high costs of clicks.
Google Hotel Finder and HPA for Dummies: how It Really Works
Unlike Search Engine Marketing, in metasearch campaigns at the moment there is no standard available to determine the cost per click. Instead, each metasearch engine has independently developed its own modus operandi and conditions. Currently, the only platforms to have a system that determines the CPC with a pure auction-like system are Google and TripAdvisor. The way Google HPA functions is highly innovative and, in my opinion, it is the most advanced system available on the market today, as it can properly calibrate both the quality parameters for the end user and the incentive to bid for the advertiser.
Let's try to explain in simple terms how this platform works:
• Whenever a user searches for a hotel through the Google ecosystem, all advertisers interested in participating in the auction are analyzed by Big G;
• Among all these potential advertisers, only the partners who are able to give the user the best service (which means they are able to offer a perfectly compatible response in terms of language, currency and device) are selected and admitted to the auction;
• These advertisers are then divided into groups, which are assigned a ranking based on the rates they propose. For example, a hotel that offers a price per room per night between 150,00 and 160,00 Euro will be listed in group A, and those proposing a price between 160,00 and 175,00 Euro will be in group B, and so on. In the interest of the end user, Google will obviously privilege Group A, which includes advertisers who publish more attractive rates;
• Within each group, the advertiser that provides more gains the Top Position (A), while the other 3-5 partners (depending on their placement) are listed in the remaining slots (M, Z);
• If an advertiser offers a CPC which is lower than the reserve price, it will not be shown, even if it belongs to the group with the most competitive price;
HPA lets you choose between two offer modes: you can offer a percentage of the value of the stay selected by the user or a fixed cost multiplied by the number of selected days. As it happens with Adwords, the actual cost is € 0.01 + the offer from the supplier placed in the ranking just below. It is still possible to set a daily budget for each hotel within the campaign. Moreover, in the wake of the philosophy that accompanies AdWords Enhanced Campaigns, the possibilities of targeting and adjusting the bidding are manifold. It is, in fact, possible to adapt the basic bidding calibrating the price depending on the device, country, Google placement (Google Hotel Finder, Google Places, Google Maps, Google Local Universal), room type, number of nights, etc.;
TripConnect and Others: How They Work and How Much They Cost
In Tripadvisor's Check Rates, also a definitely evolved and transparent system, the increase of the offer corresponds to a proportional increase in the ranking with respect to the other bidders, which means more visibility and an advantageous position to receive a greater number of clicks. The TripConnect system features functions that are absolutely interesting, as it also allows to calibrate the bid depending on the country and the device. Also, as is the case with HPA, on TripConnect you can set a daily budget for each campaign.
All other comparators, which do not base the cost per click on an auction system, lead separate and confidential negotiations with each advertiser to establish a fixed cost of the clicks. Obviously, for an individual hotel it is necessary to rely on a technology partner that can guarantee the connection and who is able to define the contractual arrangement; it is the hotel’s interest that this partner is as strong and big as possible, in the hope that he has obtained the best conditions in terms of price and concrete technical possibilities of monitoring and optimization. To tell the truth, we must say that whatever the size and the power of this partner in terms of advertising volumes managed, it is unlikely that it can reach the same bargaining power of giants such as Booking.com or Expedia.
MetaSearch: How to Monitor ROI
Since each click has a cost, it is obviously important to make sure that these campaigns produce a return on the investment which justifies the activation and maintenance of advertising activities. We must distinguish, though, the concept of ROI from the concept of ROAS (Return On Advertising Spend). The ROAS is defined as the ratio of the revenue generated by the campaign divided by the cost of the campaign. This metric is algebraically decomposable in the following way:
ROAS = Revenue per Click ÷ Cost per Click × Number of Clicks
In order to maximize the revenue of each click acquired, you must make sure that the value per visit of the landing pages is as high as possible. Algebraically, the value per visit is the product of the conversion rate by the average value of stay. Among the most influencing factors on the conversion rate we should at least mention:
• The availability of rooms and rates for the selected period (a meta campaign, obviously, cannot convert if the hotel has no rooms available for sale or if it publishes rates that are higher than the rest of the distributors - see Figure 10.08);
• The relevance of the landing page for the redirected user in terms of language, currency and device (a booking engine which is not optimized for a mobile device or which is not translated at least into the languages spoken in the countries with the highest traffic is unlikely to be ready to convert);
• The page loading time;
• The professionalism and the attractiveness the page communicates to the user
• The simplicity of the conversion process (a booking engine that offers a frustrating navigation experience will have a low conversion rate).
It is much easier to identify the two main factors impacting the average stay value: the ADR and the average number of nights booked. In this regard, however, it is interesting to add one final but important remark, which refers to the concept of customer's Lifetime Value (LTV). If the value per visit allows to measure the performance of a campaign in terms of individual transactions (I invest 1.00 euro to obtain a single booking of 100,00 EUR = ROI × 100), the Lifetime Value (LTV) allows you to calculate the overall value of a specific returning guest, separating the concept of ROI from the mere concept of ROAS.
The formula for the LTV is:
(Average Value of Stay) × (number of Stays / Time) × (Average Retention Time)
Suppose that, through a campaign on MetaSearch engines, a hotel in Milan with a rate of 100.00 euro per night was able to intercept and retain a business guest who, for professional reasons, needs to stay in Milan one night each month for the whole year. In that case the value per click is 100,00 euro, but the LTV is as high as 1,200.00 EUR (€ 100,00 per night x 12 nights). Therefore, if the hotel has developed strategies (both online and offline) that can retain direct customers, the return on the investment of an acquisition campaign can still be profitable even if the ROAS values are equal or lower than the average commissions paid to the OTAs. Needless to say that the latter, having developed and invested in highly sophisticated loyalty and retargeting programs, capable of impacting on both the frequency of purchase and on the retention rate, and having also a greater choice of products compared to the indepenent hotel or chain, they can find profitable even those acquisition campaigns that reach a break-even on the amount spent, or even negative ones.
In conclusion: the business model of metasearch engines is a very interesting opportunity for hotels, although it is hampered by hyper-competition with the Big Players. Advertising on metasearch engines can definitely be the good fortune of properties that have a high Value per Visit on their booking engine and efficient CRM strategies, while all the others, instead of embracing uncritically the Next Big Thing to find themselves disappointed by ROI values of 3x, 2x or even 1x or negative, should first of all make sure they have adequately optimized the variables that affect these two metrics.
As happens in many areas of life, before you buy something which is potentially useful but complex, you should make sure you know how to use it.