Specialist
Former Director, Engineering at Google LLC
Agenda
- Operating environment for online travel agencies (OTAs) regarding implications of Google's increased focus
- Strengths of Google's platform relative to TripAdvisor (NASDAQ: TRIP), Expedia (NASDAQ: EXPE), Booking Holdings (NASDAQ: BKNG), others
- Expected shift in OTA customer acquisition costs, OTA take rates, OTA booking volumes, etc
- Outlook for 2019 and beyond – growth runway & penetration headwinds
Questions
1.
What is your industry-wide overview of the online travel industry, pulling out 2-3 key trends you think investors should be paying attention?
2.
How should we assess market share in online travel? What percentage is offline still compared to online and what’s the share between OTAs and Google? How do you expect that to evolve?
3.
What are your thoughts on the regulatory implications that we should be monitoring? There’s an antitrust probe going on with the DOJ [Department of Justice] around Google. How does that factor into Google’s travel strategy and its ability to accelerate revenues there?
4.
In a hypothetical scenario where a DOJ decision comes against Google, what are the risks to Google’s ability to continue to drive traffic growth, and how is it going to factor into its ability to perform within the travel industry moving forward?
5.
Google’s search revenue and paid click volume was disappointing and decelerating in Q1. How should we assess the drivers for this from an OTA perspective? Would you expect Google to change its monetisation practices by becoming more aggressive to offset or fix those disappointments?
6.
How is the pullback and rationalisation on OTAs marketing spend going to impact Google’s traffic? What sort of traffic is it generating for the OTAs and how might Google be impacted by a pullback, especially since its search revenues are slightly down? I know you’re alluding to it’s a mix between macro and some idiosyncratic factors in terms of the different types of search. How does that work and how do you think that will evolve?
7.
It seems like you’re alluding to the positive benefits from consolidating the products. Can you walk through the product stack as it relates to travel for Google and their main strengths and weaknesses? Are there any areas that you’d think need immediate investment?
8.
Presumably OTAs are one of Google’s largest customers, so how should we balance whether the best strategy is becoming an OTA-type business model and cutting out that middleman compared to increasing traffic acquisition costs for the players that they’re providing traffic for? It appears Google is continuing to focus on driving up traffic and conversion, which would likely build a moat in terms of being too exposed to the OTAs, but how should we assess that? Is it better for Google to solely move toward becoming an OTA itself or just positioning itself to increase take rates from those OTAs?
9.
Presumably, in the long term, OTAs will be very rational with marketing spend and potentially the hotels going direct OTA’s are facing limits for more upper potential in terms of the CPCs that could be charged. Is Google considering going more direct to supplier longer term and looking to get further into fulfilment? How far away would we be from that?
10.
If the strategy can’t be meaningfully cut out as some of these other players in the value chain have, how might traffic acquisition costs evolve in terms of Google continuing to grow its share of the upper funnel? Who’s going to be feeling the pressure the most, whether it’s the Expedias and Bookings or regional OTAs, or otherwise a pure metasearch such as a TripAdvisor?
11.
What investments do you think would be worthwhile, whether that’s supplier direct or driving brand awareness on Google’s travel product? Is there any possibility of Google considering inorganically acquiring any metasearch platforms to defend its stronghold within the upper funnel, and the need for it?
12.
How do you think Google is approaching pricing and how has that trended over the past two years? What factors are driving differences in expected growth and why hasn’t Google been putting any commercial pressure on Flights as of yet?
13.
What is your one, three and 5-year outlook of how the online travel industry will develop, and what is a best- and worst-case scenario for Google’s efforts regarding?
14.
What KPIs or news or investments should we be monitoring to track Google’s relative success? Is there anything that, if you heard it had accomplished, would increase your worry of its ability to penetrate the industry further?
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