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But Booking.com wants to help it do so, according to Darren Huston, who is also CEO of Booking.com’s parent, the Priceline Group — the largest travel company in the world.
In an interview with VentureBeat, Huston (pictured above) said that Facebook has made the most progress in building a direct-response offering, among the pack of emerging social and messaging networks, including companies like Twitter, Pinterest, WeChat, and Line. But he said direct response is the holy grail of monetization for these companies. Some estimates put direct response at about 60 percent of total digital advertising.
Specifically, he confirmed, Booking.com has just sent two data scientists to San Francisco to work with emerging Bay Area companies. A special focus will be on working with engineers at Facebook to make that company’s advertising offerings work more like Google’s efficient performance advertising machine.
“Generally how this works is, get the business people out of the way,” Huston said. Then two groups of passionate engineers come together and generate ideas, where they “have license to break the rules.”
“We want to be involved in the process of creating product.”
Not that Facebook’s overall ad business is struggling. On the contrary, it’s booming. Facebook announced Wednesday that it raked in $4.3 billion in ad revenue in the third quarter, a 45 percent jump from the same period a year before. That makes it second to only Google as an advertising platform. But Facebook still relies mostly on targeting its ads to people based on interest, as well as retargeting ads, which is when it shows ads to people based on where those people have shopped or visited before. That makes it more difficult to calculate a highly accurate return on investment from each ad, like you can get from Google on search, according to Huston.
For example, type “Cheap tickets to Rome, December 24” into Google and it means you’re looking to buy tickets. On Facebook or other social networks, however, few people show that sort of intent, because they’re not searching those sites for travel deals. With Facebook, a user could mention Rome, but that doesn’t mean they’re flying there on December 24. Ultimately, Booking.com would like to work with other partners to find ad products that pull that sort of specificity.
So if you thought Facebook is huge now, at a $300 billion market value, thanks to yesterday’s robust earnings announcement — now in an elite club just behind giants like Microsoft ($433 billion) and Google ($500 billion) — Huston’s remarks suggests Facebook could grow even more if it cracks the code for direct response.
“We have done Facebook takeovers,” he said, referring to the full-page interstitial ads that Facebook offers. “But that’s not what we’re talking about here.”
He said he wants to know whether Booking.com’s performance ad spend, which is 20 to 30 times what it spends on brand advertising, can work on the larger audiences of Facebook. “It’s not clear the answer is yes,” he said. “If the user is on Facebook or Pinterest, and they have no intent, and if there’s only one user you can get your ROI from, it’s not a worthwhile thing to do.”
Still, Huston is hopeful Facebook can crack the code someday, because the days of making easy money from Google advertising are gone. One major trend against Google: People are spending more time in apps like Facebook, Twitter, WeChat, Pinterest, Line, and Snapchat — and these people aren’t easily reached by Google. So as Booking.com seeks to grow, it needs to find ways to get to those potential customers. Moreover, search advertising on Google is incredibly competitive, and a host of other travel and commerce companies are bidding up prices for Google ads.
Already, Priceline Group has spent heavily on other, more industry-specific search engines, like TripAdvisor, Trivago, Kayak, and EasyJet, said Huston. But those, too, are limited in how much they can help Priceline Group grow. Microsoft’s Bing, the second largest search engine, is also improving its ad offerings, and Booking is spending there too. Priceline Group is spending on international search engines like China’s Baidu, Russia’s Yandex, Naver in Korea, and Seznam in the Czech Republic.
“I’d take any of these against, say, Facebook,” said Huston. “Facebook may be great at remessaging and retargeting ads, but these are not the same as intent.”
Booking.com is also spending dollars on brand advertising efforts, including TV, but those dollars remain limited, at “north of $100 million a year,” according to Huston. That pales next to the $2.6 billion in Booking’s digital advertising, most of which is direct response.
But now Booking.com is redoubling its efforts to find other channels that work for performance marketing.
