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E marketer the_us_travel_industry_2013-digital_ad_spending_forecast_and_key_trends (1)

  1. 1. THE USTRAVEL INDUSTRY 2013 Digital Ad Spending Forecast and Key Trends AUGUST 2013 Victoria Petrock Contributors: Christine Bittar,Tobi Elkin, Daniel Munns, Martín Utreras, Stephanie Wharton Read this on eMarketer for iPad
  2. 2. THE US TRAVEL INDUSTRY 2013: DIGITAL AD SPENDING FORECAST AND KEY TRENDS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 2 CONTENTS 2 Executive Summary 3 Digital Ad Spending Forecast 5 Mobile Investments Accelerate 8 Direct Response vs. Branding: A 73-27 Split 14 Data and Tech Underpin Multichannel Push 16 Conclusions 16 eMarketer Interviews 17 Related eMarketer Reports 17 Related Links 17 Editorial and Production Contributors EXECUTIVE SUMMARY The US travel industry’s advertising spending in paid digital media will hit $3.35 billion in 2013 and will rise to $4.96 billion by 2017, for a five-year compound annual growth rate (CAGR) of 11.0%.While growth has slowed from a post-recession high of 30.4% in 2011, travel’s share of digital spending relative to other industries will remain stable during the forecast period. This year, eMarketer has taken a deeper dive into digital spending to determine how much marketers are investing in ad tactics that are primarily focused on obtaining sales and/or leads vs. those designed to drive favorable opinion about a brand. eMarketer estimates that marketers in the travel industry—led by online travel agencies (OTAs), but also including hotels, airlines, cruise lines, rental car companies, destination marketing organizations, tour operators and others—will invest 73% of their paid digital dollars in direct-response efforts this year. Brand-focused campaigns will make up the remaining 27%. Search and display will still command the largest chunks of digital spending across the category, but growth will come in newer hybrid formats such as remarketing. Spending on mobile, video, social and native advertising is also expected to increase. KEY QUESTIONS ■■ How much will travel marketers spend on paid digital advertising in the next five years? ■■ How much of their digital budgets are travel marketers spending on direct-response vs. branding initiatives? ■■ How are online and mobile platforms changing the way the travel industry approaches advertising? billions, % of total digital ad spending and % change US Travel Industry Digital Ad Spending, 2011-2017 2011 $2.40 7.5% 30.4% 2012 $2.94 8.0% 22.7% 2013 $3.35 8.0% 14.0% 2014 $3.91 8.3% 16.6% 2015 $4.31 8.3% 10.2% 2016 $4.70 8.3% 9.0% 2017 $4.96 8.2% 5.6% Digital ad spending % of total digital ad spending % change Note: CAGR (2012-2017)=11.0%; includes advertising that appears on desktop and laptop computers as well as mobile phones and tablets, and includes all the various formats of advertising on those platforms; data through 2012 is derived from IAB/PwC data Source: eMarketer, June 2013 157365
  3. 3. THE US TRAVEL INDUSTRY 2013: DIGITAL AD SPENDING FORECAST AND KEY TRENDS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 3 DIGITAL AD SPENDING FORECAST The US travel industry will invest $3.35 billion in paid online and mobile media advertising in 2013.This figure will grow to $4.96 billion by 2017, for a five-year CAGR of 11.0%. While a post-recession surge in growth has begun to moderate, the travel industry’s share of digital spending, relative to other industries, will remain stable during the forecast period, driven by increased competition among OTAs, supplier pushes for direct distribution (that is, booking through supplier websites rather than through OTAs and other intermediaries) and an increasingly complex search environment. Marketers are also upping their use of online and mobile data to retarget consumers across multiple screens and create more personal, one-to-one connections. billions, % of total digital ad spending and % change US Travel Industry Digital Ad Spending, 2011-2017 2011 $2.40 7.5% 30.4% 2012 $2.94 8.0% 22.7% 2013 $3.35 8.0% 14.0% 2014 $3.91 8.3% 16.6% 2015 $4.31 8.3% 10.2% 2016 $4.70 8.3% 9.0% 2017 $4.96 8.2% 5.6% Digital ad spending % of total digital ad spending % change Note: CAGR (2012-2017)=11.0%; includes advertising that appears on desktop and laptop computers as well as mobile phones and tablets, and includes all the various formats of advertising on those platforms; data through 2012 is derived from IAB/PwC data Source: eMarketer, June 2013 157365 Among the industries tracked by eMarketer, travel is currently the sixth-highest spender in the US when it comes to paid online and mobile media.The industry’s compound annual growth in digital ad spending is expected to remain slightly above average, at 11.0%, during eMarketer’s forecast period. billions US Digital Ad Spending, by Industry, 2012-2017 Retail Financial services Automotive Telecom CPG & consumer products Travel Computing products & consumer electronics Media Entertainment Healthcare & pharma Other Total 2012 $8.2 $4.6 $4.3 $4.3 $3.0 $2.9 $2.8 $1.8 $1.7 $1.1 $2.1 $36.8 2013 $9.4 $5.2 $5.1 $4.8 $3.5 $3.4 $3.2 $2.2 $1.9 $1.2 $2.2 $41.9 2014 $10.4 $5.9 $5.8 $5.3 $4.0 $3.9 $3.6 $2.6 $2.2 $1.2 $2.3 $47.2 2015 $11.5 $6.4 $6.5 $5.8 $4.4 $4.3 $4.0 $3.0 $2.5 $1.3 $2.3 $52.0 2016 $12.5 $6.9 $7.2 $6.2 $4.9 $4.7 $4.3 $3.3 $2.7 $1.4 $2.5 $56.6 2017 $13.3 $7.4 $7.8 $6.6 $5.3 $5.0 $4.6 $3.5 $3.0 $1.5 $2.6 $60.5 CAGR (2012- 2017) 10.2% 9.9% 12.8% 8.9% 12.3% 11.0% 10.2% 14.2% 11.9% 5.6% 4.8% 10.5% Note: includes advertising that appears on desktop and laptop computers as well as mobile phones and tablets, and includes all the various formats of advertising on those platforms; data through 2012 is derived from IAB/PwC data; numbers may not add up to total due to rounding Source: