Q1 2024 trivago NV Earnings Call
Operator: Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Trivago Q1 Earnings Call 2024. All lines have been placed on mute to prevent any background noise.
Good day, ladies and gentlemen.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again.
You for standing by and welcome to the <unk> Q1 earnings call 2020 for all lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
Like to ask a question during this time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question Press Star one again.
Operator: I must advise you, the call is being recorded today, Wednesday, the 1st of May, 2024. We are pleased to be joined on the call today by Johannes Thomas, Trivago's CEO and Managing Director, and Robin Harius, Trivago's CFO and Managing Director, temporarily designated by Trivago's Supervisory Board, pending shareholders' confirmation. The following discussion includes responses to your questions and reflect management's views as of today, Wednesday, May 1st, 2024 only. Trivago does not undertake any obligation to update or revise this information.
I must advise you the call is being recorded today Wednesday. The first of May 2024, we are pleased to be joined on the call today by Johan is Thomas <unk>, CEO, and managing director and Robin Heraeus, <unk>, CFO and managing director temporarily designated <unk> Supervisory board pending shareholders' confirmation.
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The following discussion includes responses to your questions reflect management's views as of today Wednesday may one 2024, only <unk> does not undertake any obligation to update or revise this information.
Operator: As always, some of the statements made on today's call are forward-looking, typically preceded by words such as, we expect, we believe, we anticipate, or similar statements. Please refer to the Q1 2024 Operating and Financial Review and Trivago's other filings with the SEC for information about factors which could cause Trivago's actual results to differ materially from these forward-looking statements. You will find reconciliations of non-GAAP measures to the most comparable GAAP measures discussed today in Trivago's Operating and Financial Review, which is posted on Trivago's Investor Relations website at ir.trivago.com.
As always some of the statements made on today's call are forward looking typically preceded by words, such as we expect we believe we anticipate or similar statements.
Please refer to the Q1 2024 operating and financial review and <unk> other filings with the SEC for information about factors, which could cause <unk> actual results to differ materially from these forward looking statements.
You will find reconciliations of non-GAAP measures to the most comparable GAAP measures discussed today in <unk> operating and financial review, which is posted on <unk> Investor Relations website at I R Dot <unk> dot com.
Operator: You are encouraged to visit Trivago's investor relations website for important content. Finally, unless otherwise stated, all comparisons on this call will be against results for the comparable period of 2023. With that, I will turn the call over to Johannes.
You are encouraged to periodically visit <unk> Investor Relations website for important content finally, unless otherwise stated all comparisons on this call will be against our results for the comparable period of 2023 with that let me turn the call over to Johan.
Johannes Thomas: Good morning, everyone. Thank you for joining our Q1 2024 earnings call. To begin, I want to reflect on the journey we embarked on last year. In May 2023, the new leadership team and I took the helm. In the quarter when we arrived at Trivago, we encountered a business that was declining at a double-digit pace year over year. We experienced the aftermath of several years of rather low brand investment while simultaneously dealing with the substantial changes Google began making to their search results and ad formats.
Johannes Thomas: Good morning, everyone. Thank you for joining our Q1 2024 earnings call.
But again I want to reflect on the journey with embarked on last year in.
Johannes Thomas: In May 2023, the new leadership team and I took the helm.
Johannes Thomas: In the quarter when we arrived at Vogtle, we hadn't counted a business that was declining in double digit pace year over year.
Okay.
Johannes Thomas: We experienced the aftermath of several years of rather low brand investment while simultaneously dealing with it substantially changes Google began making their search results and ad formats.
Johannes Thomas: At the same time, we were thrilled to observe the enduring appeal and relevance of our meta proposition.
Johannes Thomas: At the same time, we were thrilled to observe the enduring appeal and relevance of our meta proposition. Our data indicated an increase in the rate disparity since the pandemic, which has increased the value of price comparison.
Johannes Thomas: Our data indicated an increase in the rate disparity since the pandemic, which has increased the value of price comparison.
Johannes Thomas: In addition, our research shows that Trivago has a significant global footprint as one of the most recognized global travel brands. And, notably, we saw the company's highly capable team and unique culture as a competitive edge in a rapidly changing environment that is being disrupted by technology and AI. Our belief in these invaluable efforts has only grown stronger since then. We are committed to learning and executing at an unrivaled pace.
Johannes Thomas: In addition, our research showed that <unk> retained a significant global footprint as one of the most recognized global traveler brands.
Johannes Thomas: And notably we saw the company's highly capable team and unique culture as a competitive edge in a rapidly changing environment that is being disrupted by technology and AI.
Johannes Thomas: Our belief in these invaluable assets has only grown stronger since then.
Johannes Thomas: We are committed to learn and execute at an unrivalled pace.
Johannes Thomas: We have stated our intentions to revitalize our brand and improve our core product with the goal of returning to growth in the near future. We are making long-term-oriented decisions to increase our branded visitor baseline, which we expect to yield long-term compounding effects. We have been diligently laying the foundation of our plans, and we believe these efforts will bear fruit throughout the remainder of 2024 and beyond. The addition of Robin to our team as of April 1st is a key milestone.
Johannes Thomas: We have stated our intention to revitalize our brand and improve our core product with the goal of returning to growth in the near future.
Johannes Thomas: We are making long term oriented decision to increase our branded visitor baseline, which we expect to yield long term compounding effect.
Johannes Thomas: We have been diligently laying the foundation of our plan and we believe these efforts will bear fruit throughout the remainder of 2024 and beyond.
Johannes Thomas: The addition of Robyn to our team.
Johannes Thomas: April is a key milestone.
Johannes Thomas: Robin's wealth of expertise and experience enhances our collective vision. We're delighted to welcome him back to lead our financial organization and help us execute our growth strategy. Now, let me provide you an update on our four strategic priorities. Our first strategic priority is branded growth. We are pleased with the results of our latest campaign, which is tracking well against our expectations. We are already seeing branded traffic growing on the back of this investment, reaffirming our decisions and strategic direction.
Johannes Thomas: Robbins wealth of expertise and experience enhances our collective vision, we are delighted to welcome him back to lead our financial organization and help us execute our growth strategy.
