How Airbnb Used Brand Awareness to Drive Profitability

One great thing about this story is how an Airbnb marketing has really become a growth driver. And maybe that's a takeaway for marketers too. How do you show up with the right metrics, with the right data to back up your strategy? Hello and welcome to the Marketing Architects, a research first podcast dedicated to answering your toughest marketing questions. I'm Alena Hingle. I run the marketing team here at Marketing Architects. Hi Alena. Hi Rob. Please wait for me to introduce you. Today I'm joined by my two co-host Angela Voss, our CEO and Rob D'Amars, our chief creative officer. Lina, did you get a run in yet today? No, I swam. I swam this morning. Didn't run to Wisconsin. No, I didn't. But thanks for checking in on my workout schedule. Today we're not here to talk about that. We're back with our thoughts on some recent marketing news. Always trying to root our opinions and data, research and what drives business results. Today we're going to break down a story that was originally published in November of last year, but has recently been gaining some new life on LinkedIn, which would be the story of Airbnb moving away from performance driven search marketing and leaning into broad marketing campaigns and brand building. So the big news here is that Airbnb recently reported its most profitable fourth quarter ever. And this is a pretty big deal since according to a very interesting LinkedIn post I read from James Herman. They are the only public VC backed company founded in the US in the last 15 years that is meaningfully profitable. So this is a pretty significant list. It includes brands like DoorDash, Uber, Roblox, Peloton, Robinhood and Pinterest. So what did Airbnb do differently than all these other brands? Well, two years ago, they reportedly shifted their marketing investment away from performance channels and into brand building. And by the way, they're still trending in this direction. I did some digging in Cantar, which is a media measurement tool we use at our agency. And in the past six months alone, Airbnb increased their TV investment by more than 50% and decreased their search spend by 14%. They still spend quite a lot on digital, but according to Cantar, which is an estimate, they currently spend more on TV than digital. And at the same time, they also communicated a change in their messaging strategy. So they are now focused on driving awareness, educating travelers about their new services and offerings, and they're also focused on PR. They talked a lot about just all the different articles they've had published around Airbnb. They're focused on TV, of course. And I even saw in Cantar that they're starting to add a little bit of outdoor to their advertising. So, Anton Robb, you're both pretty familiar with this story by now, right? Love Airbnb. Love the story. I love staying in Airbnb. I just love all of it. And I think it hits home for us a bit because we grew up performance marketers, and yet we work in television. And so it's near and dear to our hearts, the balance between the two. And we don't like to throw shade on performance marketers, but we are big believers in brand as well. But what I love too is the vulnerability and transparency that they've had on this topic. Right? That's not something that you see every day is that kind of public affirmation of what's working, what's not, and bucking the trends to some degree related to dependency and digital. Rob, what do you think? You know, I'm really proud of how they're owning the category right now in their creative. They're in a category of, you know, there's like 20 plus people just right at the top of Google search when it comes to their category. And everybody's fighting for that space of, hey, you're going to, you know, position themselves against the traditional stand-of-hotel, and instead, you know, stay in a house, that message has really played out. And I think they're really doing a nice job of uping the whole category, uping the expectation of what you should experience when you use an Airbnb. And their new campaign really features, you guys have all seen that, the new work that they're doing right now. They, you know, they're really celebrating the place that you stay in as if it's the destination itself. So it's no longer just trying to find a place in, you know, San Francisco, it's about staying in a yellow submarine that's been renovated into a really cool space. And how, how cool is that? Or renting an island? And I think they're really celebrating their ability to sort even buy really cool categories like renting an island, or they have an OMG section now. So I think that's really cool. I think the creative itself is pretty differentiating. Obviously, they're, they're putting a lot of money into buying up incredible music from, you know, Bob Dylan to the Beatles, which again, just continues to show their their category leadership to be able to, to brag a little bit like that that we can spend that kind of money. It just definitely defines them as the, the category leader. I also think it's really cool that they have their secondary campaign going on right now, which is, you know, as you mentioned, Elena, the double sided marketplace, which is really cool because I think it does a great job. One of, you know, turning their brand into a verb, let's, you know, Airbnb it, which again, just allows them to own the category, own the language around the brand. But I also think that it does a really good job of, even though it's targeting the renters, I think it continues to celebrate how cool the places are that you're staying at, that these are people who care about their homes and they're, you know, they're willing to open them up to you. So I think it serves both audiences, even though it's, it's focusing on the, the inventory of the renters. They've become a verb. They obviously were now, they became the clinics of the category, but I think what is really interesting to me too is that they weren't the category creators. They seem like they are. Like I think a lot of people perceive Airbnb as all they created a category, but VRBO has been around since the 90s, you know, that's another interesting play on words, vacation rental by owner before they dropped the full language there and just went VRBO. But yeah, it's, it's an interesting growth story for sure. Right. And they're really, Airbnb has become thought of as the leader and become the leader with this creative messaging and also with this focus on awareness that we just talked about. And it's probably no