Q1 2021 Trivago NV Earnings Call
[music].
Good day, ladies and gentlemen, and thank you for standing by and was something that Chicago Q1 earnings call I'd like to change or what.
The bus you that the call is being declared to be true.
Part of me, so I could send you one.
We are pleased to be joined on the call today with upsell Heath Byrd to bad debt.
CEO and managing director and let's see yes, kilman, CFO and managing director the flow.
Moving discussion, including responses to your questions reflects management's views as of today Tuesday may floor with essentially one only two rather does not undertake any obligation to update or revise this information as always some of the statements made on today's call are forward looking typically preceded by words.
Such as we expect we believe.
Eight or similar statements.
Please refer to the Q1, 2021 operating and financial review and the company's other filings with the S. E C for information about factors.
Which could cause actual results to differ materially from the perfect looking statements.
You'll find that reconciliation of non-GAAP measures. The most comparable GAAP measure is this cost the day interval August operating and financial review.
It is posted on the company's IR website at IR.
<unk> that true Bogo dot com.
You are encouraged to free up the colleague Mr. Douglas Investor Relations site for important content finally, unless otherwise stated.
All comparisons on this call will be against yourself pretty comparable period of 2021 with that let me turn the call over to XL.
Good morning, everybody and welcome to our first quarter 2021 earnings call.
For the first time since the pandemic has begun I want to start our earnings call on a positive note.
Although the pandemic is definitely not over and the second and third waves have had countries like India, very hot and I'll still limited mobility and many of our core market the recovery has begun.
With a continuation of the rollout of vaccines in many key markets. We have seen a return of local and in some parts also international travel across a few markets.
Israel has reached 2019 activity levels already and the U S is continuing to gain momentum with a strong acceleration of demand in the past few weeks.
This positive trend is giving us a lot of comfort for a broader return off the travel market in summer and later in the year.
But it is not only the early start of the recovery that is giving us comfort.
Well if you use is coming back we have also managed to launch the first initiatives that we've been working on during the pandemic.
We are excited to get real customer feedback and accelerate the speed of iterations and improvement.
The launch of our activities offering in partnership with to amusement and the release of our weekend offering in the U K and the U S are even more exciting as they.
The first tangible results of the evolution of our strategy during the pandemic.
Leveraging our strength in city on weekend trips, we are increasing the engagement with and our relevance to our users by adding more products and features activities allow us to extend our offering to the destination of travel while the more inspirational weekend travel product is engaging with our users even before.
They've made a decision of where and when to travel too. We are excited to get first direct customer feedback on our new direction and we are looking forward to continue to add new features and products later in the year.
With that I now hand over to Matthias.
Thank you Alex and good morning, everyone.
The first quarter will still significantly impacted by the pandemic and all of our regions.
Our qualified referrals declined by 55 per cent year over year, and our revenue declined by 73% year over year.
Our net loss improved sequentially to $6 7 million euros compared to $8 6 million euros in the fourth quarter last year.
While our adjusted EBITDA declined slightly in the first quarter to minus $4 8 million euros from minus $3 4 million euros in the prior quarter in line with our guidance.
Normally we experienced a significant pickup in demand at the beginning of the year. When we are coming out of the winter holiday season in particular in our segment developed Europe.
Historically, we have increased our marketing activities in January compared to December and usually start airing new brand campaigns on television.
In 2021, the start to the year was much slower than most of our core markets Lockdowns were still in place and were extended throughout the quarter.
With most European countries, having travel restrictions in place we experienced very limited travel activity in our segment developed Europe and adjusted our marketing activities Accordingly.
And all of our segment Americas, we saw the usual seasonal decline in Latin America, starting in February which was more pronounced than in prior years.
On the other hand in our largest market in that segment. The U S. Traveler demand started to pick up in February and the trend significantly improved in March.
We observed similar travel trends that we have seen last year in other regions when demand picked up.
Namely very limited recovery in international and in particular Intercontinental travel and the shift from <unk> towards nature and beach destinations.
Based on the strength, we started to ramp up our marketing activities in the U S, including a television advertisement in March.
On a global level, we significantly reduced our advertising spend in Q1 compared to the same period in 2020 as travel demand continues to be heavily impacted by the pandemic.