Now let me provide you an update on our fourth strategic priority.
Johannes Thomas: Our first strategic priority is branded growth. We are pleased with the results of our latest campaign, which is tracking well against our expectations.
Johannes Thomas: We are already seeing branded traffic growing on the back of this investment reaffirming our decisions and strategic direction.
Johannes Thomas: Our renewed brand marketing team continues to impress us with their ability to drive positive impact and new TV ads that are being tested in preparation for our summer campaign. The importance of our brand has grown even further, as Google has become a less relevant and less appealing marketing channel for us.
Johannes Thomas: Our renewed brand marketing team continues to impress us with the ability to drive positive impact and new television ads that are being tested in preparation for our summer campaigns.
Johannes Thomas: The importance of our brand has grown even further at.
Johannes Thomas: As Google has become a less relevant and less appealing marketing channel for us.
Johannes Thomas: We are opportunistically participating in new ad formats, though expect the channel to remain volatile and a substantial headwind. Our second strategic priority is to improve our hotel search experience. We are here to help travelers find their ideal hotel. Our new AI-powered Hotel Highlights feature has been scaled significantly during the last quarter. It's now available in seven languages across 25 markets and expanded to 120,000 hotels.
Johannes Thomas: We are opportunistically participating in new AD formats, though expect the channel to remain volatile and a substantial headwind.
Johannes Thomas: Our second strategic priority is to improve our hotel search experience.
Johannes Thomas: We are here to help travelers find the ideal hotel.
Johannes Thomas: Our new AI powered hotel highlights feature has been scaled significantly during the last quarter. Its now available in seven languages across 25 markets and expanded to 120000 hotels.
Johannes Thomas: Fully AI-generated, these hotel highlights are now visible in our search results and provide users with distinct aspects to know about hotels. Our tests indicate an increase in user engagement and improved search experience. We will continue to invest in this differentiating feature of our platform. Our third priority is to offer the best deal discovery. We aim to help travelers find great deals and get better prices. A recent consumer survey revealed that 71% of respondents in the U.S. compare prices from different websites in order to find the best deal. To deliver on the needs of price-heavy travelers, we have increased the visibility of relevant deals on our platform and made our search results more price-centered.
Johannes Thomas: Fully AI generated these wholesale highlights and now visible in our search results and provides users with distinct aspects to know about hotel.
Johannes Thomas: Our tests indicate an increase in user engagement and proved an improved search experience.
Johannes Thomas: We will continue to invest in differentiating feature of our platform.
Johannes Thomas: Our third priority is to offer the best deal discovery experience, we aim to help travelers find great deals and get better prices. A recent consumer survey revealed that 71% of respondents in the U S compare prices for dip from different websites in order to find the best deals.
To deliver on the needs of price savvy travelers with increase the visibility of relevant ads on our platform and made our search results more price sensitive.
Johannes Thomas: By providing more savings options to our users, we aim to create a more memorable experience and increase user retention. Our fourth priority is to create value for our advertising partners. An increased share of branded traffic and continuous product improvements have substantially increased our conversion rate and, therefore, the quality of leads we send to our partners. As a result, we believe that Trivago's attractiveness as a marketing channel is growing. We expect this to be appreciated by our partners over time. We have also innovated our auction model and further rolled out our second price auction test last quarter. This auction model simplifies bidding for our partners and reduces economic risk.
Johannes Thomas: By providing more savings options to all users, we aim to create more and more memorable experience and increase user retention.
Johannes Thomas: Our fourth priority is to create value for our advertising partners.
An increased share of branded traffic and continuous product improvements have substantially increased our conversion rate.
Johannes Thomas: And therefore, the quality of leads we send to our partners.
As a result, we believe that regardless attractiveness as a marketing channel is growing.
Johannes Thomas: We expect this to be appreciated by our partners over time.
Johannes Thomas: We are also innovated our auction model and further rolled out a second price auction test last quarter.
Johannes Thomas: This auction model simplifies bidding for our partners and reduces the economic risks.
Johannes Thomas: Based on the positive feedback and test results, we plan to introduce a second-prize auction in all markets before the summer. To summarize, we're seeing a positive impact from our brand investment. We expect this to continuously increase our branded visitor baseline and improve monetization in the long run. Despite these headwinds, we continue to be optimistic about the summer season and in our ability to return the business to double-digit, top-line growth in the medium term. With that, I want to say thank you to our teams for all your continued hard work and dedication. Now, I'd like to hand over to Rob.
Johannes Thomas: Based on the positive feedback and test results, we plan to introduce a second price auction in all markets before the summer.
Johannes Thomas: To summarize we're seeing positive impact of our brand investment we expect this to continuously increase our branded visitor baseline and improved monetization in the long run.
Johannes Thomas: Despite headwinds we continue to be optimistic for the summer season, and in our ability to return the business to double digit topline growth in the medium term.
Johannes Thomas: With that I want to say, thank you to our teams for all their continued hard work and dedication.
Johannes Thomas: Now I'd like to hand over to Robyn.
Robin Harius: Thank you, Johannes. Good morning, everyone, and welcome to our first quarter earnings call. It feels very good to return to Trivago after nearly six years. I would like to express my gratitude to our interim CFO, Kevin Hu, and the entire team for their outstanding work during the transition and onboarding process, as well as to Johannes, Jasmine, and Andre, who laid the foundation for strategic initiatives over the last couple of months. I can say that I joined a highly energized team that wants to win.
Robyn: Thank you good morning, everyone and welcome to our first quarter earnings call. It fits where we go to return to <unk>. After nearly six years I would like to express my gratitude to our interim CFO, Kevin and the entire team for their outstanding work during the transition and Onboarding process as well as <unk>.
Robyn: This adjustment and Andrea who later foundation for strategic initiatives over the last couple of months.
Robyn: Can't say that I joined the highly energized team that wants to win.
Robin Harius: My return alongside Johannes, Jasmine, and Andre underscores our belief in the tremendous opportunity we see to create value for our users, partners, and shareholders. Today, our market cap is below 200 million dollars, despite having over 100 million euros in cash, generating 485 million euros in revenues and 54 million euros in adjusted EVDA in 2023. Although our valuation today is significantly lower than in 2012 when I first joined Trivago, we see tremendous upside potential. Trivago still stands as one of the world's foremost travel brands, operating across 53 local websites and apps in key global markets.