eMarketer, June 2013 157348 eMarketer also expects the travel industry’s share of the total US digital advertising pie to rise slightly, from 8.0% in 2013 to 8.2% in 2017. % of total US Digital Ad Spending Share, by Industry, 2011-2017 Retail Financial services Automotive Telecom CPG & consumer products Travel Computing products & consumer electronics Media Entertainment Healthcare & pharma Other 2011 22.4% 12.6% 11.3% 12.3% 7.8% 7.5% 7.8% 4.5% 4.4% 3.2% 6.2% 2012 22.3% 12.5% 11.6% 11.7% 8.1% 8.0% 7.7% 4.9% 4.6% 3.0% 5.6% 2013 22.3% 12.4% 12.1% 11.4% 8.3% 8.0% 7.6% 5.3% 4.6% 2.8% 5.2% 2014 22.1% 12.4% 12.3% 11.2% 8.4% 8.3% 7.6% 5.6% 4.7% 2.6% 4.8% 2015 22.1% 12.3% 12.5% 11.1% 8.5% 8.3% 7.6% 5.8% 4.8% 2.5% 4.5% 2016 22.0% 12.2% 12.7% 11.0% 8.7% 8.3% 7.6% 5.9% 4.8% 2.4% 4.4% 2017 22.0% 12.2% 12.9% 10.9% 8.8% 8.2% 7.6% 5.8% 4.9% 2.4% 4.3% Note: includes advertising that appears on desktop and laptop computers as well as mobile phones and tablets, and includes all the various formats of advertising on those platforms; data through 2012 is derived from IAB/PwC data; numbers may not add up to 100% due to rounding Source: eMarketer, June 2013 157350
  4. 4. THE US TRAVEL INDUSTRY 2013: DIGITAL AD SPENDING FORECAST AND KEY TRENDS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 4 eMarketer’s US Digital Ad Spending Forecasts: Scope and Definitions eMarketer’s US digital ad spending estimates for 2012 and the years prior are benchmarked against data from the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC); estimates after 2012 are eMarketer’s own projections. eMarketer’s estimates are based on the analysis of reported revenues from major digital ad selling companies; estimates from other research firms; consumer internet usage trends; and eMarketer interviews with ad agency executives, brands, digital ad publishers and other industry leaders. eMarketer’s digital ad spending figures include advertising that appears on desktop and laptop computers, as well as on mobile phones and tablets, and include all the various formats of advertising on those platforms: banner ads (static display), classified ads, email (embedded ads only), mobile messaging (SMS, MMS and peer-to-peer [P2P] messaging), rich media, search ads (including contextual text links, paid inclusion, paid listings and search engine optimization [SEO]), sponsorships, lead generation (referrals) and video (including in-banner, in-stream and in-text). eMarketer based our breakouts of direct-response vs. branding spending on overall estimates of spending by media from the IAB; analysis of third-party travel industry ad spending data; and interviews with travel brand marketers, agency media planners and other industry marketing strategists. ONLINETRAVELAGENCIES OUTSPEND THE PACK Paid ad spending in the travel industry is currently dominated by OTAs—notably, Expedia and Orbitz—which make the largest US and global ad investments. (Privately heldTravelocity spends significantly less.) According to estimates from Mark Mahaney, an RBC Capital Markets analyst, that were published in a March 2013 Bloomberg article, Priceline alone—fueled by its unit—spent $1.27 billion on internet advertising worldwide in 2012, up from $919.2 million in 2011 and $552.1 million in 2010. Priceline’s surge, according to RBC calculations, put the company ahead of Expedia, which spent $870 million on overall global advertising in 2012. Priceline, Mahaney said, has tripled spending in the past three years in the midst of aggressive international expansion. Spending by Orbitz is lower but not insignificant. Investment bank Lazard Capital Markets estimated that the OTA would invest $260 million in global advertising this year, according to a May 2013 article in Barron’s. Despite these large outlays, no travel firm alone spent enough to make Kantar Media’s annual list of the 10 highest-spending companies in the US. Likewise, though Kantar reported that travel expenditures for online display advertising were “robust” in Q4 2012, travel spending in all media was not significant enough to make the firm’s 2012 top 10 list of product categories with the highest US ad spending.This was because the travel industry is fragmented, with a higher concentration of smaller players than some other higher-spending industries. And because Kantar’s online ad spending figures do not include search advertising—a significant component of online travel industry spending—they are likely an underestimate of the sector’s true online investment. DIGITAL STAYSTHE COURSE For many travel marketers, digital spending continues to grow as a percentage of their total advertising budget. “The digital world is not slowing down,” said RobTorres, managing director of travel at Google. “Growth is slowing a bit as the market matures, but I don’t see any decline, especially in 2013.” Conversations earlier this year with a variety of high-level marketers—representing travel brands and the agencies that work with them—revealed that industry firms spend an average of 40% to 50% of their paid ad budget on digital media. However, they noted, there are wide variations depending on the type of advertiser. Digitally native companies, including OTAs,TripAdvisor, aggregators and metasearch providers, direct the vast majority of their ad dollars to digital; smaller organizations, such as destination marketers (DMOs), tend to earmark much less. Larger hotel companies and airlines usually fall somewhere in the middle. “Digital is an extremely important component of our total paid advertising, and each year it seems to become increasingly more important as consumer behavior changes,” said Flo Lugli, executive vice president of marketing at Wyndham Hotel Group. “Right now, we average about 50% digital across all our brands, but some brands are as high as 80%.”