This led to a decrease of 68% or $100 4 million euros in our total cost and expenses.
Excluding impairment of goodwill charges compared to the fourth quarter in 2020, excluding.
Excluding advertising expenses and impairment of goodwill charges, our operational expenses decreased by $16 4 million euros or 37% year over year in line with the decrease we have reported to you for the last quarter as we continued to benefit from the permanent reduction in expenses as a result of the restructuring that we announced last year.
We remain well capitalized with a cash and short term investment position of over 210 million euros, and we continue to be debt free.
We filed an S. Three shelf registration statement to replace the one that expired in that approach.
And in addition, we launched an at the market equity program, which increases our flexibility.
To further invest in the business, we will be opportunistic with this program and disciplined around price levels.
Moving onto trends in April 1st let me remind you that April 2020 was the first month that was fully impacted by the first wave of the pandemic, hence our metrics are significantly up year over year.
Thus I will discuss the most recent trends by looking at the comparison versus 2019 only.
In developed Europe qualified referrals was still significantly down in April compared to 2019. However, there is a positive trend and we did see a considerable improvement with us the first quarter in countries like Spain, Italy, Portugal.
There was already a positive trend in Q1 in the UK as the country provided a step by step plan to lift restrictions and the trend continued in April as the country's quarterly opening up.
Overall qualified referrals in developed Europe in April improved to around 35% of 2019 levels compared to around 20% in the first quarter.
At the same time, we started to see an improvement in the auction, which led to a slight increase in the year over two year revenue per qualified referral growth rates as well.
As mentioned in our shareholder letter, we saw very positive trend in the U S was qualified referrals in April improving to approximately 70% of 2019 levels.
For the segment Americas qualified referrals improved to more than 50% of 2019 levels.
As travel demand is coming back we also observed an improvement in our auction and Americas revenue per qualified referral increased to more than 80% in April compared to less than 50% in January of 2019 levels.
And our segment rest of World. We also see a positive trend. However, the performance of this more mix, we called out Israel, which obviously is a small country, but a proof that there is a lot of pent up demand and when people feel comfortable.
Traveling again, they do so.
As Akhil mentioned qualified referrals was significantly up compared to the same period in 2019 in that country on.
On the other hand, the recent spike in new COVID-19 cases in India led to a significant decline in qualified referrals in that country.
For the segment overall qualified referrals were approximately 35% of 2019 levels and due to improved auction dynamics in that segment revenue per qualified referral improved to approximately 70% of 2019 levels of net growth.
Overall, we are very pleased with the trends that we're seeing in the second quarter. So far in addition to an increase in travel demand in certain regions. We.
We see that most countries in particular in Europe are now speeding up the vaccination programs. We believe that this will ultimately be very positive for the summer travel period, and we expect a lot of pent up demand.
That brings me to our guidance as we see trends generally improving and as we are coming closer to the summer travel period, we plan to ramp up our marketing activities and invest in the business.
As a result, we expect our adjusted EBITDA in the second quarter to be similar to that in the first quarter and expect to return to positive adjusted EBITDA in the second half of 2021.
With that let's open the line for questions.
Operator, we're now ready to take the first question. Please.
Ladies and gentlemen, we will now begin the question and answer session.
As a reminder, please press star one if you wish to ask a question.
And our first question comes from the line of NAV from <unk> Securities.
Your line is now open.
Yeah, Thanks, a lot.
Maybe just a question on the on that.
On the guidance.
So.
Cause the second half you mentioned positive EBITDA and I know you are non-GAAP full year, but is there a case that you could be EBITDA positive for the full year.
Based on the trends you are looking at and then.
I had a follow up question on the on the city travel so as we think about CDO travel coming back in the back half of this year.
And think about where that could be versus 2019, how should we be thinking about that would it be.
50% will it be.
More than that.
Give us some oh.
Some framework to think about.
Doug.
Sure. Thanks, David I'll take your first question on guidance and then what.
I'll cover your second question.
So.
I mean as a caveat I have to say, it's very very difficult to.
And make precise predictions.
Right now for the rest of the year as overall the situation remains dynamic and I.
I mean, we do see positive travel demand trends in some countries as we called out.
And we expect in particular developed Europe.