Robyn: My return alongside your 100 adjustment at Andrei underscores our belief in the tremendous opportunity, we see to create value for our users partners and shareholders.
Robyn: Today, our market cap is below $200 million.
Robyn: Despite having over $100 million use of cash generating $485 million.
Robyn: News and $54 million and adjusted EBITDA in 2023, our valuation today is significantly lower than in 2012, when I first joined <unk>.
We see tremendous upside potential at <unk> is one of the world's foremost rubber brands.
Robyn: Operating across 53, local websites and apps in key global markets, our products value proposition remains highly relevant scaling up rent marketing workwear classes of Pos and we already see successes from the initial campaign started at the end of 2023, we believe that our winning Formula works and <unk>.
Robin Harius: Our product value proposition remains highly relevant. Scaling up brand marketing has worked well for us in the past, and we already see successes from the initial campaign started at the end of 2023. We believe that our winning formula still works, and we remain confident in our ability to progress step-by-step towards renewed growth on the horizon. Now, I would like to discuss our performance in Q1. I will start with a review of our results as well as provide an update on our outlook for the remainder of 2024. All comparisons for 2024 are on a year-over-year basis unless otherwise stated.
I'm confident in our ability to progress step by step towards renewed growth on the horizon.
Robin Harius: During the first quarter of 2024, we achieved total revenues of €101.4 million, which was a 9% decline compared to the prior year's first quarter. However, the year-over-year decline was of a lower magnitude as to what was observed in the past three quarters. The year started with softer bidding dynamics that gradually improved over the course of the quarter to healthier levels in the Americas, whereas developed Europe and the rest of the world were below the previous year.
Robyn: Now I would like to discuss our performance in Q1.
I'll start with a review of our results as well as provide an update on our outlook for the remainder of 2024.
All comparisons for 2024 on a year over year basis, unless otherwise stated.
Robyn: During the first quarter of 2024, we achieved total revenues of $101 4 million.
Robyn: Which was a 9% decline compared to prior year first quarter.
Robyn: The year over year decline was of a lower magnitude as to what was observed in the past three quarters. The year started was softer bidding dynamics that gradually improved over the course of the quarter to healthier levels in the America, whereas developed Europe and rest of world are below the previous year overall profitability decreased.
Robin Harius: Overall, profitability decreased as we incurred higher selling and marketing expenses. We invested in our brand marketing activities globally as part of our strategy shift to long-term growth. Let me share some additional insights into our brand marketing efforts. We saw first successes from our renewed brand marketing campaign that featured our AI-driven creators that we launched late last year.
Robyn: As we incurred higher selling and marketing expenses we.
Robyn: We invested into our brand marketing activities globally as part of our strategy shift to long term growth.
Speaker Change: Let me share some additional insights into our brand marketing efforts.
Speaker Change: We saw first successes from our renewed Brent marketing campaign that featured our AI driven creators that we launched late last year.
Robin Harius: We observed a total global brand traffic increase during the first quarter of 2024 compared to the same prior year period. We have seen significant branded traffic growth in developed Europe and the rest of the world and mixed results in America. Our North American markets perform much better than Latin American markets.
Speaker Change: We observed a total global brands terrific increase during the first quarter of 2024 compared to the same prior year period, we have seen significant brand a terrific growth in developed Europe and rest of world and mixed results in America.
Speaker Change: Our north American markets performed much better than Latin American markets.
Robin Harius: As we see positive branded traffic development, our total traffic decreased due to higher performance marketing traffic losses as we continue to observe higher levels of competition on Google. During the first quarter, we continued to observe Google ad changes, which has made Google a less attractive marketing channel for us. We continue to invest opportunistically in performance marketing channels, though we plan to maintain or selectively increase our profitability targets. We are not planning to compensate for volume losses stemming from performance marketing channels at a cost of long-term brand investment.
Speaker Change: As we see positive trend of traffic development, our total traffic decreased due to higher performance marketing terrific losses, as we continue to absorb higher levels of competition on Google.
Speaker Change: The first quarter, we continued to observe Google changes, which has made Google a less attractive marketing channel for US we continue to invest opportunistically in performance marketing channels.
Speaker Change: Though we plan to maintain or selectively increase our profitability targets. We are not planning to compensate volume losses stemming from performance marketing channels at a cost of long term oriented Brent investment.
Robin Harius: The overall volume losses in performance marketing channels were partly offset by our brand marketing gain. I would like to next discuss the results of our three reporting segments. Referral revenues declined by 6% in America and by 15% in our developed Europe segment, while they increased by 8% in our rest of the world segment. We invested across all three segments. Advertising spend is increasing by 45% in America, 12% in developed Europe, and 51% in our rest of the world sector.
Speaker Change: Overall volume losses in performance marketing channels were partly offset by our brand marketing gains.
Speaker Change: I would like to next discuss the results of our three reporting segments. We further revenues declined by 6% in America and by 15% in our developed Europe segment, while it increased by 8% in our rest of World segment <unk>.
Speaker Change: We invested across all three segments.
Speaker Change: Advertising spend increasing by 45% in America, 12% in developed Europe, and 51% in our rest of World segment. The increased brand investments made during the quarter resulted in our return on advertising spend or Ross our key ratios that compares referral revenue with advertising spend.
Robin Harius: The increased spend investments made during the quarter resulted in our return on advertising spend, or ROAS, our key ratio that compares referral revenue with advertising spend, declined across all three segments as a result of our marketing campaign. The declines in our Americas and developed Europe segments were largely driven by performance marketing volume losses as a result of continued higher levels of competition. In developed Europe, the losses were further driven by softer bidding dynamics on our platform compared to the same period in 2023.
Speaker Change: Slide across all three segments as a result of our marketing campaigns the.
Speaker Change: The declines in our America developed Europe segment were largely driven by performance marketing volume losses. As a result of continued higher levels of competition in developed Europe. The losses were further driven by softer bidding dynamics on our platform compared to the same period in 2023.
