How does Google’s push further down funnel into travel-related services tie in with data privacy? How does data privacy tie in with antitrust investigations against Google and other tech giants? What do travel-specific marketplaces and brands need to do to survive and thrive in the age of Google?
Google’s ad-supported app ecosystem relies on user data to deliver targeted advertising to its users. The company also faces mounting scrutiny over data privacy from regulators and media. Ireland recently launched the first major GDPR probe into the company’s ad tracking practices (read here). The California Consumer Privacy Act (CCPA) is set to go into effect in January 2020.
Meanwhile Google has taken measures to get ahead of the privacy debate. During the 2019 I/O developers’ conference the company announced a set of features for users of its Maps and Chrome browser. The rollout will allow users to block third-party tracking tools including cookies and fingerprinting. Conventional thinking posits that more privacy could hurt Google’s ad network.
Thesis: The privacy debate will push Google to innovate. "Google has evolved from a company that helps you find answers to a company that helps you get things done". Statement from CEO Pachai during last month's I/O conference. Travel-related services i.e. better flight, hotel, and activities booking functionality - play into this transformation. A more closed ad ecosystem founded on Google ad properties gives Google more control over its own destiny. It will also raise more eyebrows with regulators.
New privacy features could strengthen Google’s quasi-monopoly position with the consumer. Other advertising platforms use Google as a data channel to target, re-target, and measure ad effectiveness. A recent Digiday article (read here) talked about how Google’s privacy features on Chrome could hurt Amazon’s nascent advertising business: “Amazon will struggle to match audiences off its own site, and its ability to marry its own customer data with audience data from third-party sides will be blocked, should users decide they wish to do so, according to agency executives.”
Travel brands and other marketplaces are clearly not immune. Google has strengthened its position with travel suppliers and consumers by effectively taking on the role of intermediary. This presents a challenge to certain players i.e. OTAs and travel-specific metasearch channels and, potentially, airlines and hotel chain brands longer term. I spoke with a marketing analyst at Norwegian Airlines. She said that they “trust Google because they spend so much money with them”.
GDPR and other pending regulations in the U.S. could indirectly help Google achieve this objective. The core complaint focuses on what happens to the data, once it leaves the Google ecosystem. The workaround for Google is the following:
Building an unstoppable ecosystem of interoperable apps that create significant value for the consumer
Put the decision of data sharing into consumers’ hands
Give consumers layered options to block various types of data privacy
Distinguish between first-party and third-party data sharing
Encourage users to share data with Google (1st party) in order to improve the interoperability of its apps
Over 80 percent of advertising revenues come from Google properties. This could disrupt the digital advertising ecosystem e.g. programmatic buying etc. making it harder for smaller publishers and platforms to deliver on programmatic ad placement consistency, accuracy, and measurement for their customers. If many Google users opt to block third-party tracking, then this could push even more ad spend and negotiating leverage into Google’s court, as advertisers opt for Google properties.
Google’s recent aggressive push into travel-related services also ties into it. A closed Google ecosystem of apps needs robust functionality, dynamic pricing and inventory data to replace what its biggest ad partners (e.g. Booking Holdings, Expedia, the airlines etc.) offer. It also leaves customer experience and support costs in the hands of the supplier. The customer relationship and the entire purchase full rests with Google. This exposes other intermediaries for more supply-side growth and technology solutions.
Google wants to own the customer relationship entirely, so that it can maximize ad and other Google product revenue. Any website or online marketplace is therefore a partial quasi-competitor to Google. For example, the Maps app has incorporated ride hailing as option alternative to walking, biking, and public transit. Uber, Lyft, and other hailing services e.g. Juno. Greater price transparency puts pressure on these companies to differentiate with their user base e.g. loyalty programs, better cars, and other features.
The bigger assumption here is that Google can win over the the travel consumer with robust functionality and better content.
Google recently took steps to move in front of the data privacy debate by essentially copying Apple and attacking the cookie, and other third-party web tracking tools deployed via its Chrome browser (read here for more on Apple’s privacy strategy). Transparency and privacy were big themes during this year’s I/O developers’ conference.
Google wants to give users more choices to control who is using his or her data and how. During I/O, CEO Sundar Pichai declared that its new mission is to go from “the company that helps find information, to the company that helps get things done.” Facilitating user tasks in transport, lodging, and local commerce is a key component to achieving that mission.
Moving first on privacy will allow Google to dictate the terms of an increasingly heated social debate. The push for more privacy could give Google reason to close off its ad-supported app ecosystem from its data and advertising partners.
Travel brands rely on Google the digital marketing channel, but also Google the data and analytics partner. If more Google users opt to block tracking features e.g. cookies, then this could push advertisers to spend more with Google over other channels.