coincidence that they've been sharing these messages and working on building this awareness using TV as one of their core marketing channels. Yeah, I mean, generally when you hear of a brand looking to be less reliant on search, they're likely going to shift to proven top of funnel channels like television, especially when they're trying to communicate a double sided marketplace, the story behind making it a destination. And I think for Airbnb, you know, there's so many life instances in which either renting or renting out your play is, you know, might make sense for a consumer. And I love what they're doing there in terms of you wouldn't think that when the conference comes to town, you should maybe vacate your city and open up your apartment or your home to make a little money on the side. So obviously, there's vacations, but they and they need the supply side arguably more than they need the demand side. So when you've got the opportunity for a wide target like they do with a lot of messaging opportunities, wide reach channels make sense because there's so many use cases. Right, right. And they seem to have had a lot of success with TV. I think that there's been some debate about this story and just how, you know, how much does it have to do with TV and driving brand versus just good time in the travel industry, Rob? I might ask you, you sent us an interesting sort of counter argument to this. Yeah, I thought it was really interesting. You know, someone was trying to, you know, call out the fact that it's just really all about the fact that they switched brand because that person used the case of Expedia saying they've been primarily performance marketing. And in fact, they've been doing incredibly well over the same time period. So we just dealing with macro forces here. I mean, he was talking about things that related to this, you know, the strong dollar as it relates to travel, obviously the pandemic, all of these different, you know, macro factors that really can be lifting the industry. Yeah, yeah, Rob, when you said that, I went and looked into Expedia and what have they been doing? Because you're right, they've been having really strong performance as well. And I did see that Expedia is not taking the Airbnb route. It appears. They're spending a lot on search, at least from what I can tell. They still spend on TV. They're pretty big TV spenders, but they're definitely leaning more into digital. But when I looked into it more, I did notice there's a few differences between the two of them. One is that I was reading through Airbnb's recent earnings report and their CEO mentioned that 90% of their traffic comes direct, which is pretty impressive. And I think that we know from our own advertisers that that can make a huge difference to your cost because if someone's coming directly to your website, you're not getting that Google tax. And when I looked at Expedia, it was about 50% of their traffic is direct. So I can see why they're having to spend so much money on search. They're capturing a lot of those, those people that are searching for their services. And I know that their services are a bit different, but maybe building this category can pay off. And I might kick it over to you because I know we have an advertiser that did a really good job becoming the go to in their category, right? Instead of searching for what they sell, people are now going directly to them. Yeah, there are definitely other brands. We've seen it as well with a variety of brands, actually, not just the one that you're thinking of. But often when brands are launching television they're looking to reduce dependency. and digital. And we've had brands that have been around for, you know, 50 plus years, launch television, billion dollar public brands looking to reduce that dependency, really with the theory that even if they could just shift, you know, 20, 30% of their non-branded search traffic to branded search or even better to your point to direct traffic, you know, it will lead to a transformational change for their business. And when you do that, you also start to see the effects of top of funnel marketing that you've never seen before. You see more word of mouth, very often you see higher lifetime value, supplier relationships become easier to negotiate, partnership opportunities are more prevalent. And so while all brands need digital, Airbnb included, and overdependence is really just going to leave growth opportunity on the table. Right. And I also want to add just with, you know, questioning Airbnb and is this all from brand, this did come directly from them. So it's not that we're just looking, hey, look, there's plenty a lot on TV. That is why they're successful. This was reported by Airbnb, which I think is significant. And I do think that brand and TV does make a lot of sense for them because of this two-sided marketplace, the reach of TV makes a lot of sense. And like Rob was saying, they're being strategic about it. They're really using it to tell a different story about Airbnb. However, I would like to say that this is not exactly groundbreaking either that this is happening for them. They're not alone in this experience of investing more in brand and seeing returns. I actually found a marketing week article from back in 2019. It was written by Sarah Viserd and it told a similar story about Adidas. So Adidas, they decided to lean all the way into digital. They felt that they couldn't compete with Nike with brand building. So they thought, hey, we can't win with brands. So let's win on performance. And they thought that digital was driving their online sales, which is the most profitable part of their business. But they invested in an econometric model and discovered that while they thought returning customers were driving sales, 60% of their revenue was coming from first-time buyers. And what's more, they found that it was brand activity. That was driving 65% of their sales across their wholesale retail and e-commerce channels. This turned out to be an issue because their budget was split. Only 23% was dedicated to brand and 77% was dedicated to performance. So Adidas actually admitted that they were focused on the wrong metrics. These metrics were created by some of their attribution modeling from platforms like Google and Facebook that came directly from Adidas themselves. So they shifted away from these models, shifted into econometrics, and this helped them see that they should actually be investing more in video, TV, outdoor, and cinema to drive online sales. So I suppose my point is that this isn't really