But the trend will accelerate and volumes to increase and more and more countries. As we are approaching the summer travel season, but on the other hand, I mentioned, India. So it shows that.
It's not a straight line it will go in waves and.
What.
What I said.
And the guidance is that we.
We forecast in.
In the near term and then also in the.
Third quarter on.
Capturing all market share so we want to bring people back to our platform and.
What that means in terms of top line growth is hard to predict at this point and we will actually depend on the overall recovery.
But regardless of the exact shape and level of recovery.
We have to recalibrate our advertising spend.
And we expect that to be a dynamic process and.
Television will be an important channel in that mix, but it is clear that even if the market recovers to let's say and I'm randomly picking number 70% 80%.
Cannot reach the same efficiency as before as it is a mass medium and it is difficult to exclude the share of people that did not come back to the market. Yet. So clearly if you. If you think that flow that means our marketing efficiency will be slightly lower.
But we want to invest in the opportunity and Thats why we expect a similar EBITDA in Q2.
We just.
Disclosed for Q1.
Despite unexpected increase in overall travel activity and at this point I would view that similar in the third quarter, but that is further out and we'd have to see how how we're getting to second quarter. So probably expect an update from US next time obviously.
But overall, yes, what will happen exactly in the second half this is a bit more uncertain at this point.
Yes, just coming to you.
Question on the city trips.
We added one one page to the to the DAC, where we're giving some.
Of the different recovery stages of the different kind of trips and in the U S and.
And what you can see there is that <unk>, which is really our strength, where our product is best and offers most value to our users and significantly lagging beach.
Beecher nature trips and we do expect that gap to narrow.
Over time until end of the year, having said that as Matteo stress that it is very very difficult to predict the exact level of the recovery later in the year.
Because they are there are a lot of uncertainties in terms of.
Lots of margin in terms of vaccination progress in the in the western markets, but more in terms of potential variance.
That might come up and what that will mean for international travel that also has an impact on city trips.
The way we are thinking about it as debt we are on.
Sustainable recovery path it will still have some ups and downs, but the direction is very positive and that is what we think we need.
For our business, but what is also important for travelers around the world to really see a gradual improvement with some ups and downs, whether the the slope of the recovery well, where it gets deeper and the end of the year or are a bit flatter or two that get steeper next year.
That's impossible to predict to be honest.
And we will need to see.
Got it thank you.
Thanks.
Okay. Our next question comes from the line of Tom White from D. A Davidson your line is now open.
Great. Good morning, Thanks for taking my questions.
Could you guys give us a bit more color on maybe how the bidding strategies of your large advertisers have evolved here over the last.
A couple of months as the World that's true.
To open up a bit just curious if youre seeing kind of more evidence that there are less risk averse.
When it comes to their expectations around cancellation policies stuff like that.
And then just sort of as a follow up.
Now that we're starting to kind of emerge a bit from the height from the pandemic, what's your latest thinking on the potential for <unk>.
Significant consolidation of <unk>.
Our lodging supply and to.
To the extent you think that.
Happening just curious to hear your thoughts on how you think that impacts your business.
Sure so on the on the bidding strategy. So overall the bidding behavior in the market.
That's really one one very clear trend that we have observed across many markets.
To a certain extent also last summer about but in particular in the last couple of months the better the visibility is getting and the more.
<unk> seen recovery the more.
The more advertisers are participating very broadly and very actively in the lower <unk>.
Risk discount for potential increase in constellation is getting so so really it's almost it's not exactly a linear relationship but more recovery in terms of volume generally also means that there is more recovery in the auction overall.
And that's also what <unk> seen.
From some of the data points that that my T. As mentioned so there we are confident that we will see.
Much more normal dynamic across many many of our markets.
Adding the summer and a broader recovery overall of the of the travel market.
On the on the second question, whether we are expecting.
Consolidation of the lodging supply.
I mean, so far.
We haven't seen that much and they are there are no no strong indications from our perspective.
It's a bit.
Is a bit too early to tell to see what exactly the pandemic has down to a lot of the industry participants, but so far if anything.
Yeah. It has been very very positive and most of our partners are coming out strong.
On this side of the pandemic.
But yeah, it's still a bit too early to tell so the after summer I think we'll have a much much clearer care perspective, because the summer is obviously very very important to many many of the lodging suppliers in the industry.