Conventional thinking might assume that more data privacy would negatively impact an ad-driven platform like Google. On the other hand, if the company can convince regulators and the public of its mission to become “the company that helps you get things done”, then privacy could be a big win for Google.
Google has finally stepped in front of the data privacy debate with new features aimed at presumably protecting users from the pitfalls of today’s modern ad-supported digital economy. New privacy features on Chrome are set to give users more freedom to block third-party cookies on the world’s most popular internet browser. This will help address increasingly vocal regulators, critics, and competitors calling for better stewardship over user data. The Chrome browser is also a key gateway that marketers use to target consumers and to measure campaign effectiveness. Tightening access to this portal will play into Google’s broader strategy to become the operating system for our daily lives - powered by Google apps. On the surface, more privacy should be a bad thing for a company like Google that depends so heavily on accessing user data. It could also play perfectly into Google’s plan to free itself from its advertising and content partners.
Google’s travel strategy explained
The Google app ecosystem is now big enough to where it doesn’t necessarily need to share its users with its ad and content partners. Google has become a mini internet of sorts, an operating system for our lives where users can more or less satisfy the basic daily life needs using Google app products exclusively e.g. Search, YouTube, Calendar, Gmail, Maps, Pay, and now Google Assistant.
Historically, Google’s ad business depended on revenue generated from partners aiming to push qualified traffic to their brands and supplier booking portals. The threat of Google moving further down funnel to compete with its largest travel partners had loomed for nearly a decade since 2010, with the acquisition of ITA Software - an airline price and search technology company.
In retrospect, it appears that these companies (e.g. the online travel agencies and metasearch sites) were short-sighted in missing Google’s potential to become both the booking channel and advertising platform - presumably since they owned the consumer and supplier relationships. Whether Google planned it or not, the company executed brilliantly, waiting until the full Google app ecosystem was interoperable and ingrained enough in the daily lives of the consumer.
Google then flipped the proverbial switch in an aggressive roll out (over the last 12-18 months) of many new features and upgrades to its hotel and air search products, but also to its local commerce discovery and booking features with Reserve with Google. In today’s high-tech platform economy, the full Google ecosystem of apps and capabilities ultimately offers much more value for the supplier or consumer than the incumbents could ever deliver.
And while Google’s dominant position in travel seems anti-competitive by yesterday’s standards, it’s more reasonable when considering Google’s more direct competitors which are Apple, Facebook, Amazon, and a host of Chinese platforms. In short, Google successfully out-maneuvered some of its biggest advertising partners without visibly impacting its revenue. Google is so ingrained into the fabric of their business models, that incumbents are forced to reinvent themselves while continuing to spend with Google.
How does user privacy play into it?
Background, the internet is broken
The bigger assumption around the data privacy issue is that something is broken with today’s ad-driven model of the internet. Mounting pressure for more data privacy regulation (e.g. GDPR) is the result of a maturing internet economy that is increasingly controlled by a few dominant players. Google and Facebook offer tremendous value to the consumer, in exchange for our time and attention paid to their advertising partners.
The advent of mobile computing amplified the relevance and effectiveness of data-driven advertising and custom content marketing. This scheme has been tolerated, but now technology plays such an integral role in daily life, that government and society more broadly are reassessing the tremendous influence that these companies have accumulated over the past couple of decades.
The platform economy
Technology has led to consolidation in the economy which has sparked a range of criticism coming from various political camps and business forums. The data privacy debate gets lumped into other issues now coming into play. Here is a brief synopsis:
Data is the oil that has fueled the last ten years of global economic growth; consolidation of big tech is creating digital monopolies with anti-competitive features built into their business models. Amazon is now the supreme supplier and distributor of all consumable goods and services; Facebook now controls both the world’s public forum and access to its data; Google is now the supreme operating system that controls the global flow of information, with built-in pay-to-play features. All of this scale is making regulators, watch dogs, and society as a whole twitchy.
Regulation is a blunt tool (with unforeseeable impacts) that increasingly uneasy policy makers will likely use to address these brewing perceived or actual inefficiencies within the digital order of things. More regulation could also impact the established flow of data across these platforms; and in doing so could undermine the ability for these companies to sustain the high level of grow to date. The platforms will go to great lengths to protect stakeholder interests; they will make all attempts to control the privacy discussion as a partial smokescreen to pull attention away from some of these other issues.
Changes in privacy strategy
A bigger more visible shift is now emerging. Rather than dealing with data privacy as a cost of doing business e.g. paying heavy fines and legal fees, the big technology platforms appear to be embracing the privacy discussion more proactively.