  5. 5. THE US TRAVEL INDUSTRY 2013: DIGITAL AD SPENDING FORECAST AND KEY TRENDS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 5 US travel marketers appear far more bullish on digital media than on traditional tactics. A fall 2012 study from Advertiser Perceptions asked industry ad and marketing execs whether they planned to increase or decrease their ad spending in specific media in the next 12 months and then calculated the difference between percentages.The study’s “optimism index” showed high numbers for most digital media, indicating high intent to boost spending. optimism index* Travel Ad Spending Outlook According to US Ad/Marketing Executives, by Media, Fall 2012 Mobile 59 Digital video 52 Digital display 44 Digital search 41 Advanced/interactive TV30 Cable TV 15 Broadcast TV3 Magazines2 National newspapers-30 Note: *difference between the percent of respondents increasing and those decreasing their ad spending in the next 12 months Source: Advertiser Perceptions, "Advertiser Optimism Index Advertiser Intelligence Reports (AIR) Wave 18, Fall 2012," March 14, 2013 156591 Positive—though lower—scores for cableTV, broadcastTV and magazines also indicated a continued role for offline media. “In the past five years, we’ve seen double-digit growth in our share of digital advertising as a percentage of total advertising,” said Felipe Carreras, senior manager of ecommerce at Best Western International. “We’ve shifted our focus to be more online without taking our eye off the value and importance of traditional advertising.” MOBILE INVESTMENTS ACCELERATE Travel-related mobile use continues to rise at a healthy pace. Not only do internet users go online to research and book travel, they make fluid use of tablets and smartphones during the purchase cycle, often switching back and forth among PCs, smartphones and tablets. Paid mobile advertising is similarly growing quickly. A study fromThe Search Agency found that between Q1 2012 and Q1 2013, the majority of US travel and leisure paid search clicks came from PC searches, but the proportion from mobile devices had risen fairly steadily. % of total US Travel and Leisure Paid Search Click Share, by Device, Q1 2012-Q1 2013 Desktop Tablet Smartphone Note: numbers may not add up to 100% due to rounding Source: The Search Agency, "State of Paid Search Report - Q1 2013," April 18, 2013 156408 Q1 2012 87.1% 9.0% 3.9% Q2 2012 84.3% 11.0% 4.7% Q3 2012 82.3% 12.3% 5.3% Q4 2012 82.9% 12.7% 4.4% Q1 2013 76.8% 16.7% 6.5%
  6. 6. THE US TRAVEL INDUSTRY 2013: DIGITAL AD SPENDING FORECAST AND KEY TRENDS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 6 The Mobile Marketing Association (MMA) predicted that “accommodation and food services marketers” would collectively spend $281 million on US mobile marketing in 2013, up 52% from the $181 million they spent in 2012. The study also estimated that spending would grow another 82% by 2015. millions US Mobile Marketing Spending, by Industry, 2010-2015 Finance, insurance, real estate Retail trade—other Manufacturing—other Information Professional, scientific and business services Manufacturing —consumer packaged goods Retail trade —consumer packaged goods Government Transportation and warehousing Wholesale trade Accommodation and food services Healthcare and social assistance Resources (agriculture, mining, utilities, construction) Educational services Arts, museums, sports and recreation Other Total 2010 $470 $397 $269 $240 $152 $139 $107 $116 $93 $72 $68 $56 $42 $20 $17 $145 $2,405 2011 $784 $648 $471 $389 $245 $227 $171 $179 $156 $119 $110 $95 $74 $36 $27 $227 $3,957 2012 $1,332 $1,082 $842 $648 $407 $382 $281 $294 $266 $202 $181 $164 $132 $64 $44 $371 $6,693 2013 $2,080 $1,676 $1,373 $991 $632 $597 $433 $432 $422 $322 $281 $265 $218 $105 $67 $562 $10,456 2014 $3,032 $2,425 $2,023 $1,401 $903 $867 $625 $622 $612 $473 $403 $396 $323 $156 $95 $807 $15,162 2015 $4,017 $3,164 $2,691 $1,778 $1,163 $1,123 $804 $771 $814 $630 $512 $539 $446 $204 $120 $1,028 $19,806 Note: includes mobile media advertising, mobile-enhanced traditional advertising and mobile CRM; numbers may not add up to total due to rounding Source: Mobile Marketing Association (MMA) and mLightenment, "Mobile Marketing Economic Impact Study" in partnership with IHS Global Insight, May 9, 2013 157001 Though the MMA’s definition of marketing includes more than just paid advertising, and the organization includes a narrower definition of the industry than does eMarketer, the numbers still serve to illustrate the massive investment hospitality companies are making—and the future potential they envision—in the mobile platform. Tata Consultancy Services projected that by 2015, 50.0% of North American airlines’ (up from 27.3% in 2012) and 47.8% of the region’s travel, hospitality and leisure firms’ (up from 29.1% in 2012) marketing campaigns would be designed exclusively for mobile consumers. These industries were second and third only to telecom advertisers in the projected rankings. Percent of Marketing Campaigns Designed Exclusively for Mobile Consumers According to Large Companies in North America, by Industry, 2012 vs. 2015 Projected (2015) Telecom services 51.8% Travel, hospitality and leisure 47.8% Airlines 50.0% Automotive manufacturing 44.3% Energy and utilities 36.5% Retail 41.5% Industrial manufacturing 36.5% Media, entertainment and sports 35.8% Computer (hardware and software) 32.9% Government (federal, state, local) 35.0% Banking/financial services/insurance/ private wealth management 34.1% Transportation logistics 31.2% Consumer products manufacturing (food, beverages and durables) 33.3% Healthcare services 32.7% Pharmaceuticals 29.1% Other 25.1% Average Current (2012) 35.0% 29.1% 27.3% 27.1% 26.3% 23.2% 20.9% 20.0% 19.9% 18.9% 18.0% 17.3% 17.2% 16.3% 15.0% 13.4% 21.4% 36.9% Source: Tata Consultancy Services, "The New Digital Mobile Consumer: How Large Companies Are Responding" conducted by Research Now, Sep 26, 2012 145893 Mobile advertising in the travel industry has already seen enormous growth, both in the US and around the world. Millennial Media reported that travel industry advertising on its worldwide network grew 495% year over year in 2012 and accounted for 9% of its mobile campaigns.