Robin Harius: In our rest of work segment, we continue to see referral revenue growth primarily driven by higher traffic volumes as a result of increased brand investment and better booking conversion, which was partly offset by softer fitting dynamics. Moving on to our operational expenses, we incurred 16.7 million euros of higher operating expenses, totaling 113 million euros during the first quarter of 2024. The increase was primarily driven by a €19.1 million higher advertising spend, which was partly offset by a €1.4 million lower share base compensation cost. Overall, we had a net loss of 8.4 million euros and an adjusted EVTA loss of 9.2 million euros during the first quarter.
Speaker Change: In our rest of World segment, we continue to see we further revenue growth, primarily driven by higher traffic volumes as a result of increased brand investments and better booking conversion, which was partly offset by softer operating dynamics.
Speaker Change: Moving on to our operational expenses, we incurred $16 7 million euros higher operating expenses totaling $113 million during the first quarter of 2024.
Speaker Change: The increase was primarily driven by $19 1 million euros higher advertising spend which was partly offset by $1 4 million euros lower share based compensation costs.
Speaker Change: Overall, we had a net loss of $8 4 million and an adjusted EBITDA loss of $9 2 million during the first quarter.
Robin Harius: Looking ahead, the main travel trends remain solid, and we continue to see strong demand for hotels as we head into summer. We have continued to observe improved booking conversion levels on our platform, providing our partners with high quality and better-converting traffic. We expect advertisers to react to this over time. We plan to maintain our profitability targets and do not plan to compensate for performance marketing volume losses as we continue to focus on our brand marketing campaign to drive long-term growth.
Speaker Change: Looking ahead, the main credit trends remained solid and we continue to see strong demand for holders as we head into summer.
Speaker Change: We have continued to observe improved booking conversion levels on our platform, providing our partners with high quality at better converting terrific. We expect XO tiger to react to this over time.
Speaker Change: We plan to maintain our profitability targets and do not plan to compensate for performance marketing volume losses, as we continue to focus on our brand marketing campaign to drive long term growth.
Robin Harius: We continue to expect revenues year over year to decline in the second quarter and to reverse the trend in the second half of the year. We continue to guide our adjusted EBITDA for the full year to be at around break-even levels. The initial results of our brand marketing campaigns are in line with our expectations, and we remain confident that our brand investments will help us to further increase our branded traffic over time to achieve long-term growth and profitability. With that, let's open the line for questions. Operator, we are now ready to take the first question.
Speaker Change: We continue to expect revenues year over year to decline in the second quarter and to reverse the trend in the second half of the year. We continue to guide our adjusted EBITDA for full year to be at around breakeven levels.
Speaker Change: The initial results of our brand marketing campaigns are overall in line with our expectations and we remain confident that our brand investments will help us to further increase our branded traffic over time to for long term growth and profitability with that let's open the line for questions. Operator, we are now ready to take the first question. Please.
Speaker Change: <unk>.
Speaker Change: Okay.
Speaker Change: Okay.
Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you're called upon to ask a question and you are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Naved Khan of B. Reilly Securities. Your line is open. Yeah, and
Speaker Change: Thank you the floor is now open for questions. If you have dialed in and we'd like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue. If you would like to withdraw your question simply press Star one again.
You are called upon to ask a question and you are listening via loud speaker on your device. Please pickup your handset and ensures that your phone is not on mute when asking your question.
Speaker Change: Your first question comes from the line of <unk> Khan of B Riley Securities. Your line is open.
Khan: Yeah. Thanks, a couple of questions from me, maybe just on the on the on the weakness in the performance China. When we had seen some weakness even.
Naved Khan: Yeah, thanks a lot. A couple of questions from me, maybe just on the weakness in the performance channel. I mean, we've seen some weakness even in the prior quarters. Did any changes related to the implementation of VMA have any additional impact in March? And can you maybe just talk about travel demand broadly across different regions? Did you see any changes in the.., and on that front.
Khan: In the prior quarter.
Khan: Did any changes related to the implementation of DNA.
Khan: Any additional impact in March.
Speaker Change: And can you maybe just talk about the.
Speaker Change: Travel demand broadly across different regions did you see any changes in the end.
Speaker Change: On that front.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yes.
Johannes Thomas: Hi, thank you for the question, Naved; this is Johannes. I think in terms of performance marketing, there was weakness starting in the second half of the year already, where Google gradually made changes to their search results and tested new ad formats. And that has gradually increased over time. And Q1, from what we observed, the visibility of the new ad format PPA, especially in Europe and the US, our observation is PPA and GHA being more visible, has increased in Q1, which we think is probably part of the DMA adjustment. So it basically has increased in visibility.
Speaker Change: Hi, and thank you for the question now that as Johan.
Speaker Change: I think on the first quarter in terms of performance marketing there was weakness starting second half of the year already where Google gradually that changes to their search results and tested new AD formats and that has gradually increased over time in Q1 from what we observed and the visibility.
Speaker Change: And when you add formats, PPA, especially in Europe, and the U S.
Speaker Change: Our observation is PPA and gha being more visible.
Speaker Change: <unk> has increased in Q1, which we.
Speaker Change: <unk>, probably part of the DMA.
Speaker Change: DMA and adjustments and so it basically increase in visibility we are participating in these formats, though and we are very focused on brands, we see opportunistically, where we are joining and what makes sense for us we are seeing not the performance we would appreciate it.
Johannes Thomas: We are participating in these formats, though we are very focused on brands. We see opportunistically where we are joining and what makes sense for us. We are not seeing the performance that we would appreciate from a conversion perspective. And also, we lack optimization levers that would help us optimize these ads effectively. And I think that's the performance marketing perspective. Robin can comment on demand. Yeah, thanks for the question.
Speaker Change: A conversion perspective, and also we lack an optimization levers that would help us optimize these apps effectively.
Speaker Change: And I think that's the.
Speaker Change: And that's the performance marketing perspective Robyn.
Comment: Comment on demand, yes. Thanks for the question regarding demand. So we see a robust demand. So it remains strong it's rather increasing so on that side it looks quite good.