Tim Cook CEO at Apple Inc. raised the first battle cries against the pervasive abuse of user data. The iPhone and app store company positioned itself as the safer alternative to its immediate and future competitors when it launched ITP (intelligent tracking prevention) in May of 2017. ITP has since released new versions with the expressed aim of blocking third-party cookies and other tracking methods used by digital advertisers.
Facebook, Google, and Microsoft are now also rallying wholeheartedly behind privacy. Microsoft CEO Satya Nadell announced that “privacy is a human right” during the last Microsoft Build conference. Mark Zuckerberg, during Facebook’s F8 developer conference, proclaimed that “privacy is the future”, and that their focus on messaging apps would help protect users against the abuse of data. Google CEO Sundar Pichai, during the last I/O developer’s conference, fired back and stated that “privacy is the present”.
Pichai’s team followed up with announcements of Google features set to deliver more transparency and privacy controls into the app ecosystem, including the Chrome browser. The features will give users more easy-to-access information and power over which cookies third-party websites have installed on their browsers, crucially distinguishing between cookies that actually help you and those that glean data for advertisers. It's also prohibiting another type of online tracking called fingerprinting.
The pending cookie apocalypse
The culprit in question is the pesky third-party cookie. Apple Inc. catalyzed the privacy race by following Fire Fox and other cookie-killing browsers with the launch of ITP (Intelligent Tracking Prevention) 1.0 back in 2017. ITP has strict default rules that govern the use of third-party cookies on the site. Google Chrome, the web browser with roughly 60 percent of global search traffic, also wants to make it easier for users to block third-party cookies.
Good cookies and bad cookies
Digital travel marketing basics
Modern digital marketing is founded on two general principles: targeting and measurement i.e. understanding select audiences in order to deliver custom advertising or content; and measurement i.e. understanding whether X amount of marketing spend generates Y amount of revenue and profit. The two are inextricable components to how modern digital marketing gets done.
Marketers operate paid advertising campaigns within walled gardens e.g. Google, Facebook, and other social media platforms and increasingly Amazon. These platforms offer proprietary targeting and measurement tools. These platforms are notorious for not talking to each other. Since the travel purchase journey can hit multiple and potentially dozens of different touch points, marketers want to know things like whether ad exposure on Facebook is attributable to bookings on Google or Booking.com. Cookies and other tracking options e.g. the Facebook pixel that implant themselves through the Chrome browser are critical to this process.
Chrome the connector
The Chrome browser is a critical conduit that allows travel brands working outside of the Google ecosystem to better target content and to measure ROI across these various channels. And since Chrome controls roughly 60% of internet market share, Google is also the gateway to three out of every five consumers.
The keyword here is “relevant offers”. By relevant offers Booking.com presumably means personalized content and partner advertisements that match consumer interests and budgets, and get delivered on booking.com properties and other third-party sites via display ads on blogs and publishers. Retargeting is also critical here. Companies like Sojern help optimize the effectiveness of banner advertisements that help keep the brand top of mind with the consumer.
Here is Booking.com’s privacy statement on cookies:
“Whenever you use our online services, including our applications, cookies and other tracking technologies can be used in various ways, like making the Booking.com website work, to analyze traffic, or for advertisement purposes. These technologies are either used by us directly, or by our business partners, including third-party service providers and advertisers we work with.”
Inherent challenges to travel marketing
Booking flights and hotels is something most consumers do on rare occasion, perhaps two or three times per year on average. Motivations for travel also change on a trip-by-trip basis i.e. sometimes it’s for leisure and sometimes it’s for business etc. These two qualities make it challenging to target travel consumers with digital content and ads. Once a relationship with the customer has been established, brands will use all avenues available to convert that lead. This involves targeting and retargeting, price optimization, and personalized search results. Being good at digital marketing requires a scientific approach to channel management, attribution mapping, etc.
Travel marketing & distribution complexities
The travel marketing and distribution value chain has grown vastly complex. Suppliers - i.e. those that meet, greet, and clean up after customers push their product and content through many different third-party channels and content formats: online travel agencies both global and regional - search engines, social media, as well as other suppliers. Complexity increases with cross-selling of products, merchandising, and new partnerships developing across a swath of brands.
In an interview, Christine Walker Scarce the head of product & sales marketing at Expedia Group Media Solutions talked about Expedia’s dual role as an e-commerce and digital media platform. This particular interview came from a branded report in partnership with Phocuswire. The report was published to promote the group’s new incrementality functionality (read full report here)
Expedia Group is both an e-commerce and a digital media platform. How does that tie in to your [new] incrementality reporting capability?