  7. 7. THE US TRAVEL INDUSTRY 2013: DIGITAL AD SPENDING FORECAST AND KEY TRENDS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 7 % change vs. prior year Leading Industries Worldwide, Ranked by Mobile Ad Spending Growth, 2012 Government services 860% Employment 523% Travel 495% Personal & home services 461% Health: fitness & wellness 281% Energy & power 265% CPG/FMCG 235% Entertainment 224% Automotive 193% Telecommunications 143% Retail & restaurants 106% Real estate 103% Note: based on campaigns on Millennial Media's network Source: Millennial Media, "Scorecard for Mobile Advertising Reach and Targeting (SMART)," March 12, 2013 153693 Though mobile ad opportunities are still more limited than those on the desktop, they are often more effective because advertisers can provide unique options to on-the-go customers who make activities like booking travel more convenient. For example, when Wyndham shifted a “significant portion” of its ad budget to mobile this year, Lugli said the hotel company saw success from adding trackable click-to-call functionality to its mobile ads and same-day booking capabilities to its mobile site. In an earlier study, Millennial Media also found that a higher-than-average number of travel industry mobile campaigns were focused on driving app downloads.This tracks with insights from other industry marketers, who said their mobile campaigns had been focused not only on the research and booking phases of travel planning, but also on encouraging app usage. “This year, we have increased our mobile marketing and are spending a good amount on driving mobile downloads for our app, which is something that at this time last year we really weren’t doing,” said Jon Guljord, senior director of marketing operations at Expedia. “We believe that there’s good long-term value in doing it and are spending more on mobile downloads and mobile marketing than we have before.”
  8. 8. THE US TRAVEL INDUSTRY 2013: DIGITAL AD SPENDING FORECAST AND KEY TRENDS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 8 DIRECT RESPONSE VS. BRANDING: A 73-27 SPLIT This year, eMarketer has taken a closer look at paid digital spending in the US to determine how much marketers in vertical industries are investing in ad tactics primarily focused on obtaining sales or leads, compared to those designed to drive favorable opinion about a brand. As a result of this analysis, eMarketer estimates that the US travel industry this year will spend 73% of its digital advertising dollars— or about $2.45 billion—on direct-response tactics. eMarketer includes online and mobile paid search, classifieds, online directories and paid ads embedded in email messages in our definition of direct response. billions and % of total US Travel Industry Digital Ad Spending, by Objective, 2013 Direct response* $2.45 (73%) Branding** $0.91 (27%) Note: includes advertising that appears on desktop and laptop computers as well as mobile phones and tablets, and includes all the various formats of advertising on those platforms; *includes classifieds & directories, email, lead generation, mobile messaging (SMS, MMS and P2P messaging) and search; **includes banner ads, rich media, sponsorships and video Source: eMarketer, June 2013 157704 Total=$3.35 The remaining 27%, or $910 million, will be invested in brand-focused digital formats, including online and mobile banner ads, rich media, online video, paid social placements, in-game ads, content sponsorships and native ads. TRAVEL SEARCH POISED FOR CHANGE Search is a critical discovery tool for travel research and booking, consistently proving to be one of the most influential sources in purchase decision-making. “Our research last year found that 85% of people begin travel research through a search,” Google’sTorres said. An October 2012 survey of leisure travelers worldwide from Text100 found that search was the top online source used to choose a travel destination. % of respondents Online Sources Used to Choose a Travel Destination According to Leisure Travelers* Worldwide, Oct 2012 Internet search 55% Individual provider websites 49% Online travel sites 46% Internet reviews 44% Tourist board websites 41% Online travel forums 37% Facebook 27% Deal sites 26% YouTube/Vimeo 24% Pinterest 22% Twitter 21% Note: *traveled for leisure purposes in the past 12 months or intend to do so in the next 12 months Source: Text100, "Digital Index: Travel & Tourism Study" conducted by Redshift Research, Nov 28, 2012 149909 Search-engine marketing is the backbone of the travel industry’s digital direct-response efforts, with online and mobile paid search and SEO making up a large segment of many travel advertisers’ budgets. “Search makes up the majority of spending” for travel marketers, said Neeraj Kochhar, managing director at digital marketing agency Reprise Media. “It’s a core foundational aspect of the media plan.”
  9. 9. THE US TRAVEL INDUSTRY 2013: DIGITAL AD SPENDING FORECAST AND KEY TRENDS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 9 An analysis of US paid search spending compiled by AdGooroo found that in Q3 2012 alone, travel advertisers spent nearly $200 million on online search advertising on Google AdWords and $27.89 million onYahoo! Bing. millions US Paid Search Ad Spending, by Search Engine and Industry, Q3 2012 AdWords Yahoo! Bing Shopping and classified $497.74 Financial services $418.82 Computer and internet $305.97 Business $220.42 Education $201.39 Travel $199.42 $56.05 $81.01 $42.95 $18.31 $17.50 $27.89 Note: PC data only, excludes searches via mobile devices Source: AdGooroo, "Yahoo! Bing PPC Performance Metrics" What Search Marketers Need to Know About 'The Other Search Engine'," March 19, 2013 154555 Not surprisingly, OTAs and their subsidiaries are among the biggest search spenders in the US. According to the Bloomberg article that analyzed ad spending by top OTAs, these online firms spend the majority of their digital ad dollars on search. “Even as social-networking services Facebook Inc. andTwitter Inc. capture a widening share of the web-advertising market, the top online travel agents still choose to place most of their ads on search sites, where consumers can quickly compare prices and complete a transaction in a matter of clicks,” the article said. And RBC Capital Markets’ Mahaney noted that Priceline spent about 90% of its online ad budget on Google last year. “One of the secrets to Priceline’s success has been its ability to manage search campaigns,” he told Bloomberg. “There is a major new marketing war going on between Priceline and Expedia, and Google is the beneficiary.” An analysis of the top 10 US travel industry advertisers, based on pay-per-click impressions on AdWords, revealed that all of the top search advertisers in 2012 were indeed online companies, according to AdGooroo. “With the vast majority of travel bookings now taking place online, travel is a highly competitive category for paid search,” the company said in a May 2013 blog post. millions Top 10 US Travel Industry Advertisers, Ranked by PPC-Generated Impressions on AdWords in the US, 2012 1. KAYAK 883 2. 