KEY POINTS
- Coming Back to the Table: BKNG reported accelerating room night growth in 3Q18, and its guide is implying further acceleration into 4Q18. BKNG showed another quarter of improving ad efficiency despite reaccelerating online ad spend in 3Q, which is likely due to another quarter of declining meta spend. BKNG suggested that it has "fully lapped" it's reset from last year, so we suspect that means it's not planning to further tighten the screws on Meta (TRIP/TRVG) moving forward, especially since BKNG is expecting deleverage in performance marketing spend in 4Q18. However, BKNG made a point to suggest that its advertising mix will remain dynamic, which we still see as somewhat of a shot across the bow to Meta unless anything were to change on the below.
- Rationalized the Space: As a reminder, we believe the BKNG was attempting to rationalize the industry by making it harder for Meta to compete for traffic at the top of the funnel by reducing its own Meta ad budgets. It appears that TRVG has since responded, implying that that it is planning to pare back its own traffic acquisition efforts through at least mid 2019. Naturally, this should help improve BKNG's ad efficiency as it starts to reengage in traffic acquisition given less overall competition, but more importantly, BKNG appears to have neutralized what was becoming the growing threat of TRVG eventually increasing its organic traffic/mix via repeat paid acquisition. Note that TRIP had already responded by paring back its own ad spend alongside BKNG's initial reset in 3Q17. All said, it appears that Meta is getting out of the way, which should solidify BKNG's stronghold over the space. Still, we're curious to hear what TRIP's plans are for 2019 now that its TV ad campaign is fully baked into the comps.
Let us know if you have any questions or would like to discuss further.
Hesham Shaaban, CFA
Managing Director
@HedgeyeInternet
Todd Jordan
Managing Director
@HedgeyeSnakeye
Sean Jenkins
Associate