Robin Harius: Thanks for the question. Regarding demand, we see robust demand, so it remains strong. It's rather increasing. So on that side, it looks quite good.
Johannes Thomas: Okay, great. Maybe just a related question on your answer about the headwinds and performance. What gives you the confidence that you can see positive growth in the back half given these headwinds are continuing? We are seeing
Robyn: Okay, Great maybe just a related follow up on your answer to the.
Robyn: The headwinds in performance.
Robyn:
Robyn: So what gives you the confidence that you can.
Robyn: Can see positive growth in the back half given these headwinds continuing in China.
Yeah.
Johannes Thomas: We are seeing a strong response to our branded campaigns, and branded campaigns have a compounding effect over time. So it's a matter of doing the right things and branding consistently, and that means optimizing markets, and optimizing our creatives. We see room for improvement, and whenever we make improvements, we see further impact. So it's a matter of doing this consistently throughout the year, and we see a very good chance to offset losses in performance marketing. And we certainly are learning how to adapt to and participate in new ad formats, which we're trying to optimize over time as well.
Robyn: We're seeing strong response of our brand campaigns and branded campaigns have a compounding effect over time, so it's a matter of doing the right things and brand consistently.
Robyn: And that means optimizing markets optimizing our creative we see room for improvement and whenever we do improvements we see further impact so it's a matter of doing this consistently throughout the year.
And we see a very good chance to to offset losses in performance marketing and we certainly are learning and how to adapting and participating in the new AD formats, which we're trying to optimize over time as well.
Robyn: Yeah.
Speaker Change: Thank you.
Operator: Your next question comes from the line of Stephen Jew of UBS. Your line is open.
Speaker Change: Your next question comes from the line of Stephen Ju of UBS. Your line is open.
Jeremy: Hey guys, good morning. This is Jeremy on behalf of Steven.
Speaker Change: Hey, guys. Good morning, this is Jeremy on for Stephen.
Jeremy: Good question.
Jeremy: First on brand marketing can you talk broadly about how the rollout and the payback period may be different.
Jeremy: So I have two questions. First, on brand marketing, can you talk broadly about how the ROAS and the payback period may be different from performance? And then second, as a follow-up on the demand side, the software bidding activity you're calling out for Europe and the rest of the world, is this largely a consequence of local currency devaluing relative to global, for example, the yen, making it more expensive for travelers and APAC? Or is there something underlying you're seeing in terms of consumer demand?
Robin Harius: Thank you.
From performance.
Speaker Change: And then second as a follow up on the demand side.
The doctor bidding activity Youre, calling out for Europe and rest of the World is this largely a consequences.
Speaker Change: Local currency devaluing relative to global for example.
Speaker Change: The yen and making it more incentive for travelers.
Speaker Change: Or is there something underlying theme in terms of consumer demand. Thank you.
Speaker Change: Okay.
Robin Harius: So let me comment on the first part, on the ROAS. The difference in performance marketing is that you have a good level of ROAS with the acquisition of users. And that is basically in performance marketing, the beauty you invest in quickly and quickly gets a return. With brands, it's just a little bit of a longer horizon that we put on the perspectives. But we see short-term impact, and we know what the short-term impact is as proxies for long-term impact. That's where we have a ton of data on and good assumptions on how the branded visitor baseline would evolve over time, and that translating into a long-term return.
Speaker Change: So let me comment on the first part on the rollout and the difference in performance marketing is that you have.
Speaker Change: You have a good level of rollout with the acquisition of the of the use us and that is basically in performance marketing. The beauty you invest in quick and quickly get a return with brand is just a little bit of a longer horizontal that we put.
Under perspective, but we see short term impact and we know what the short term impact.
Speaker Change: As proxies for long term impact, that's where we have a ton of data about and good assumptions on how the branded visitor baseline.
<unk> over time and that translating into a long term return.
Speaker Change: Okay.
So regarding travel trends, what we see across the three segments is that <unk>.
Robin Harius: So regarding travel trends, what we see across the three segments is that ADRs are slightly down in the segments, so in our trivago internal data. And we see that length of stay is slightly down in America and the rest of the world, slightly up in Europe. And this leads to slightly lower ABVs in America and the rest of the world and stable ABVs in Europe. When we look at Star Hotels, we see a share of four to five Star hotels that is continuously going down in all three segments.
Speaker Change: Slightly down on the segments, so an hour to MTV <unk> data and we see that length of stay is slightly down in Americas and rest of world slightly up in Europe also and this leads to slightly lower Abb's in America, and rest of world and stable.
Speaker Change: <unk> in Europe, so when we look at the.
Speaker Change: Okay.
Speaker Change: When we look at the Star hotels, we also we see a share of 4% to five star hotels continues to grow and that is continuously going down so in all three segments.
Speaker Change: And.
Robin Harius: Yeah, so this indicates that people are more price sensitive. And we also see this in the rest of the world. Especially when you look into Japan. And we see ADRs going down there as well, also on local ground. Thank you.
Speaker Change: Yes. So this indicates that people are more price sensitive and we also see this in rest of the world also especially when you look into Japan.
Speaker Change: And we see 80 us going down there as well.
Speaker Change: Also in local media.
Speaker Change: Thanks.
Speaker Change: Yeah.
Operator: Your next question comes from the line of James Lee of Mizzou. Your line is open.
Speaker Change: Your next question comes from the line of James Lee of Mizuho. Your line is open.
James Lee: Great, thanks for taking my questions. My question is on AI investments. And can you help us understand what you're doing there specifically? Are you developing apps on top of the foundational model? If so, can we get a sense of who you're working with and what use cases you're developing that could differentiate your product versus your peers? Thanks.
Great. Thanks for taking my questions. My question is on AI investments and can you help us understand what you're doing there specifically.
James Lee: Building apps on top of the.
James Lee: From the foundational model, if so can we get a sense of who you're working with and what use cases, yet developing.
James Lee: Could differentiate your product versus your peers.
Johannes Thomas: Yeah, thank you for asking the question. I think it's pretty central to our efforts. On the one hand, there's a ton of things we do internally to improve operations and be more efficient and create a lot of awareness, and it's everybody's strategic priority internally to think about it. If you see our TV ads, we mentioned how we are leveraging AI to localize our ads. In the past, we had a lot of different speakers per market, which was quite expensive, because production was a very long process.