699 3. Orbitz 670 4. TripAdvisor 663 5. Cheapoair 629 6. Expedia 595 7. 538 8. 469 9. 353 10. 349 Note: excludes searches via mobile devices Source: AdGooroo as cited in company blog, May 21, 2013 158025 A snapshot of Google search advertising from the same time period, compiled by WordStream, revealed that the travel industry was second only to financial services in its Google AdWords investments. Google served 345 million travel-related search ad impressions daily during Q3 2012, which received 16.80 million clicks. Collectively, they had a 4.88% clickthrough rate (CTR) and a 29-cent cost per click.The analysis revealed that that the travel industry had the second-highest CTR for search, but one of the lowest costs per click (CPCs) and the lowest conversion rate—defined by Wordstream as sales, leads generated and other actions—of all industries studied. Travel Industry Google Advertising Metrics, Q3 2012 Metrics Ad impressions (millions) Clickthrough rate Number of clicks (millions) Cost per click Top 5 advertisers 1. Expedia 2. 3. 4. 5. KAYAKConversion rate Completed sales* (thousands) Google search 345 4.88% 16.80 $0.29 1.45% 244 Google display network 2,140 0.18% 3.89 $0.28 2.99% 116 Note: *includes all conversions, including sales, lead generation, etc. Source: WordStream as cited by Search Engine Watch, Oct 26, 2012 157624
  10. 10. THE US TRAVEL INDUSTRY 2013: DIGITAL AD SPENDING FORECAST AND KEY TRENDS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 10 AdGooroo used a different methodology to assess cross-industry search performance during the same time period. While AdGooroo’s calculations differed from Wordstream’s, they similarly indicated high CTRs and low CPCs relative to other industries.Travel had the highest CTR on both Google AdWords (4.14%) andYahoo! Bing (1.27%), while CPCs were among the least expensive (83 cents and 64 cents, respectively). Findings from both studies are consistent with the peripatetic nature of travel research and the likelihood that consumers may explore a wide range of options—and click on a higher-than-average number of ads—before committing to a purchase. Search Becomes More Competitive During the past several years, travel search has undergone significant changes.The entire travel search landscape is evolving to accommodate new paid search products, new pricing models and new formats— including metasearch, social search, mobile and local. While OTAs and suppliers—including airlines and hotels— have long been mired in intense competition for the same customers and visibility, they are now facing additional challenges as companies such as Google,Yahoo! Bing, Microsoft and others move aggressively into the travel arena.These companies are seeking to more definitively insert themselves into the travel-shopping process, control the direction of more travel traffic and become consumers’ search mechanism of choice. Google is playing a prominent role in this evolution.The recent rollout of Google Enhanced Campaigns will make it possible for travel marketers to create a single campaign that targets desired audiences across devices with contextually appropriate messages.This will likely result in an increase in search prices, as lower-priced mobile CPCs rise to parity with their online counterparts. But it will also likely result in more efficiency for advertisers. Google is also taking steps to control more of the search traffic to online travel destinations, with new metasearch products such as Google Hotel Finder, Google Flight Search and its “local search” Carousel. While this move might result in less spending on AdWords, it could mean more overall click monetization for Google. As competition for search terms intensifies, and more search real estate becomes paid instead of organic, travel marketers will likely find themselves spending more to appear “above the fold” in search-engine results. As a countermeasure, many are taking steps to streamline their campaigns and make them more effective. In addition, OTAs have been vertically integrating and investing in metasearch engines that move searchers away from Google.The most recent of these acquisitions have been Priceline’s purchase of KAYAK and Expedia’s purchase of trivago. Reprise Media’s Kochhar said he was seeing more clients interested in what he called holistic search. “They are increasingly looking for a search agency that can provide both paid as well as organic services, because ultimately it’s all about real estate on the search results page,” he said. DOUBLING DOWN ON RETARGETING Travel advertisers looking to drive bookings from the middle-to-lower purchase funnel have also found success with “hybrid” search and display performance-based formats—such as retargeting (sometimes known as remarketing) and keyword targeting across display networks.Though these formats typically involve display advertising, they are often linked with search campaigns and convert much more like direct response. In fact, a number of industry experts noted that travel industry advertisers are among the heaviest users of retargeting, because it has consistently driven conversions in ways that basic search cannot. “We track all of our online advertising marketing very closely to understand the ROI, and different channels will have different levels of ROI,” Wyndham’s Lugli said. “Retargeting does produce for us, and we’ll continue to do it and continue to try and optimize that ROI, utilizing the available data that we’re able to gain access to.” Best Western’s Carreras also confirmed that his company works with display networks to retarget paid advertising messages to its site visitors. “People who have visited our site are among the most valuable customers or potential customers for us,” he said. “If there’s any chance we can serve them something more specific to them or what they’ve been searching for on our site, we want to take that opportunity.”
