Airbnb’s 'anti-search' strategy pays off with best-ever quarter

Much-hyped move towards brand building drives success as CEO says performance marketing function is to “laser focus” supply and demand rather than “just purchase a large amount of customers.”

Home-sharing company Airbnb has posted its most profitable quarter to date, saying its pre-pandemic move away from search advertising is working.

In an earnings call Tuesday, its CFO Dave Stephenson said the company was pleased with the return on investment it is seeing with the different approach to advertising.

It posted its most profitable quarter to date, with $1.2bn of net income marking a $400m improvement from Q3 2021, suggesting that demand for travel is strong despite challenges from inflation.

“Our brand marketing results are delivering excellent results overall with a strong rate of return, and it’s been so successful that we’re actually expanding to more countries,” Stephenson said.

90% organic traffic

The company’s marketing strategy has raised eyebrows over the past few years. Back in pandemic stricken 2020, Airbnb halted its marketing activities and froze hiring, saving $800m in a cost cutting drive that also saw its founders give up their salaries and senior executives take a pay cut of 50%.

It then took a high profile strategy of spending less on search advertising and leaning more on broad marketing campaigns such as TV and public relations. Instead of using marketing as a means to “purchase” customers, Airbnb has turned to taking a full funnel approach to marketing, including PR in communication as more than 90% of its traffic is direct or organic.

Recession proof marketing?

When asked by analysts about future spending plans, Airbnb said its marketing spending is now low enough that it doesn’t anticipate drastic reductions even if economic headwinds worsen next year. “We’ve already kind of hit this new kind of lower overall rate,” Stephenson said.

“Certainly, we can moderate that over time, but we’re already so low that I wouldn’t anticipate us dropping it dramatically in the face of substantial headwinds with overall growth.”

Brian Chesky, CEO at Airbnb, added: “We think of performance marketing as more of a way to laser in to balance supply and demand rather than a way to just purchase a large amount of customers.”

Chesky said the company’s strategy is now is to use advertising to publicise its ‘Categories’, a way to search for homes based on criteria such as style or proximity to an activity such as surfing or skiing, and AirCover, a policy meant to help travellers who encounter problems such as inaccurate listings or hosts who cancel booking on short notice.

The company also offers an AirCover policy for its hosts, including liability insurance and damage protection.

Breaking down brand and performance

In previous years, Airbnb has not broken down the split between brand and performance marketing spend. But its latest results have shed some light on its activities.

In the first nine months of the year, its search engine marketing and advertising expenditure rose by $76.9m year-over-year - but there are no 2021 figures for comparison.

By contrast, the company spent $771.9m on “brand and performance marketing”. Of that, $202m, or 26%, represented increased spending on specific brand marketing campaigns. Again, it did not reveal the company’s total spending on brand marketing.

Brand spending was used to support campaigns including its “OMG” category of properties.

Since the category’s introduction, the OMG listings have been viewed more than 300 million views, according to the company’s quarterly report.

The company’s other “sales and marketing” costs included personnel-related expenses for its communications teams and for “policy,” which cost a separate $335.7m in the first nine months of the year — representing a 3% increase year-over-year.

An unspecified amount of Airbnb’s other sales and marketing money was used for referral incentives and coupons. The company did not reveal how much it spends on these programs but customer payouts for incentives and refunds increased to $152 million, marking a 78% increase.

“You can only go so far without investing in brand”

Airbnb is a good example for direct-to-consumer brands that want to evolve from a performance-marketing model to one with brand marketing integrated. But the brand could be tested if its competitors ratchet up spending in a downturn.

Commenting on the findings, Jim Hawker, Co-Founder and Sales and Marketing Director of agency Threepipe Reply, said: “Solely employing a performance strategy will only get you so far. Brand investment is key to improving performance metrics. Why it’s taken Airbnb to make this announcement for this to be understood is quite baffling.

“Airbnb’s biggest strength has always been its product and user experience. That’s what got it as far as it has. Sophisticated digital pure play businesses have known this for a while. That’s why you have seen them opening real world stores and opening concessions. You can only go so far without investing in brand.”