All too often, branding and performance are depicted at loggerheads. The narrative of creativity stifled and overlooked by data teams or beautiful campaigns winning Cannes Lion awards but losing sales is a familiar one. In this new column, Robin Langford, Editor at PMW, looks at why this siloed approach is dangerously out-of-date.
Performance marketing? Completed it mate.
While not quite channelling Jay from the Inbetweeners, Airbnb CEO Brian Chesky was clearly comfortable with announcing a slow down in performance marketing spend at a recent earnings call. When your brand has a 90% share of organic searches in your category, it's easy to take the foot off the Google Ads pedal. Brand visibility? Completed it mate.
Quizzed about the role of pay-for performance channels in marketing plans going forward, Chesky envisioned them as a chisel, rather than a chainsaw: “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.”
Instead, the home rental company put an extra $202m into its brand marketing campaigns, while only investing $77m more into ‘search engine marketing and advertising’.
The result? Its most profitable quarter to date, with $1.2bn of net income marking a $400m improvement from last year, suggesting that demand for travel is strong despite challenges from inflation.
“Our brand marketing is delivering excellent results overall with a strong rate of return, and it’s been so successful that we’re actually expanding to more countries,” Dave Stephenson, Airbnb’s CFO added.
Piling onto this sentiment was eBay – a one-time prime example of under-investing in brand building. Back in 2015, its budget was split 90:10 in favour of performance. Think ‘hyper targeted display ads selling a sofa to a house-mover’ rather than ‘a TV ad extolling the green credentials of buying a “pre-loved” jumper from a vibrant and trustworthy community.’
Fast forward to the online marketplace’s latest Q3 results and a pivot back to a “full funnel” approach, emphasising its brand and focus on customer experience, has seen a remarkable turnaround from a COVID slump.
“Heading into the pandemic, volume was declining. Since that time, we have invested in game-changing product experiences and adjusted our approach to marketing,” said eBay president and CEO Jamie Iannone, on the company’s recent Q3 earnings call.
“Part of our strategy, and the shift in our marketing, was really to approach full-funnel marketing and move away from just lower-funnel optimisation. That's worked out really well for us,” Iannone added.
These results have been championed by creatives frustrated with the marketing industry’s increasing obsession with data and measurement – metrics which might not be telling the whole customer journey story and leaving the branding ‘halo effect’ uncredited.
But Airbnb and eBay’s branding successes come with a huge caveat: the fight for share of voice is much easier when your brand is basically a verb, with phrases such as…
“You should Airbnb it.”
“Let’s Uber it.”
“I’ll just eBay it.”
…entering the lexicon.
So are these results the exception, rather than the rule? After all, not every brand has the luxury of such a strong brand identity.
“My pet hate is when the industry analyses odd unicorn businesses like AirBnB and tries to draw parallels to unrelated categories and businesses,” says Tom Ollerton, founder of Automated Creative.
“The hotel industry as a whole will be benefiting hugely from a post-COVID holiday hunger so it's no surprise Airbnbis doing well. It's a sensible strategy to keep the brand top of mind as people flock to search engines to find their digs.”
A post-pandemic correction
Performance marketing is certainly coming down from a pandemic high. As lockdown hit, online grocery shopping became a necessity rather than a luxury and teens and grandparents alike flocked to TikTok, podcasts and mobile gaming to pass the time and recreate the communities they missed in the offline world.
Beyond a renewed hybrid working culture, much of the ‘new normal’ looks suspiciously like the ‘old normal’. The snap back has left many current search traffic and social media engagement stats looking unfavourable to their 2020/21 numbers. Meanwhile, a cooped up audience is on the streets again and craving tangible experiences, leading to a boom in digital out of home and experiential marketing.
Combine this with an economic downturn – and a drop in average order volumes – and marketing that primarily drives clicks and conversions becomes more expensive and less lucrative. Time for a branding revival to bring in more customers at the top of the funnel?
“Solely employing a performance strategy will only get you so far,” says Jim Hawker, founder at Threepipe Reply. “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.”
Branding versus performance: it's not a zero sum game
As Hawker points out, each dollar invested in branding is not necessarily a dollar taken out of performance channels. When balanced carefully, one complements the other, and for every Airbnb leader broadly hammering home its customer experience credentials in branding, there's a challenger brand using smart targeting and tailored messaging to be heard above the noise.
“It's more interesting to look at AirBnB copycats – how are they doing it?” adds Ollerton. “If I was going up against Airbnb I'd be throwing spend into performance ads and testing messaging and visuals around the multitude of different emotional drivers consumers have around accommodation.
“The major setback to top of funnel work that doesn't test multiple different territories is that the brand can't be sure why their ads worked. Running low volumes of variants for brand related work is like driving your car around with the handbrake on.”
Michelle Urwin, VP of Marketing at Skai, agrees: “I’d argue that Airbnb’s strategy to focus on brand marketing is a luxury that only a market leader, whose brand is already synonymous with the category it plays in, can really afford. Companies looking to disrupt a major player like Airbnb will be much more focused on stealing market share through conquesting techniques on performance media that help them to gain brand exposure.”
“The point of diminishing returns”
The halo effect of branding is hard to ignore and Airbnb’s performance costs are all the cheaper for it, as Marc Pearson, Global Head of Precision at Wavemaker, explains.
“A stronger brand would drive better delivery rates on your search, which in turn improves your quality score and reduces your CPCs to make the whole channel work harder for you,” Pearson says. “Airbnb benefits from being a known brand, so it can then trade less on price, offers and discounts. So that when you are active in your search channels, they’re not just trading on discounts or lowest price. This means it's easier to maintain a decent margin from the sales driven through their performance channels.”
“From an econometrics point of view, we talk to clients about looking at the point of diminishing returns you're at for each of your channels as well. For some brands spending your next pound in search is going to be less cost effective than putting it into TV, for example,” Pearson concludes.
Is branding becoming performance?
Rather than a sign of weakness or decline, a successful brand spending less on performance marketing channels is a sign of rude health of an industry geared towards making every penny count.
While the practice is forecast to attract more investment over the coming years, all brands should ultimately aspire to spend less on performance channels – driving down CPAs is the raison d’etre of search, social and affiliate marketing through to gaming, the metaverse and beyond.
While 'spend' has always been the traditonal (and easier) way to measure the health of an industry, its harder to measure actual 'value'. The beauty of channels such as seach marketing or paid social is that they can be scaled, from local bakery to huge conglomerate. Guerilla marketing aside, branding tends to require bigger upfront costs to get results.
“Let’s also not forget that while Airbnb is prioritising brand marketing over performance; they have not stopped doing search marketing completely,” adds Urwin. “Getting the balance right between short-term results and long-term brand building is critical in the digital age; where consumers can go from browsing to booking in an instant.”
“That’s where newer marketing measurement techniques like incrementality testing are becoming critical –helping marketers understand the point of diminishing returns for budget on a particular channel for example. Without rigorous testing and measurement, even brands like Airbnb don’t truly know what additional opportunity they could be missing out on by not investing more in performance,” she concludes.
Just like Jay’s fanciful claim about the Championship Manager video game, you can’t ‘complete’ performance marketing. But there is a sweet spot where investments don’t justify returns….
… and that just shows that it’s working.
Want to hear more? We have just launched our new spin off podcast, Attention Seekers: News Shorts, where Editor Robin Langford and Reporter Lucy Shelley discuss Airbnb's performance cuts in more detail...