Thank you.
Okay.
Okay. Our next question comes from the line of Lloyd Walmsley from Deutsche Bank. Your line is now open.
Thank you two questions if I can first.
When you look at the last few weeks or so is in the inflection in Europe is that following a similar path to what you saw in the U S where things went from 30% to 70% of <unk> 19.
In a matter of a few months anything you could share there and then the second one if you can give us a sense of what youre seeing in terms of recovery between maybe weekend vacation in business. During the IPO process. He shared some data showing what looked like a pretty healthy mix of business travel. So wondering whats that mix stable.
At least from the IPO to 2019 any any major changes there.
What are you seeing kind of in terms of the divergence in recovery.
Yes, Thanks a lot.
Take your first question on trends.
In Europe, I mean, and how that compares to the U S first of all.
Nobody is common but in high level, but it is important.
The U S is one big market and it is more humane menus homeowners so.
Compared to developed Europe.
Where we have many different countries and.
We also see different policies in different countries and <unk>.
Countries reacted differently to the pandemic you have different restrictions in place timing is different progress and vaccination program softened so.
All this makes it a bit difficult to compare Europe overall to the U S.
I mean, we called out.
In the U K before and there you can see once once you make or get traction on your vaccination program and you gradually start.
Opening things up then.
People do want to travel we've seen that in several service.
Third party ore on surface that we ran in different countries that people absolutely want to travel.
That's why we believe there is a lot of pent up demand and we see when people generally have the opportunity.
Do that as well.
And that's a trend I mean in Q Q1, I gave you some numbers against your auto numbers for April. So generally you have a good idea I guess, where we stand right now.
The one comment I would add is.
When you look at the April figures that I provided.
That we have seen.
Also in Europe.
A positive trend throughout the month.
By week.
So that gives you an idea of where we stand right now.
Yes.
Yes on the on your question about the business share of our business I mean, so pre pandemic.
We don't don't process, the the booking ASO.
We have our logic how to estimate would share his business what is the typical business destination that typical business duration in that destination.
It is it is a small part of our overall business. So we don't expect the.
Do you expect a drop in business traveler going forward to have a meaningful impact on our business on the other hand, we are positive and looking forward to what materials was mentioning there's this huge pent up demand.
Of leisure travel.
That is the vast majority of our business. So net we expect this effect to be positive for us given that business is a small part business travel is a small part of our overall business.
Alright, thanks, guys.
Thanks Lloyd.
Okay. Our next question comes from the line of Brian Pizza line from Wells Fargo Your line.
It is now open.
Thanks, guys.
<unk>, we were wondering if you could talk about how you may be able to get consumers to come back to July go after initially.
Doing the lodging booking.
Either when they are close to the travel dates or in destination that choosing activities and then second question on activities the day.
The initial level of cross sell or penetration Youre seeing there and then where do you where do you want that to get to longer term.
Thanks.
Okay.
Yes, so activities are very exciting for us.
Let me just start with that.
The key reason why we are excited there is not only because it's a very big vertical but it is exactly what you were mentioning that it gives us an opportunity to engage with our users in destination and.
We are very early on I mean, so we just basically signed the agreement with that with two amusement.
It was supplying us with the activities for our users. So we start to test to integrate and it's early days, but.
There are various re targeting options, either onsite directly or through App or E mail marketing that we have in mind and we do think that it is a sizable opportunity but.
Yes, we would like to see some more test results.
Before we would quantify the absolute opportunity, but strategically very very interesting to have <unk>.
<unk> point in destination at.
Not only the point of travel, but also the time of travel where we are so far we our engagement as is.
It's quite a bit ahead of the trip as such.
And there we do see a significant benefit in having that additional touch point.
Got it thanks guys.
Okay. Our next question comes from the line of James Lee from Mizuho Securities. Your line is now open.
Great. Thanks for taking my questions I was wondering which hotel segment are you seeing the most recovery as you start seeing.
The rebound in the accommodation sector is still pretty much don't turn at the accommodation or which of the hotel segment are you seeing more rebound whether its highest high end hotels mid tier and also economic change and also secondly, you guys mentioned about ramping up and Brian advertising King also.
Talk about performance advertising here should we think about it the trends.