  11. 11. THE US TRAVEL INDUSTRY 2013: DIGITAL AD SPENDING FORECAST AND KEY TRENDS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 11 Travel retargeting will likely see more growth now that Google has entered the picture in a bigger way. In June 2013, the company announced the launch of its dynamic remarketing program, which is being rolled out initially to Google Merchant Center clients in the travel and education industries.The program enables advertisers to create dynamic ads for products that Google search users have already seen on a company’s website. Google also offers the Google RemarketingTag, which lets advertisers simultaneously tag all pages on a site and design dynamic ads that are served to visitors based on pages visited and actions taken. BRANDING CAMPAIGNS GET SECOND LOOK While travel industry marketers rely on direct-response ads to drive leads and conversions, a post-recession renaissance in digital brand advertising is also taking place. Branding efforts are primarily aimed at bolstering brand image, improving loyalty and, in the case of hotels and airlines, encouraging more direct bookings. “It’s really an overall paradigm shift for a lot of our advertisers in viewing digital as a branding mechanism, and that hasn’t been the case in years past,” said Claire Bishop, senior vice president of integrated media strategy at travel marketing agency MMGY Global. “They’ve been siloed in the direct-response category. But as consumers’ usage habits move more online, there’s an opportunity to create branding messages that resonate.” Torres said these display investments are growing across the board, though the mix is slowly evolving away from standard banner units to rich media, video, mobile- social display and hybrid formats that can deliver brand messages and integrate more tightly with traditional branding workhorses likeTV and print. Bishop agreed. “We don’t buy as many straight-line flash banners as we used to,” she said. “Our buys are often banner ads, rich media executions with video capabilities or expanding with multiple calls to action or some other embedded functionality.” Travel suppliers invest significantly in digital display. In July 2012, comScore Ad Metrix reported that the top display advertisers among travel brands were Southwest Airlines, Disney, La Quinta, Starwood, Westin and Choice Hotels International. billions Top 6 Travel Brands Among US Internet Users, Ranked by Total PC Ad Impressions, July 2012 1. Southwest Airlines 3.6 2. Disney 2.2 3. La Quinta Inns & Suites 1.9 4. Starwood Hotels & Resorts 1.7 5. Westin Hotels & Resorts 1.6 6. Choice Hotels International1.5 Note: five-month aggregate ending July 2012 Source: comScore Ad Metrix Advertiser and Ad Metrix Advertiser Mobile as cited by Expedia Media Solutions and comScore, "The Rise of Mobile: Adoption, Sentiment & Opportunity," Nov 14, 2012 148351 Video and Social Poised for Growth Newer, richer and more engaging display formats hold significant promise for the travel industry, but they are just beginning to take off as advertisers get better at measuring their value. Digital video is the fastest-growing of these but is still significantly underutilized by travel when compared with other industries, according to some sources. For instance, Q1 2013 statistics from Videology showed that travel advertisers represented only 3.2% of video advertisers on its network. % of total US Digital Video Advertiser Share, by Industry, Q1 2013 Consumer goods 22.2% Financial services 14.5% Entertainment 11.7% Retail 9.9% Automotive 7.9% Restaurants 7.7% Education 5.2% Pharmaceutical4.2% Healthcare 4.0% Telecom 3.9% Travel 3.2% Business2.5% Other 3.1% Source: Videology, "US Video Market at a Glance Q1 2013," April 2013 159495
  12. 12. THE US TRAVEL INDUSTRY 2013: DIGITAL AD SPENDING FORECAST AND KEY TRENDS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 12 Still, marketers using video are doing so to reach target audiences in ways not possible withTV. “I think video today is really more of a pure brand play, and a lot of people look at it as an extension of or as an alternative to television,” Google’sTorres said. “We are trying to position video not as a replacement for television, but an opportunity to target and to do micro-targeting. We want to be able to go after audience buckets that may not be possible withTV.” MMGY’s Bishop said she saw tremendous potential in digital video. “It’s a format in which you can really lay the emotional and contextual groundwork for some of the bigger picture, more important purchases in a person’s life,” she said. “If a picture is worth a thousand words, a video is worth a million.” Online ad metrics appear reasonably favorable for travel-related video advertising. A VideoHub study from Q2 2012 found that travel-related online pre-roll video ads had a click rate of 0.71%, about average among industries. Completion and Click Rate of US Online Pre-Roll* Video Ads, by Industry, Q2 2012 Food and drink Business and finance Entertainment Automotive CPG Computing/tech Health and lifestyle Travel Telecom Retail Consumer electronics Total Completion rate 78.18% 77.79% 75.50% 73.95% 73.03% 72.66% 72.34% 69.41% 67.51% 60.47% 53.22% 71.65% Click rate 0.48% 0.82% 0.75% 0.77% 0.51% 0.80% 0.84% 0.71% 1.20% 1.12% 0.56% 0.71% Note: *includes both pre-roll and interactive pre-roll video ads Source: VideoHub, "Performance Replay Report: Q1 2012," Oct 1, 2012 146366 Nielsen research commissioned by the IAB showed strong results for online video when compared with television. Hospitality-related online video ads outscored TV commercials by a large margin for general recall, brand recall and message recall. % of respondents Ad Recall of US TV vs. Online Video Advertising, by Industry, Jan 2011-March 2012 General recall Brand recall Message recall Finance Retail Restaurants Hospitality Pharmaceuticals Telecom Food & beverage Health & beauty Technology Automotive 71% 67% 65% 65% 63% 62% 61% 61% 60% 60% 50% 47% 47% 45% 45% 51% 46% 37% 46% 44% 53% 53% 53% 55% 49% 44% 50% 45% 44% 42% 30% 30% 32% 26% 26% 26% 30% 19% 24% 23% 43% 44% 45% 44% 36% 36% 40% 35% 32% 34% 21% 23% 24% 19% 18% 21% 23% 13% 18% 17% Note: ages 18+; online and TV data based on responses up to 1 day post-ad stream; limited to the same brands that streamed online and aired on TV during the same period Source: Nielsen, "A Comprehensive Picture of Digital Video and TV Advertising: Viewing, Budget Share Shift and Effectiveness" commissioned by Interactive Advertising Bureau (IAB), Feb 25, 2013 153982 Online video ads in full episode players TV commercials (broadcast & cable) For more detailed information about the dynamics of the online video advertising market, see the May 2013 eMarketer report, “Buying Online Video Advertising: Making the Most ofYour Budget.” In addition to an underuse of video advertising, the travel industry appears to be lagging others when it comes to paid social network advertising. eMarketer estimates that paid social spending is currently less than 10% of total digital travel ad spending, depending on the type of advertiser. And an analysis from Business Insider found that no travel companies made the list of the top 30 advertisers on Facebook. One reason for this lag is that travel companies’ “social” efforts have been heavily focused on the top online travel-review properties, such asTripAdvisor and Yelp, which have proven critically influential to travel researchers and bookers. Another reason: Advertisers haven’t yet quite cracked the code on how to drive bookings through social networks. “Social media has been mostly focused on an engagement and brand strategy,” Expedia’s Guljord said. “There have been some retail messages and some sweepstakes and promotions we do, but I don’t think the industry has it figured out from a direct-response perspective. It’s one of those things that’s emerging, but I wouldn’t say we’ve got the formula down.”