Speaker Change: Yes. Thank you for asking the question I think it's pretty central to our efforts on the one side.
Speaker Change: There is a ton of things, we do internally to improve operations and be more efficient and that will create a lot of awareness and.
Speaker Change: It's on everybody's strategic priority internally to think about it if you see our TV ads, we mentioned, how we are leveraging AI to localize our ads in the past we have.
Johannes Thomas: We now use AI to localize our TV ads. So that's something you see teams innovating and leveraging AI at the edge of what's actually possible. And that's what we expect from every team in the company. When it comes to our product, I've mentioned the AI highlights. So you can go to New York, look at the Mandarin Oriental, and you will see snippets that say unbeatable views, gourmet cuisine, and then we give context around it, breathtaking panoramas of Manhattan. So, very distinct things USP's hotel can offer.
Speaker Change: A lot of different speakers per market, which was quite expensive production was very long periods. We now use AI to to localize our television ads. So that's something you see teams innovating and leveraging AI at the edge of what's actually possible and Thats, what we expect from <unk>.
Speaker Change: Team.
Speaker Change: And the company when it comes to our product and I've mentioned the AI highlights. So you can go to New York.
Speaker Change: Look at the Mandarin Oriental and you would see.
Speaker Change: You will see snippet that SaaS unbeatable views gourmet cuisine, and we give context around it breathtaking panorama of Manhattan, So very distinct things USPS hotel can offer these are not human generated data.
Johannes Thomas: These are not human generated; they are AI generated. And to be able to do this at scale for 120,000 hotels, we have built the infrastructure, we have used a range of models, tested different models, which we are experimenting with. We have a solid setup that works for us now, that is operational and effective. And we continue doing that. We're not sharing who we work with.
Speaker Change: AI generated and to be able to do this at scale for 120000 hotels, we have built the infrastructure. We have used a range of models test the different models.
Speaker Change: Where we are experimenting with them we have a solid setup that works for US now that is using.
Speaker Change: It's operational and effective and we continue doing that we're not sharing who we work with and this changes over time as well as we don't want to be locked into one model, but continue run on what where we see biggest impact and then the last thing. So it's about content aggregating, bringing what's real event.
Johannes Thomas: And this changes over time as well, as we don't want to be locked into one model but continue to run on where we see the biggest impact. And then the last thing, so it's about content aggregation, bringing what's really relevant for users into their minds when it's relevant. And then the last one that we are excited about where we have put a team on is natural language search. Everybody that is in the search field is certainly thinking about conversational search and how you create a different experience for the user.
Speaker Change: Relevant will use us into their into their minds when it's relevant and then the last one where we are excited about where we have put a team on is natural language search everybody that is in the search field certainty is thinking about compensation of search and how you create a different experience.
Speaker Change: For the user and that's what we have built core models on.
Johannes Thomas: And that's what we have built our core models on. How do we not use city plus date and region and a static data infrastructure, but rather a free search environment that gives you a list of hotels.
Speaker Change: How do we not use city, plus date and region and like a static data infrastructure, but rather free search environment that that gives you a list of hotels.
Johannes Thomas: And we call this natural language search that we're exploring, but it's super early in our space. But I think we can expect everybody in the search space, including us, will find ways of using that to make the search results more relevant. And machine learning and AI we've used for a long time to show more relevant search results already. But improving our search, showing more relevant content, and leveraging it in marketing, that's a focus for us.
Speaker Change: We call. This a natural language search that we're exploring but it's super early in our in our space, but I think we can expect everybody in search space, including us.
Speaker Change: Find ways of.
Speaker Change: Use cases, where we make the search results more relevant through that and machine learning and AI with used for.
Speaker Change: A long time.
Speaker Change: Showing more relevant search results already.
Speaker Change: Improving also thats, showing more relevant content and leveraging it and marketing.
Our focus for us.
Speaker Change: Okay, great. Thanks.
Speaker Change: Yeah.
Operator: Your next question comes from the line of Ron Josey of Citi. Your line is open.
Speaker Change: Your next question comes from the line of Ron Josey of Citi. Your line is open.
Ronald Victor Josey: Great, thanks for taking the question. I want to ask John, if you talked a little, you talked about Trivago's second prize auction test and the plan to launch here shortly. Talk to us a little more about the results that you're seeing from the testing there and what makes you feel confident about moving forward here in launching that. And can you just provide some additional thoughts on DNA and the DSA and some of the newer rules and regulations regarding the gatekeepers and maybe how Trivago is positioned here. Thank you very much.
Ronald Victor Josey: Great. Thanks for taking the question I wanted to ask John If you talked a little you talked about August 2nd price auction cast and plan to launch a launch here shortly talk just a little more about the results that youre seeing from the testing there and.
Ronald Victor Josey: What makes you feel confident about moving forward here.
Ronald Victor Josey: And launching that and can you just provide some additional thoughts on.
Ronald Victor Josey: The DNA of the DSA and some of the new rules and regulations regarding the gatekeepers and maybe how <unk> is positioned here. Thank you very much.
Johannes Thomas: Thank you for your question. Maybe the SBA part. I think it has been a very big project for us. We've been working on this now for about nine months, a great effort. And this is work with our partners, internally, a quite complex infrastructure change. And we have rolled this out at record speed and very consistently. And we are seeing that the intentions were twofold.
Speaker Change: Thank you for your question, maybe the SBA part I think it has been a very big project for us with the working on this now for about nine months.
Speaker Change: Great effort and this is our work with our partners.
Speaker Change: Certainly quite complex infrastructure change and.
We have rolled this out in record speed.
Speaker Change: And very consistently and we are seeing their intentions were two fold on the one hand, we want to improve our search results and a first price auction you have the problem when advertisers bid up the hotel gets pushed up in the ranking very fast and that means you can pay hotels up the ranking and then that means that not the peso.
Johannes Thomas: On the one hand, we want to improve our search results. In the first price auction, you have the problem that when advertisers bid up, the hotel gets pushed up in the ranking very fast, and that means you can pay hotels to be higher in the ranking. And then that means that not the best hotels are in front of users' minds.