Performance going up in line with your revenue growth. Thanks.
Yeah.
Yes, so on the on.
On your first question I mean, we we.
We do believe in it.
And really having an integrated offering so offering hotels and apartments on one side, having said that the majority of our users has some preference for hotels also because we have we have been positioning ourself as hotels survival for many many many years. So it is more okay.
There is some preference.
Towards hotels, but also some interest in apartments and because of that thing.
I think it's fair to say that we have not benefited from the boom of alternative accommodation during the pandemic as much as some pure play players.
If you turn that around for us and our user base and our positioning.
The recovery is also strong on the hotel side. So it is I think it's.
It's partially representative of what you see in the market, but it's slightly different given our positioning and our user base.
And then James on your second question on performance marketing.
So obviously I mean, how we look at marketing.
We don't like look at the channel only in isolation, but always.
The combination of the various options that we have.
So that is branded that is performance.
But.
If you look at performance channel, specifically I would say Theres no big change no big change to our approach.
We will continue to invest where we see attractive rois.
In volumes overall volumes, then depend on the level of recovery and obviously on the competitiveness in the respective channels.
But again I think it's pretty straightforward and our approach there has not changed the more complicated part is on the branded side I would say.
As I mentioned before.
Because if you if you advertise on TV.
That is a mass medium and it's difficult to exclude the share of people that did not come back to the market yet and <unk>.
Can partly compensate debt.
For that by shifting budgets to more targeted channels like online video or connected TV and then it becomes a bit more blurred legacy debt brand is that performance et cetera.
But.
High level.
What we usually see is the more targeted you advertisement the more expensive. It is so that is something you need to consider.
And but in general we will explore all options.
We'll make sure that we get our market share.
Great. Thanks.
Thank you.
Okay.
Okay. Our next question comes from the line.
Shyam Patil from <unk> your.
Your line is now open.
Hey, guys, it's Ryan on for Sean.
First when you guys look out long term do you foresee any permanent changes in travel behavior coming out of the pandemic.
And then secondly.
What are you seeing on booking windows, particularly in the U S and other markets that are a little more normalized on travel demand are you seeing the windows normalize along with demand.
Okay.
Yes on your question on travel travel patterns.
In the very very long term, that's obviously very difficult to predict and.
Trends tend to converge, but for the foreseeable future, we do think that intra continental travel.
Well, we'll lose importance versus pre pandemic.
And that is that is not only because there it will take quite some time until the virus is globally under control and as long as debt as the case, you will have waves of new variance.
Basically coming through different countries, reducing the uncertainty for travelers to go very far away from home.
But also increasing the fraction the second element is the restart of the of the airline networks that will take some time to get to the same convenience that we've seen pre pandemic.
And so because of that Intercontinental travel, we do expect to suffer in the overall mix and local travel to gain.
And then near Nearshore International Traveler Continental travel.
Somewhere in between.
Whether these trends will persist in the long term.
I'm not sure I mean, as I said, I mean trends tend to tend to converge to the mean over a very long time period, but but this this disturbance could yes, it could be in the market for really a few years and and because of that that we we actually are very excited about the weekend product that we just launched because that is.
As trying to capture in particular, the local demand and local demand that is searching for new destinations.
Net are a bit off the beaten track.
Yeah.
Yeah, and then on your second question.
Booking windows.
I think what we're seeing there on our platform is pretty much what you would expect.
If I compare developed Europe and Americas for example.
In developed Europe in the first quarter.
Travel was largely.
Yes, heavily restricted or not even possible in some cases.
So.
That's why obviously, we saw a decrease in short.
Booking windows and all that spontaneous treble you plan something for the next couple of weeks out.
That was very very limited and even though overall demand was lower.
If you plan to your summer vacation for June July August whenever already and book Bad debt was a bit less affected and then if you take the two together that obviously you can see in the booking window that increased in developed Europe.
Compared to.
In last year, but then more so even compared to 2019 in.
In America.
It's it's the opposite.
In them.
Also no surprise I would say because overall the uncertainty is still high. So you don't know exactly what will be in 345 months.
So people are probably less confident in doing no longer term plans as I want to see how.
How the overall situation is shaking out on the other hand Trevor Ross.
Largely possible.
