Trivago cuts advertising to return to profitability but revenues and referrals fall

Turnaround made to ‘adapt to changing marketplace dynamics’ Continue reading →

Hotel price comparison website Trivago saw a return to profitability in its third quarter although overall revenues and leads passed on to partners were down.

In a quarterly trading update, the site said the turnaround has come as it reduced advertising to “adapt to the changing dynamics on our marketplace”.

Trivago, which is majority owned by Expedia, reported net income in the third quarter of 2018 of €10.1 million, compared to a net loss of €7.7 million in 2017.

Net loss in the nine months to the end of September was €32.5 million, compared to net loss of €3.5 million for the same period in 2017.

Adjusted EBITDA, a measure of profitability, was €26.6 million in the third quarter, compared to a loss of €7.1 million in the same period last year.

For the nine months to the end September adjusted EBITDA was a loss of €13.0 million, compared to €15.3 million in 2017.

The firm said: “While our shift in focus to profitability resulted in improvements in our Return on Advertising Spend (“ROAS”) in the third quarter of 2018, it also resulted in a decline in revenue and Qualified Referrals as compared to the same period in 2017.”

Total revenue decreased to €253.7 million in the third quarter, representing a decline of 12% year-on-year, compared to €287.9 million in the same period in 2017.

Total revenue decreased to €748.0 million in the nine months ended September 30, 2018 compared to €853.8 million for the same period in 2017, representing a 12% decline period-over-period.

The number of qualified referrals decreased to 189.1 million in the third quarter of 2018, or by 12%, compared to 214.2 million in 2017.

The number of qualified referrals decreased to 555.6 million in the nine months ended September 30, 2018, compared to 587.8 million for the same period in 2017, or by 5% period-over-period.

Due to its third quarter performance Trivago announced an improved profitability guidance for the full year to an adjusted EBITDA of between nil and a loss of €10 million.

Rolf Schrömgens, chief executive and founder, said: “This quarter we continued to focus on our core principles and what has made us successful by optimizing our marketing, improving our traffic quality and putting our users at the centre of the experience.  We believe we’ve done just that.”

Axel Hefer, chief financial officer, added: “Our aim was to return to profitability in a sustainable way by reducing inefficiencies and getting the business back on track. We believe we are now well-positioned moving forward and have adjusted our guidance to reflect our improved outlook.”

Trivago listed a number of operational achievement for the third quarter including hitting a “significant milestone” of over one million units of alternative accommodation, such as vacation rentals and private apartments.

The firm added, now that it has consolidated its core infrastructure, it is “focusing on user experience innovation” having launched its new app on both Android and iOS which features a redesigned user interface, improved functionalities and an increased focus on in-app content.

Trivago added: “Our revenue share from mobile websites and apps continued to exceed 60%.

“We believe our attribution model and product optimization measures have contributed to continuous improvement in our referred traffic quality, which would have had a positive effect on our referral revenues and revenue per qualified referrals, or RPQR.

“We were able to improve the quality of the traffic that we referred to our advertisers…which was evident in the development of Revenue per Qualified Referral (RPQR) in those segments in the third quarter of 2018.

“We continued to experience lower levels of commercialisation as our largest advertisers appeared to have increased their return on investment targets for their spend on our marketplace compared to the same period in 2017.”