  13. 13. THE US TRAVEL INDUSTRY 2013: DIGITAL AD SPENDING FORECAST AND KEY TRENDS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 13 Still, travel companies do appear to be expanding their presence on social networks. Worldwide, the number of new Facebook pages for the travel industry grew 23% between Q2 2012 and Q3 2012, according to data from % change vs. prior quarter Top Industries on Facebook Worldwide, Ranked by Growth in Number of New Pages in Industry, Q3 2012 Health 28% Travel 23% Ecommerce 22% Finance 20% FMCG 17% Beauty 16% Retail 13% Automotive 12% Fashion 12% Airlines 11% Alcohol 11% Media 11% Electronics 8% Telco 8% Note: read as the travel industry's number of new pages on Facebook grew by a net increase of 23% vs. prior quarter Source: as cited in company blog, Nov 28, 2012 148183 This presents an opportunity for more paid social network placements to enhance this owned and earned content. “We’re not going to recommend throwing a lot of money at paid social for a client that’s not executing particularly well in the social space on the organic side,” MMGY’s Bishop said. “But it does make a good complement to effective editorial efforts.” For this reason, some of the top social networks have begun aggressively courting travel advertisers. In December 2012, Facebook hired former Expedia marketing pro Lee McCabe as its first “head of travel” for the company’s global vertical marketing team. In a February 2013Travel Weekly article, McCabe said he would aim to work with major hotel brands and independents to help them use Facebook products—such as Facebook Exchange, Graph Search and Nearby—more strategically, and in coordinated ways. These efforts—coupled with a more sophisticated array of ad products—appear to be making headway within the industry. “Up until now, it hasn’t been a high priority,” Wyndham’s Lugli noted, adding that the hotel company recently began using Facebook Exchange, a retargeting solution that enables users to click on an ad that redirects them to a booking engine. “We’ll also probably move forward with testing new things such as hashtags, which are onTwitter and Instagram, but will soon be available on Facebook,” she said. Increases in programmatic buying are also contributing to the growth in targeted display.The travel industry is fairly active in programmatic display ad buying, as compared with other industries. Casale Media’s quarterly breakouts of ad purchasing on the Index ad serving platform show that the industry consistently ranks among the top five of 10 ranked industries in terms of real-time bidding (RTB) impressions. Top 10 US Industries, Ranked by Share of Real-Time Bidding (RTB) Impressions Purchased, Q1 2012-Q4 2012 Q1 2012 Retail Financial Telecom Travel Automotive Computers Food & drink Consumer electronics Media Business 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 26.6% 14.1% 11.3% 11.1% 8.4% 8.2% 3.8% 3.7% 2.8% 2.0% Q2 2012 Retail Telecom Financial Automotive Travel Computers Food & drink Media Business Fashion 24.6% 14.3% 12.0% 11.1% 11.0% 5.0% 4.5% 3.5% 2.3% 2.0% Q3 2012 Retail Telecom Travel Automotive Financial Food & drink Media Health Business Education 31.6% 16.5% 11.4% 10.5% 9.3% 5.2% 3.0% 2.6% 2.5% 1.8% Q4 2012 Retail Telecom Automotive Financial Travel Food & drink Media Health Entertain- ment Business 35.9% 13.0% 11.0% 9.7% 7.7% 6.2% 4.0% 3.7% 2.5% 2.3% Note: data is based on the RTB impressions purchased over the Index ad-serving platform Source: Casale Media, "Index Quarterly Report: Issue 2, Q3-Q4 2012," April 11, 2013 155834
  14. 14. THE US TRAVEL INDUSTRY 2013: DIGITAL AD SPENDING FORECAST AND KEY TRENDS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 14 Similarly, the Rubicon Project found that travel was the No. 4 industry in RTB spending on its platform in Q3 2012, and that spending had risen 25% from the prior quarter. Southwest Airlines ranked as the fifth-largest advertiser on the platform, with a 48% increase in spending from Q2 2012 to Q3 2012. % change vs. prior quarter Top 10 US Advertisers and Advertising Categories, Ranked by Real-Time Bidding (RTB) Spending, Q3 2012 Advertisers 1. AT&T 2. Toyota 3. Sprint Nextel 4. American Express 5. Southwest Airlines 6. Amazon 7. Chrysler 8. Verizon Communications 9. Unilever 10. Ford Motor Co. Industries 1. Technology & computing 2. Personal finance 3. Automotive 4. Travel 5. Shopping 6. Arts & entertainment 7. Business 8. Style & fashion 9. Home & garden 10. Food & drink % change vs. prior quarter 12% 143% 94% 11% 48% 261% 6% 43% 453% 82% 1% 16% 44% 25% 38% 26% 22% 1% 22% 21% Change in ranking No change 8 4 1 No change 29 3 No change 66 9 No change No change 1 1 No change No change 1 1 No change No change Note: impressions served over the Rubicon Project REVV platform; includes mobile and video Source: Rubicon Project, "Real Time Trading Marketplace Report Q3 2012," Oct 23, 2012 146927 DATA AND TECH UNDERPIN MULTICHANNEL PUSH The growing availability of digital data—and the travel industry’s increasing sophistication about how to collect and use it—will be a game-changer for travel advertising. Not only can data tell marketers who potential customers are, which devices they use and where they are in the purchase funnel, it can help them target ads across media platforms and reach audiences with personal, relevant and actionable communications. A 2012 study conducted by social marketing analytics company 33Across found that 60% of US travel brand marketers and their agencies strongly agreed that data access and use was very important to their ad spending. At the other end of the spectrum, 20% were neutral on the subject, and none disagreed. % of total US Brand Marketers and Agencies Who Believe Data Access/Use Is Very Important to Their Ad Spending in 2012, by Industry Automotive 71.5% 14.6% 13.9% Financial services 70.4% 15.3% 14.3% Travel 60.0% 20.0% 20.0% Consumer packaged goods (CPG) 55.6% 44.4% Entertainment 45.5% 36.4% 9.1% 9.1% Retail 44.7% 42.9% 12.4% Strongly agree Agree Neutral Disagree Strongly disagree Note: numbers may not add up to 100% due to rounding Source: 33Across, "Advertiser & Agency Survey," May 17, 2012 141581 Total 60.6% 30.3% 6.1% 3.0%
