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Did Airbnb really benefit from its shift to brand building?

karsten-winegeart-sStahKEhT9w-unsplash Credit: Karsten Winegeart on Unsplash
I recently came across this post on LinkedIn about how Airbnb's shift to brand building advertising had paid off. I read it. I liked it. Then I started thinking about the evidence offered to support the case. I should have done that sooner because the evidence turns out to be superficial at best.

A smart move
Before I detail my exploration of why Airbnb performed so well in Q3 2021, let me just state that I agree with the basic sentiment expressed in the post, that Airbnb made a smart move when it shifted money from performance advertising to brand building. Far too many companies spend money on performance advertising simply because it appears to offer proof of effectiveness. As this post explains, it does not. Close-in digital advertising, the stuff you can target and track easily, often fails to inspire, and mostly ends up being seen by people who would have bought your brand anyway.

Little downside from cutting performance spend
In 2020, Airbnb cut its performance marketing spend to zero and saw only a marginal loss in online traffic. As a result, according to this article in Campaign, Airbnb roughly halved its performance marketing spend in the first three months of 2021 and launched the "Made Possible by Hosts" brand campaign to help attract more guests via direct or unpaid channels. So, yes, Airbnb did shift marketing spend from performance advertising to brand building.

Advertising is not the only profit driver
However, I must question whether the shift away from performance marketing is how Airbnb recorded its highest ever profit. If nothing else, that claim ignores other fundamental changes made by the company, like controlling costs and improving the app, including the new I'm Flexible feature. Airbnb's Q3 shareholder letter reports that optimized marketing strategy was just one reason for its 28% Adjusted EBITDA margin expansion relative to the same period in 2019, alongside financial control and higher average daily rates.

Site traffic up 15%
OK, you say, but didn't Airbnb report a 15% increase in overall site traffic in campaign-focused countries? Yes, but how does that compare to what happened elsewhere (allowing for the fact that those countries were probably the ones where Airbnb was most likely to benefit from advertising and ones where better vaccination rates might encourage more travel)?

Search for Airbnb up 17%
We do not know the answer to that question, but what I can tell you is that a quick analysis of Google Trends for the USA finds that searches for "Airbnb" were up 17% in the first half of 2021 compared to the same period in 2019. Convergence between two different data sets! Must be the advertising, right?

A rising tide lifts all boats
Not so fast. What if I tell you that searches for "vacation" were up 19% during the same time frame? How about searches for "VRBO" being up 17%? It seems clear to me that pent-up demand and availability of vaccines for those that wanted them prompted many people to explore the idea of a vacation in 2021. And renting a house looked like a better bet to many than staying in a hotel.

Does ad awareness indicate success?
The LinkedIn post suggests ad awareness increased, can we learn anything from that? I could not find a source for the stats other than in the post but I did find this post from YouGov which reports a 2-point increase in past 2-week ad awareness for Airbnb from 10.5% to 12.3% among US consumers in March. Given that Airbnb is reported to have spent more than $5.7 million in the campaign's first week alone, one might have hoped to see a bigger response, particularly given the strong bias to TV. It makes me wonder just how memorable and well-branded those ads were.

Little evidence of short-term impact
I have struggled to find any proof that Airbnb benefited significantly from its shift to brand building advertising. Using search trends as a surrogate for salience and relevance finds a long-term upward trend in searches for "Airbnb" compared to a marginal increase for VRBO over the last five years (and Airbnb has more than a X3 advantage in the number of searches). Focusing in on 2021, however, finds little evidence of the new campaign's impact. Indexing searches to the first 4 weeks of 2021 finds almost identical trends in searches for Airbnb, VRBO and vacation. Airbnb might have a slightly better response than its competitor, but the advantage is small. 

When should we see an effect?
I guess the biggest question that needs to be answered is, how soon should we expect a brand building campaign to pay off for a brand like Airbnb? Brand advertising influences sales over time. So, even assuming the campaign is effective, by which I mean predisposes people to use that app rather than another or attracts more people to host, are there going to be a lot of new users and hosts ready to act right now? Or, is it more likely that as the desire to travel or the need to make some additional income arises a greater proportion of people will turn to Airbnb? 

Influencing future users and hosts
Since 2008 Airbnb has done a great job of building its brand, in large part simply by offering people a better way to find and book places to stay. Witness the huge search advantage the brand has over VRBO, which has been in business far longer, and in 2020 and 2021 spent far more on advertising than Airbnb. Once you use Airbnb, you likely keep the app installed on your phone. Availability is not an issue. According to Brian Chesky, Airbnb's chief executive and co-founder, 90% of traffic was "unpaid or direct" in Q1 2021. So, advertising for Airbnb today is about influencing future travelers and hosts, and advertising is not going to make them sign up until they are ready to do so.

In conclusion...
Did the shift to brand building advertising help Airbnb record its highest profit ever? This member of the jury is still out. If nothing else, I am concerned that while the strategy is right the execution may be ineffective, but in the absence of more definitive data on ad effectiveness it is difficult to say for sure. What we can say is that the cut in overall ad spending and shift to brand building has not done Airbnb any harm, despite not spending as much as VRBO. And maybe that is as it should be, because what we should really be asking is did Airbnb really benefit from its shift to brand building yet? 
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July 12, 2024