In the short term so we had more.
Confidence if you book something for next week that you can actually go there and do the Trevor and Thats why we have seen less of a decrease in there and again if you if you combine the two effects.
Then that leads to a shorter booking window that we have seen for that segment overall.
Does that answer your question.
Yeah. Thanks.
Great. Thank you.
Okay. Our next question comes from the line of Bill <unk> from Jpmorgan. Your line is now open.
Great. Thanks for taking the questions I just wanted to follow up on the auction dynamics and some of the markets that are coming back more like Israel and the U S. I'm. Just curious if you can talk about the degree of participants perhaps versus 2019 levels and just kind of overall auction density and then just on the brand campaign is.
Curious if theres anything you can add on the strategy, there and how you're approaching that.
Kind of coming out here.
Okay.
Yeah.
Yes, sure so on the on the advertisers adapt.
And we have pretty much the same number of advertisers.
The advertiser basis is pretty much unchanged.
The key lever that is helping improving the auction is basically twofold, a that cancellation rates overall are coming down with a with a recovery in the market. So uncertainty overall is coming down and volatility is coming down which as such it's already helping our CPC than our <unk>.
And the second one is that day the.
The predictability for larger but in particular also smaller players is getting easier and easier and theyre getting more and more comfortable debt. They will not face a situation like in March 2020, where they had to refund and a very very short.
A period of time very significant amounts and so those start to lever us basically progress almost in parallel.
Across all of the advertisers.
And that's why we are seeing this steady improvement in line with the improvement in overall volume and recovery across really really all day markets.
Yep.
Okay.
Let me take the second question on brand marketing.
So we started to prepare our new brand marketing campaign for summer and it is a continuation of our shift away from the Mr true viable concept.
We tested a more engagement driven approach last summer as we believe it was a better fit for the sentiment in the market and we were very happy with the results and we got some great learnings and now we are developing the concept further so we think the sentiment is changing once again.
People really fear that.
After one year or longer of the pandemic, they really want to get out they'll want to do something and.
Along those lines.
We developed a new campaign and it nicely fits to our most recent productivity <unk> as we are building more features and products that focus on engagement with our customers as well.
Time will tell.
How successful that will be.
But we think it's the right step to continue in that direction.
Great. Thank you both.
Thank you Doug.
Okay, our next growth.
Income from the line of have been a couple of months from.
Cowen and co. Your line is now open.
Okay.
Great. Thanks, a lot.
I just had a couple of follow ups.
First one is on Europe.
You talked about.
QR is growing up to 35 per center pre pandemic levels up from 20% in Q1 can you talk about specifically in Europe, how well.
Downstream conversions.
Yeah.
And add beds have held up through that increase in our referrals and then I had a follow up thanks.
Yeah.
Sure.
Kevin I mean, so when we when we look at.
Sure.
Qualified referrals that debt is.
Our volume component right. So that's really the.
We measure that is how people are coming back how is the market coming back house overall demand recovering.
When you look at downstream conversion, but that's more on our revenue per qualified referral, which is essentially our monetization.
A product of all monetization and the conversion and what we what we're seeing there is that the conversion is not that different.
If you look at it sequentially or even year over year. So there are no big changes adjust on a lower level.
So what would we expect and what we are planning to do is to scale up basically overall volume developments are the qualified referral at or around the current level of conversion we are seeing.
Excellent.
And then on Europe.
In terms of the week or recovery that you've seen in the last few weeks.
Would you say that.
Is that a broad based thing or is it being driven by a couple of markets.
Yes, it's not the same everywhere.
A few markets in my remarks, like Spain, Italy, and Portugal.
U K, we mentioned before.
But we also in the recent weeks see positive development more broadly based but it's certainly not <unk>.
Where do you see exactly the same development everywhere.
I gave you.
For the overall segment number for April already.
And what I mentioned as well as debt.
We saw a week by week improvement. So if you if you take the two together then that gives you an idea where we stand right now overall for the segment.
Great and then just one last question on a follow up on that.
Discussion about about advertising.
Can you talk about maybe give some color on your.
Channel how the channels are developing as markets are ramping back up like.
How are you seeing any kind of at AD driven traffic versus direct traffic or any other developments there.
Yeah, I think I mean, it's a very good question.