  15. 15. THE US TRAVEL INDUSTRY 2013: DIGITAL AD SPENDING FORECAST AND KEY TRENDS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 15 Studies suggest major benefits in using data for targeting. An analysis by Jumptap showed that the use of third-party targeting data in the mobile ads it served increased the CTR a significant 72.03% for the travel vertical.This lift was more than for any other industry. Increase in Clickthrough Rate (CTR) from Using Third-Party Targeting Data in Mobile Ads Served by Jumptap, by Vertical, July 2012 Travel 72.03% Automotive 68.75% Pharma 37.45% Finance 35.27% Retail/CPG/QSR 32.28% Insurance 30.15% Technology 24.72% Source: Jumptap, "Simple Targeting and Audience Trends (STAT)," Aug 7, 2012 143964 Location-based targeting has dramatically improved and is gaining momentum among travel companies, especially on the mobile platform. Advertisers can now target in a host of different ways that weren’t available just a few years ago. In an example illustrative of targeting options, Verve Mobile reported that 57% of travel-related campaigns it served in 2012 were targeted by designated market area or ZIP code, while 30% made use of location-based real-time data, and 13% were targeted to specific audience segments that were built based on a user’s location and time. % of total US Location-Based Mobile Ad Campaigns Served by Verve Mobile, by Industry and Target, 2012 Political 73% 27% Auto 70% 10% 20% Financial 67% 11% 22% Travel 57% 30% 13% Retail 55% 32% 13% Restaurant 50% 43% 7% Consumer goods 49% 30% 21% DMA/ZIP/ZIP+4 Geoaware or geofenced Audience* Note: *includes third-party data and place-based targeting Source: Verve Mobile, "Location Powered Mobile Advertising Report," Feb 6, 2013 151520 Telco 69% 28% 3% With the help of more sophisticated tools, systems and know-how, marketers are beginning to bring together operational data from CRM systems, company databases, website analytics, search engines, social media, third parties and other sources to reach their target audiences, across screens and in more precise and granular ways. “We use data that comes from our own customer relationship management systems, from our own email systems and direct marketing databases to help us understand more about what our customers are looking for, and what’s important and relevant to them at that time,” Best Western’s Carreras said.
  16. 16. THE US TRAVEL INDUSTRY 2013: DIGITAL AD SPENDING FORECAST AND KEY TRENDS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 16 CONCLUSIONS Travel-related US digital ad spending will continue to grow. Paid digital investments by OTAs, travel suppliers, DMOs and others are expected to grab a larger slice of the total advertising pie, even as overall budgets remain flat. Mobile is critical to the ad spending mix. Mobile campaigns are no longer viewed as afterthoughts or add-ons. Marketers understand that smartphones and tablets present unique ways to target audiences and deliver specific and actionable messaging. The search landscape is becoming more complex. Search engine marketing has long been a top performer for the travel industry. Now, new products, new channels and more sophisticated targeting are forcing advertisers to optimize their search-marketing strategy in a highly competitive environment. Branding campaigns are back. Suppliers that dialed back their brand-building campaigns during the Great Recession are reviving efforts to boost loyalty and reputation.They are turning to richer and more engaging display formats that go beyond a simple banner ad. There’s more to do with data.Travel industry marketers are getting smarter about collecting and acquiring audience data and using it for more effective targeting and measurement. EMARKETER INTERVIEWS Verified User Reviews Pay Off forWyndham Flo Lugli Executive Vice President, Marketing Wyndham Hotel Group Interview conducted on June 21, 2013 Travel Seekers Have Integrated Online and Offline Experience RobTorres Managing Director,Travel Google Interviews conducted on December 17, 2012, and January 29, 2013 Claire Bishop Senior Vice President, Integrated Media Strategy MMGY Global Interview conducted on February 11, 2013 Felipe Carreras Senior Manager, Ecommerce Best Western International Interview conducted on June 24, 2013 Jon Guljord Senior Director, Marketing Operations Expedia Interview conducted on June 27, 2013 Neeraj Kochhar Managing Director Reprise Media Interview conducted on January 23, 2013
  17. 17. THE US TRAVEL INDUSTRY 2013: DIGITAL AD SPENDING FORECAST AND KEY TRENDS ©2013 EMARKETER INC. ALL RIGHTS RESERVED 17 RELATED EMARKETER REPORTS Travel Search Redefined:What Google’sTravel Content Means for Marketers US DigitalTravel Sales: Mobile Drives Changes in Mature Marketplace MarketingTo MobileTravelers: Device Usage During Travel Offers NewTouchpoints US Ad Spending: Mid-2013 Forecast and Comparative Estimates Buying OnlineVideo Advertising: Making the Most of Your Budget State of Mobile Search 2013: KeyTrends in Mobile SEO and SEM RELATED LINKS 33Across AdGooroo Advertiser Perceptions Casale Media comScore Experian Marketing Services Google Interactive Advertising Bureau (IAB) Jumptap Kantar Media Millennial Media MMGY Global Mobile Marketing Association (MMA) Nielsen RBC Capital Markets Reprise Media Rubicon Project The Search Agency Tata Consultancy Services Text100 Verve Mobile VideoHub Videology WordStream EDITORIAL AND PRODUCTION CONTRIBUTORS Cliff Annicelli Senior Editor Kaitlin Carlin Copy Editor Joanne DiCamillo Senior Production Artist Stephanie Gehrsitz Senior Production Artist Dana Hill Director of Production Heather Price Copy Editor Nicole Perrin Associate Editorial Director Allie Smith Director of Charts