news. This has happened. Other brands have experienced a similar thing from shifting their marketing mix. And what are your thoughts on this shift? Well, I remember Mark Pritchard, a Proctor and Gamble talking about this years ago. I think a lot of times in Adidas and Airbnb's case too, I think it's a misunderstanding of what's driving what and how do we view the value of digital versus what the reality might look like. In Proctor and Gamble's case, they cut over 200 million from their digital ad spend after finding that a substantial portion of their ads weren't reaching their intended audience. So they were more concerned, I think, with concerns of ad viewability, ad fraud, brand safety, but ended up shifting their focus back to traditional advertising channels like television and radio where they just felt more confident about their ads effectiveness. And ultimately that ended up playing out for them. But I think it's, you know, when you think about what Airbnb is doing and even a Proctor and Gamble too, they really, even just based on their consistency in being almost always on, I would say, from a marketing standpoint in television, they're not trying to win spring break. They're not trying to win moments, right? They're, they're trying to win mental availability in top of mine. And I think that's why you see things like their direct traffic being so high because we think of vacationing as an Airbnb opportunity, we go right to them. Right. And we've talked about this before on the show, but there's brands that are highly digital are utilizing television because they feel that effect, right? You look at meta, you look at Google, even TikTok is running TV ads. And of course, this wouldn't be an episode if I didn't bring up Apple. And they spend $300 million in network television. It's actually their single largest channel that they spend on, you know, when you look at all the different facets of digital, if you add all those up, then it's over 300. But in terms of one single channel, the linear network TV is, is their largest. If I had that correct, Alina. Oh, don't put that on me. You're the fact checker. You keep us honest. If you're a marketer, you already know TV advertising is powerful, but launching TV is not exactly easy. That's why marketing architects rebuilt TV advertising to help brands drive profitable growth. Introducing all inclusive TV, a revolutionary approach to TV advertising where all you pay for is media. Marketing architects provides everything else needed for success, from stunning creative to results you can trust. Visit marketingarchitects.com to learn more. Well, yet things rub, those are all good examples of just brands who lean into both, you know, both digital and traditional advertising and you said something about measurement and just knowing what channels are doing. What it seems like in the Airbnb example, as well as in the Adidas example, there was sort of a reckoning of how am I measuring the impact of my marketing and we had Matt Holtkernon a few episodes ago and he's our VP of analytics. So I'm probably going to butcher this, but I'm going to do my best. He described it a lot better. He talked about just measuring marketing in general and making sure you have multiple models set up micro macro business and really just understanding where are my customers coming from and what I'm trying to tee up here is this story is about Airbnb, which is a massive company, a massive brand, but this story, there has to be takeaways right for every marketer could one of those be measurement or and what do you think marketers should be thinking about when they read a story like this? Yeah, I mean, I think to your point, a lot of measurement is thought of as what happens as a result of marketing, but I think it really is important to start with a baseline as well. It's important to start with understanding what your in-market versus out-of-market demand looks like for your brand. How often does your target shop for your product or service? And of your addressable audience, what percent is in an out-of-market at any given time? That starting point is crucial to understanding how the game should be played and I think it's also crucial data for executive teams so that they can buy in to why out-of-market consumers matter for your brand. And then once you have that understood, look at what your digital channels are doing for you. Does it feel like there's more opportunity to be had? What are your competitors doing? Create some benchmarks so that that can give you a sense of where on this journey you might be. And then once you get to the phase of feeling like, okay, I'm feeling tapped from a digital perspective. You're looking for top-of-fundal channels that can ease your brand into building mental availability with a consumer. TV is a great brand builder, but it's also a great driver of immediate sales and we often see that on a short-term basis from an activation perspective, it will perform similarly to your acquisition efforts maybe on social media, but not every channel can do both performance marketing and branding channels like TV and radio can. So find an expert in that space that can really help guide you as to what to your point of layna. Those effects that you should be looking for might be and to best understand what those sustained impacts should look like and your CFO is probably going to need those and I think as accountable marketers we should be able to provide them. Right, well speaking of the CFO I think one great thing about this story is how an Airbnb marketing has really become a growth driver and maybe that's a takeaway for marketers too. How do you show up with the right metrics with the right data to back up your strategy and that doesn't mean becoming like Airbnb and dumping everything into brand and all depends on your brand and what growth phase you're in but the fact that we've got marketing in the spotlight for a company that's doing so well I think that's a pretty good goal for every marketing team. We should do a shout out to our CFO Brent Longgull. He is our chief fund officer just to kind of their important part of the marketing mix. Right, right. Thank you Brent, good supporter of our marketing team too and let us do things like a podcast. That's it for this episode of the Marketing Architects. You can connect with us on LinkedIn and if you find our show valuable please leave us a rating and review and if you want to know what the research says about some recent news you can contact us at marketingarchitects.com/podcast. Now go forth and build great marketing.