Speaker Change: <unk> are in front of us as mines and a.
Speaker Change: Second price auction. This is milder we have a more stable search results sets the expectation over time with indication that we get there.
Johannes Thomas: And a second price auction, this is milder. We have more stable search results. That's the expectation over time with indications that we get there. And that has been an important qualification.
Speaker Change: And that has been an important qualification are we improving the user experience and that's what we want to see in the second part our partners are working on Google another.
Johannes Thomas: Are we improving the user experience? And that's what we want to see. And the second part, our partners are working on Google, on other marketing channels, and the second price auction. So we simplify the world for them, so they don't need to think about first and second price, and we make it more simple for them. Also, when you bid in a second price auction, you don't have the risk of overbidding and don't need to bid down to understand who's the next highest bidder. So you may end up overpaying in the auction.
Speaker Change: On other marketing channels in the second price auction. So we simplify the world. So they don't need to think about first and second price.
Speaker Change: We make it more simple for them also when you bid in the second price auction you don't have risk of overbuilding and don't need to beat down to understand who's the next highest EBITDA. So you may be overpaying.
Speaker Change: In the auction that risk is gone, which means the marketplace overall becomes more efficient and also medium sized players can be more aggressive without.
Johannes Thomas: That risk is gone, which means the marketplace overall becomes more efficient, and also medium-sized players can be more aggressive without a huge economic risk. So that is, I think, in line with expectations. We see both signals on the user side and the feedback we get from our partners that they are satisfied with how things are going, with how they are steering our auction. And then when you get to the tipping point where partners are excited, we see the right results on our user end.
Without a huge economic risks so that is I think on the on the expectations. We see both signals on the user side and the feedback we get from our partners that they are satisfied with how things are going with how they are steering our auction and then when you get to the tipping point.
Speaker Change: Where partners are excited we see the rights of results on our on our user and that's why we want to push the pedal.
Johannes Thomas: That's when we want to push the pedal. We want to be done by the end of the month ideally, but complexity is there. So there's a little bit of room. Before summer, we want to be out. So on auctions, normalize, and partners, and we have a new normal that we all feel good about and can optimize with forward. And that's it for the SBA.
Speaker Change: We want to be done by end of the month ideally, but complexities. There. So there is a little bit of room and before some of them want to be out so on auctions normalize and partners and we have a.
A new normal that we all feel good in and can optimize with forward.
Johannes Thomas: The DMA, I commented on it, and that is something where you have seen a new reality in Google, where this is now being assessed by the Commission, and we will find out what the Commission is happy with and what it is not. Overall, we see fewer entry points in Europe into GHA, so their hotel product, from our perspective, has been weakened, and that's good for us in the long term. In the short term, it's still a headwind that they put PPAs more visible, and PPAs for us aren't converting as well as text ads did.
Speaker Change: That's it on the SBA the DMA I commented on it.
Speaker Change: That is something where you have seen now a new reality in Google where.
Speaker Change: This is now.
Speaker Change: Being assessed by the commission and we will find out what the commission is happy with and what's not and overall, we see less entry points in Europe into gha and so they have a hotel product from our perspective has has been weakened and that's good for us in the long term in the short term.
Speaker Change: It's still a headwind that they put ppas more visible.
Speaker Change: And ppas for us not converting as well as text at debt and Thats I think will be interesting we look at it as hard to predict where this is going.
Johannes Thomas: And that, I think, will be interesting. We look at it as hard to predict where this is going. We know they are experimenting further. They have other types of formats that they will be testing, so it's volatile and hard to predict where this will normalize. And we are learning faster how to find our sweet spot in this game, I think, given we focus on brand, and it's less relevant for us already because it has been happening for a while, and we now see the traction on brand. We aim this to offset, and then it would rather be an opportunity that we can dive into if we are excited about the dynamics in that space.
Speaker Change: We know they are experimenting further they have other types of formats that they will be testing, so it's volatile and hard to predict where and where this normalizes and we are learning fast and how to find our sweet spot.
Speaker Change: And this game I think given we focus on brands and it's less relevant for us already because.
Speaker Change: It has been it has been for a while and we now see the traction in brand, we aimed to offset and then it would rather be an opportunity that we can dive into if we are excited about the denim dynamics in that space.
Johannes Thomas: Very helpful. Thank you, Johannes.
Speaker Change: Very helpful. Thank you Jonathan.
Speaker Change: Okay.
Operator: Your next question comes from the line of Brian Fitzgerald of Wells Fargo. Your line is open.
Speaker Change: Your next question comes from the line of Brian Fitzgerald of Wells Fargo. Your line is open.
Brian Fitzgerald: Thanks guys. In the prepared remarks, you mentioned that branded traffic volumes are growing nicely and developing in Europe and the rest of the world but not so much in Latin America. To what extent is that a function of you running material, different campaigns, or is it just the timing in the markets there, anything different? With respect to Latin America, with regard to branded campaigns. That is a
Brian Fitzgerald: Thanks, guys in the prepared remarks, you mentioned that branded traffic volumes are growing nicely.
Brian Fitzgerald: Develop Europe rest of world, but not so much in Latin America.
Brian Fitzgerald: What extent is that a function of.
Brian Fitzgerald: You're running material different campaigns or or is it just the timing.
Brian Fitzgerald: Timing in the markets there.
Brian Fitzgerald: Anything different with respect to Latin America.
Brian Fitzgerald: Good.
Brian Fitzgerald: With regard to brand campaigns.
Johannes Thomas: That is, I think we in Latin America have not strategically focused on it at the beginning of the year. The reason was that the levels of optimization and the focus we put there were not at the levels we liked. So you are trying to find out where you have the best dynamics across the globe and where you want to invest your money. And that was not the place where we had seen the returns we wanted to.
Brian Fitzgerald: That is I think we in Latin America, we have strategically not focused on at the beginning of the year and the reason was that the levels of optimization and the focus we put there we're not at at at the levels. We liked so youre trying to fine.