Obviously, what you know from assets that are in the past we.
We heavily advertised on TV and it's it's important channel for us and will continue to be an important channel so at the moment.
You are offline.
Certainly a drag on that part of it.
Traffic mix.
And with with TV as I said before it's a it's a.
Mass medium so.
It's not you cannot just ramp that up but.
It's almost it works in a step function, so theres a certain level threshold when it makes sense to more broadly advertise on TV again, I mean, obviously, what you can do you can broadcast a regionally and not a nationwide in certain countries.
But whenever you do things like that you lose some efficiency.
So that's why.
I would not expect the same gradual recovery that we do see in performance channels with much easier too.
So gradually ramp up or down.
Great Thanks for that.
Thank you Kevin no problem.
Yeah.
Okay. Our next question comes from the line of Brian Milwaukee from Morgan Stanley.
Okay.
Hi, This is Alex Wang on for Brian Thanks for taking the question.
First just on <unk>.
Follow up on the marketing side, I think historically <unk> talked to a 50 50 split between brand and performance can you maybe philosophically talk to US how you think about that going forward and why that might be the right balance, particularly as we've seen sort of this digital transformation as a result of the pandemic and net.
If there are any sort of performance channels understanding you said could be more expensive from a pricing perspective, but anything thats encouraging at this point that you could lean in over the coming months.
And then second on.
I think historically you've taken also a very collaborative approach with.
Your large OTA partners.
Offering different bid modifiers different billing models can you maybe talk about some of their priorities are how that's changed in the near to medium term and how that conversation might be progressing.
Yes, Thanks, Alex.
Good question. So let me start with your first one on.
The marketing mix and historically over a 50 50 mix, though I think.
We commented on debt many times before that was a very.
<unk>.
Our mix was stable and served us very well for many years, but there was also a mix.
In stable times, so right now obviously.
Debt that makes us.
It's different by country, it's different by region.
As I said.
It's not that we plan our advertising spend it's not that we.
No exactly right now what we want to for example, invest in brand marketing on TV in Q3, but it will take a week by week and we will look at the performance and the results we are seeing and <unk>.
We reflect on the recovery of any particular market and then we have to calibrate that day also right now.
There is no no golden rule like we want to do 50, 50, but we are really doing that opportunistically.
And then going forward I mean, it's too early to tell you we will do.
Approach I just described for the second and probably for the third quarter and then once the markets overall.
Our most stable and coming back to 2019 levels. That's the point in time, when we probably will have a more stable shift our mix as well in our marketing incentives and.
On the performance side, yes, it's not net out of a sudden completely new channel came up but there are different channels, where we tested in the past already I mentioned online video I mentioned connected TV.
Clearly you have seen in the pandemic.
A shift.
Through digital channels.
They they were interesting.
Couple of years ago, they are probably even more interesting right now.
We continue to test their end.
Look at the performance.
But just just to be clear I think you cannot replace the channel Activision overnight.
Even though linear TV.
Is declining it is one.
One of the largest centers out there.
We believe it will be important for us.
The foreseeable future for us as well.
Yes on your question on an hour.
Our approach towards our advertisers I mean, you're absolutely right I mean, we see them as partners and we take a very very collaborative approach there to jointly optimize the user experience end to end and.
If anything the pandemic I think has strength and that approach and with some of our key competitors are strategically moving more against their partners. We do think that debt is the right.
The right strategy and we will continue to be very collaborative and jointly really optimize on delta rebuilt the travel industry.
Great. Thanks, guys.
Thank you.
Okay. Once again, if you wish to ask a question need to press star one.
Yeah.
Okay no questions at the moment please continue.
Yes, many thanks for taking the time to participate and today's earnings call.
As we look forward I want to reiterate how proud I am of what our company and our employees have achieved in the past 14 months collectively and individually.
We have long championed the central role travel plays in society as it brings people together creates experiences and memories and broadens People's Horizons.
During the pandemic doesn't become much clear to all of US and it has helped us as a company to focus our strategic direction. Therefore, we are very much looking forward to the near future. When lives are back to normal and where we can experience the magic that our products bring to all of our lives stay safe and see you next quarter.
Okay.
Your conference for today. Thank you for participating you may all disconnect.
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