And of those, Facebook is the most attractive — courtesy of its scale and significant investment in its advertising platform. Next are Twitter, WeChat (owned by large China’s Tencent), and Line (owned by Japan’s Naver). Huston said companies that are public or owned by public companies benefit from the focus that brings, namely driving revenue from advertising. That means companies owned by Facebook, such as Instagram and WhatsApp, are also desirable partners to work with. Pinterest, while still private, comes next. Snapchat, meanwhile, trails the pack because they’ve spent the least time preparing their advertising offerings for performance marketers. They’re still focused on the lowest-hanging fruit: brand advertising.
Given that Facebook is the most advanced, Booking is committing resources to help it along.
Already, during Facebook’s earnings call on July 29, Facebook COO Sheryl Sandberg revealed that Booking.com is using Facebook’s “Book Now” link ads to drive reservations. Sandberg said the Facebook ads drove a “meaningful increase” in room reservations for Booking.com, helping Booking.com “meet their ROI goals for the campaign.” She said Booking was expanding their use of Facebook ads across multiple markets.
The “Book Now” ads, similar to the more popular “Shop Now” ads, show up in a user’s Facebook news feed (see image for example).
But these efforts, said Booking’s Huston, are still in the genre of retargeting and remessaging, and are inferior to the intent-driven ads he’s looking for. “The level of sophistication has been increasing significantly,” Huston said. “Facebook has been a leader in that respect. But to say that we’ve had a major breakthrough would be completely overstating it.”
Huston declined Wednesday to comment further on the “Book Now” button results, the ROI it achieved, or in what markets it is expanding the campaign. Sandberg did not mention any progress with Booking.com in yesterday’s earnings call for the third quarter.
But she did say Facebook is making progress on direct response overall.
In one example, she said Ikea invested in some ads on Facebook when the company’s stores were closed in Norway — from Saturday through Sunday evenings. Ikea turned a $35K investment into $2 million in sales over the weekend, she said. She said this was direct-response advertising, because of the very specific product ads shown by Ikea (products from its catalog, featured in Facebook’s new Carousel ad format).
Sandberg also claimed that Facebook’s relatively new Dynamic Product Ads are driving ROI “comparable to search.” DPA ads are ones that target Facebook users with product ads when Facebook knows those users have recently scanned the same products on other sites. She cited Marriott and MercadoLibre, but did not give specifics.
Huston said he’s not sure how exactly Facebook can close the gap with Google’s intent-based offering. One way would be for Facebook to expand its own search offerings, Huston said. He acknowledged that Facebook has tried various search options in the past. But those efforts haven’t taken off thus far — perhaps because people see Facebook as a place to share and consume information, not to do search.
Booking.com has the depth of engineering savvy and experience to help, Huston said. In the past, for example, Booking.com worked with Google by co-creating some of Google’s key ad link formats on top of its organic results. “Every single word, the length of the text, it has all been optimized,” he said of the ads.
While Huston said he doesn’t mean to boast, he said Booking.com specifically, and Priceline Group generally, have won respect for the sophisticated tools they have built in-house to buy ads on Google. “Very few people have done that. We want to be the absolute best.”
One challenge is that Booking.com is based in Amsterdam, and so cooperating with Bay Area engineers at Facebook and Google is more difficult than it is for some of Booking.com’s competitors — for example, Expedia, which is in Seattle. So it’s critical to send people to the Bay Area to remain competitive, he said: “We cringe a bit when companies partner with other companies because they’re next door.”
While Facebook is a priority, the Booking.com engineers will continue to work with Google, and also with Pinterest, Twitter, and Apple. They will also be working with Facebook’s Instagram.
Huston said the company has just started working with WeChat in China, and that Japan’s Line is “one of our deeper engagements.”
Interested in hearing more from Booking.com and Facebook? Request an invite for VentureBeat’s Marketing.FWD Summit, taking place on February 22 in New York City. This one-day event offers a rare chance to learn and strategize with other senior marketers who are driving change within their organizations using new marketing technology.
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