Brian Fitzgerald: Out where you have the best dynamics across the globe, and where you want to invest your money and that was not the place where we where we have seen the returns. We wanted to we quickly stopped investing in those markets to be able to invest into markets with more elasticity.
Brian Fitzgerald: Okay.
Speaker Change: Thank you.
Speaker Change: Okay.
Operator: Again, if you would like to ask a question, press star, then followed by the number one on your telephone keypad. Your next question comes from the line of Doug Edmonds of J.P. Morgan. Your line is open.
Speaker Change: Again, if you would like to ask a question Press Star then followed by the number one on your telephone keypad. Your next question comes from the line of Doug Anmuth of Jpmorgan. Your line is open.
Speaker Change: Okay.
Dae K. Lee: Hey, this is Dae Lee. Thanks for taking the questions. I have two. So the first one, I'm curious to hear your thoughts on why you're seeing self-evading dynamics and if that's properties across all advertisers and why specifically in developed Europe and the rest of the world and what makes America different. And I have a follow-up.
Speaker Change: Okay.
Speaker Change: This is Katie on for Doug Thanks for taking the questions.
Katie: Curious was the first one.
Katie: I'm curious to hear your thoughts on why you're seeing also drilling dynamics.
Katie: Yes.
Katie: Properties across all advertisers why specific claims develop your phone for us overall.
Katie: Merck, etc.
Speaker Change: Hello, Paul.
Robin Harius: Yeah, thanks for the question. So we saw that big advertisers were a bit softer at the beginning of Q1. Yeah, but they went back to more healthy levels in America and remained softer in developed Europe and the rest of the world. So, um... So the reasons.
Paul: Yes <unk>.
Paul: So we saw that big advertisers a bit softer at the beginning of Q1.
Paul: No.
Paul: But went back to more healthy levels in Americas.
Paul: We remain softer in developed Europe and rest of the world.
Paul: So.
Paul: Tom.
Tom: So the reasons.
Robin Harius: Yeah, so I think we, I mean, we expect more branded traffic and higher conversions will be appreciated by our partners over time. We see at the moment in America, there might be more heated competition on our platforms. So this leads to better bidding dynamics, and yeah, so this is at the moment on a healthy level in America, and it's increasing in developed Europe and the rest of the world, so it's still softer compared to last year.
Tom: Yes, so I think we I mean, we.
Tom: <unk> bought brand a terrific and higher conversions will be appreciated by our partners over time, we see at the moment in America that might be more heated competition on our platforms, so which leads to better.
Tom: Bidding dynamics and so this is at the moment on IFC level in America, and it's increasing.
Tom: Developed Europe, and the rest of the world, So, but it's still softer compared to last year.
Johannes Thomas: I guess related to that, and you kind of briefly touched on it already, but what do you think is needed for advertisers to react to or appreciate the higher quality and better-converting traffic that you're sending right now?
Tom: So I guess related to that.
Tom: <unk> e-commerce purchases customer already bought.
Tom: We think as needle floor advertisers too.
Tom: Or appreciate the higher quality better converting traffic per year or something right now.
Johannes Thomas: I think this is the most important or one of the important factors in our engagement with advertisers, and they are very engaged; big ones, small ones, medium-sized suppliers; there's a very active discussion. What they certainly want is traffic that's incremental, so if we compete on Google and buy the same traffic, and it's not incremental for them, it's not that attractive. And if we look at the past years, our share of performance marketing has been bigger, and now leaning back into brand, we expect them to see more incrementality, and we are showing that, by much higher conversion rates already, our branded traffic converts much better.
Tom: I think here the most important or one of the important factors in our engagements with advertisers and they are very engaged.
Tom: One small one medium sized suppliers this very active discussions.
Tom: What they certainly want this traffic that incremental so if we compete in Google and by the same traffic and it's not incremental for them, that's not that attractive and if we look at the recent years our share of performance marketing has been bigger and now leaning back into brand.
Tom: We expect them to see more instrumentality.
Tom: It comes and we are we are showing that by a much higher conversion rates already our branded traffic converts much better so along with better both product improvements in conversion rates are up and I think that is an aspect that and then next review there, we'll hopefully see that our trap.
Johannes Thomas: So along with both product improvements, conversion rates are up, and I think that is an aspect that in the next review, they will hopefully see that our traffic is more incremental, and then on a relative basis to other channels, you become more attractive. And that's a matter of how quickly this materializes. We have seen the year start much softer, and over the course of the quarter, numbers have normalized. And as Robin said, in America, very healthy. In Europe and the rest of the world, a bit softer, but overall, at a good level.
Tom: It is more incremental and then on a relative basis to other channels, you become more attractive and and Thats a matter of.
Tom: How quickly does this materialize we have seen the year started a much softer and over the course of the.
Tom: Of the of the quarter numbers have normalized and as.
Tom: Robin set in Americas, and very healthy in Europe, and rest of the world a bit softer.
Tom: But overall at good levels.
Dae K. Lee: Okay, I understand. Thank you.
Speaker Change: Okay understood. Thank you.
Tom: Yes.
Operator: With no further questions, this concludes our Q&A session. I will now turn the conference back over to Johannes for his closing remarks.
Tom: With no further questions. This concludes our Q&A session I will now turn the conference back over to Johan for closing remarks.
Johannes Thomas: We are committed to delivering sustainable growth and creating long term value for our shareholders. The.
Johannes Thomas: We are committed to delivering sustainable growth and creating long-term value for our shareholders. The success of the company will be driven by our continuous transformation in marketing and innovation in our core product.
Johannes Thomas: The success of the company will be driven by our continuous transformation and marketing and innovation in our core product I'd like to thank everyone for participating in our earnings call. We appreciate your time and your ongoing interest in our company. We look forward to updating you on our progress and results in the next call. Thank you and have a great day.
Johannes Thomas: I'd like to thank everyone for participating in our earnings call. We appreciate your time and your ongoing interest in our company. We look forward to updating you on our progress and results in the next call. Thank you, and have a great day.
Operator: This concludes today's conference call. You may now disconnect.
Speaker Change: This concludes today's conference call you may now disconnect.
Speaker Change: Okay.
Johannes Thomas: and our company. We look forward to it.
Johannes Thomas: Now our company, we look forward.