Walker Scarce: The combination of being an e-commerce company and a publisher gives us a really unique perspective and a view of the full consumer journey from beginning to end, from the second a traveler starts dreaming and researching all the way through to when they have made their purchase. We are able to combine that with the scale of a global traveler audience across the Expedia Group brands to uncover trends and offer a really precise level of targeting and reporting that not a lot of other platforms are able to do. We are able to harness the power of literally the billions of data points that we are generating every day and provide the insights from those data points back to our advertisers.
What is an example of how using data can benefit advertisers?
Walker Scarce: It’s an easy thing for an advertiser to come to us and say, ‘I need to reach a 40-something woman who lives in Seattle, teaches yoga, has curly hair, and wears glasses.’ We can help you do that because we have the scale to be able to target at that level of granularity and make sure our partners are finding exactly the right traveler they want to reach at exactly the right time. Then, as their campaign progresses, we can help them understand the impact of the campaign and whether or not that targeting has worked. We work with that partner throughout the campaign to optimize and adjust that campaign when and if necessary to achieve the goals and objectives they set. Incrementality reporting is one more level, and one more way we are able to do that.
The following figures come from a survey conducted by adtech company Sojern. These data points offer a great overview of the digital travel marketing landscape:
Back to Google’s privacy strategy
Sticking to the thesis, it clearly makes sense for Google to get ahead of the data privacy debate. Certain hawks within the European Union and increasingly in the U.S. e.g. Senator Elizabeth Warren would like to see the company broken up. Delivering a proactive message on privacy will earn Google points with these camps. Perhaps more relevant to this discussion, Google stands to profit from tighter privacy settings; indeed, the current social context has opened up an opportunity for the company to deepen its relationship with advertisers.
Taking the initiative on building privacy mechanisms into the Google ecosystem means that Google can shape how the ecosystem gets affected. Diversification away from advertising is an objective for parent company Alphabet, but advertising continues to be core to its growth; new Google property ad formats are readily introduced.
Any new privacy settings introduced into the Google ecosystem will therefore focus on those external players engaging Google users from outside of the ecosystem. These include direct and indirect competitors e.g. publishers, blogs, adtech firms, and other content aggregators. This last group includes Facebook, Microsoft, and Amazon - but also travel brands e.g. Booking.com, Expedia, TripAdvisor, Airbnb - Google’s push further down funnel puts it into direct competition with these groups.
The last I/O developers’ conference sheds light on how Google leadership is reconciling privacy with its ambitions of growing as an advertising channel. The new privacy features give consumers more choice in what data is shared (read here for all features). Choice and transparency was a reoccurring theme throughout the event.
At the same time, in alignment with Google’s new mission to become “the company that helps get things done”, leadership openly spoke about the benefit of sharing data with Google, so that all of the different apps can be more interoperable and ultimately helpful to the user.
New Google product and feature releases will likely have this hook i.e. co-dependency between apps. One recent example is a new loyalty feature rolled out with Google Pay that pulls and aggregates content from Gmail (read more here). The key takeaway here is the Google privacy strategy is integral to its growth strategy as both a powerful life platform and advertising channel for brands.
According to the company’s Q1 2019 financials (below), advertising revenue accounted for 84.5 percent of total Alphabet (parent company) revenue, down 1,000 basis points from Q1 2018. The company has diversified away from advertising (as it hopes to do) somewhat, but Google is still primarily an advertising platform.
Google properties (Search, Gmail, Maps, etc) also account for the lion’s share of total advertising revenue. Google Network Members’ properties refer to revenue generated through its AdSense platform from ads that appear on blogs, publications, and other websites via banners. The share of Network Members properties revenues declined by 1,000 basis points in Q1 of 2019 compared to 2018. 17.4 percent vs. 16.4 percent.
In short, this tells us that Google already stands alone as an independent, ad-driven and interconnect app store.
Google is powerful but revenue growth is also slowing. The stock price slid 7,000 basis points after the Q1 earnings call pointed to a slowdown in ad sales growth (read more here). Keeping up with growth expectations will push Google to get aggressive the offense and defense. Offense meaning going after competitors market share and the long tail of the global ad spend business. On the defensive meaning that it will go to great lengths to protect its ad-driven business model from activists, regulators, competitors, etc. Taking the lead on privacy will prove to be a central component to both sides of this strategic coin.
This aggressive positioning creates other risks e.g. anti-trust suits etc., but it’s a risk that Google needs to take in order to sustain its ad-supported business model. This is a moving target with arguments on both sides of the fence. My sense is that Google will not get broken up. The global context e.g. the rapid growth of China tech will act as a deterrent and cushion against calls for a breakup of big tech in the U.S.