KEY POINTS
- PCLN missed the Room-Night Guide again: 3rd quarter in a row. We could say that PCLN sandbagged the guide, but that doesn't matter if the sell-side continues to negate the buffer that PCLN is trying to build into consensus room night (RN) estimates. The only problem with this print was the sell-side modeling comparable 4Q17 RN growth (vs. the 3Q17 guide) despite the tougher comp, which was its strongest RN growth since 1Q14.
- Performance vs. Brand Ad Spend is not an issue: The sell-side asked a bunch of questions here, seemingly trying to rationalize why mgmt guided light again (see point 1). For context, performance-based ad spend historically makes up ~90% of PCLN's ad budget. In 3Q17, the Brand Advertising mix picked up to 8% of the total, up ~1 percentage point y/y. But that increase was mostly a function of a light comp since PCLN pulled back on Brand Ad spend in 2H16; the 3Q17 branded percentage is inline with historical norms.
- Only pulling back on meta: Performance-based ad spend increased 18% y/y. That rate decelerated by 7 percentage points vs. 2Q17, but that slowdown is comparable to the deceleration that TRVG saw its net revenue growth (both in $ terms). Combine that with the deceleration in TRIP's 3Q17 referral revenue, and it appears that PCLN may just be shifting ad budget away from meta toward SEM (e.g. Google).
Let us know if you have any questions.
Hesham Shaaban, CFA
Managing Director
@HedgeyeInternet
Todd Jordan
Managing Director
@HedgeyeSnakeye
Sean Jenkins
Associate
