Airbnb hails ‘effective’ marketing strategy with record profits

Airbnb senior executives have praised its “efficient” approach to marketing spend and focus on brand building rather than performance as the company reports its most profitable quarter ever.

The online vacation rental company hit $1.2bn (£1.04bn) in net income in the third quarter of its financial year, an improvement of almost $400m (£348m). pounds sterling) compared to the third quarter of 2021.

The company also posted its highest ever quarterly adjusted EBITDA at $1.5bn (£1.31bn), a 32% year-on-year increase, which it said brand, demonstrates “the company’s continued strength and discipline in managing” the cost structure.

Last night (November 1), on a call with investors, Chief Financial Officer Dave Stephenson pointed to Airbnb’s decision to “drastically” adjust its marketing spend to be “substantially lower” as a factor. key to the company’s growing profitability.

In 2019, Airbnb shifted its marketing strategy to be more brand-focused and PR-focused, and less reliant on search engines and performance marketing. The brand said it now sees marketing as an “education” tool, rather than a tool to “buy customers”.

“We’re really happy with our approach to the marketing strategy we’ve had,” Stephenson said. “Our brand marketing results deliver great results overall with a strong return rate.”

We are not a commercial organization where you have four marketing departments. We have a functional organization.

Brian Chesky, Airbnb

Indeed, 90% of the platform’s traffic remains direct or unpaid, he said, “which generates an excellent return on investment for new active customers”.

The CFO added that Airbnb’s brand advertising campaign has been “so successful” that the company will expand it to other countries over the next year.

Speaking alongside Stephenson, CEO and co-founder Brian Chesky claimed that Airbnb now spends “much less” on marketing than competitors and is “pretty efficient” with its investment.

This efficient spending, combined with a “lean” organizational structure, positions Airbnb well to meet the challenges of the macroeconomic situation, he added.

“When the pandemic hit, we lost 80% of our business and completely changed our cost structure. And from this crisis, we made a decision. And the decision we’ve made is that we’re not going to wait for another crisis, another weak economy, or a recession to change the way we invest or run the business. So we were going to be lean regardless of the economy,” Chesky explained.

“We really embrace being a lean organization, which is part of our functional structure. We are not a commercial organization where you have four marketing departments. We have a functional organization, which allows us to be a little lighter. »

Airbnb CFO: We were right to shift spending from performance to brand building

Ad spend for the year as a whole will be “relatively flat” compared to 2021, Stephenson added, with similar marketing as a percentage of revenue expected in 2023. There are currently no plans to cut marketing spend in response. to the economic crisis.

“We have already achieved this new lower overall rate. And what we’ve really found is that to the extent that we stay the course even as we grow, it’s because we see such success that we want to be able to invest in other countries said Stephenson. ,

“Granted, we can moderate that over time, but we’re already so low that I wouldn’t expect us to drop it dramatically in the face of substantial growth headwinds.” But we can scale it with revenue within a reasonable range of a few hundred basis points here and there.

William L. Hart