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The Airbnb-case: brand versus performance, that's the question


The debate about performance marketing versus brand building is a perennial favourite that appears particularly resonant amid the current times of squeezed marketing budgets. Last month, Airbnb said it did the right thing, shifting marketing spend from performance marketing to brand building. The perfect example for other brands?

The home rental platform joined well-known companies including P&G, Uber and eBay that have also taken a step back from performance marketing in recent years.

Despite these knocks, performance marketing, boasting inherent accountability, continues to occupy a significant chunk of overall marketing spend for many brands. Amid an environment in which marketing departments are facing massive pressures to promise growth, marketing chiefs view performance marketing strategies as a tangible way to help hit financial targets. Furthermore, the continued ascent of key digital trends like influencer marketing, DTC growth and podcast advertising continues to propel performance marketing forward.

That said, brands still need to invest in long-term brand building- alongside performance marketing- to enhance the perception of a brand now and in the future, experts say. And experts fervently believe Airbnb's bold move is not for all brands. Luke Smith, CEO and co-founder, Croud, the digital marketing agency, said: "Airbnb's approach has appeared to have worked for them, but I'd err on the side of caution for other brands looking to take a similar route. "Performance still has a very strong and relevant place in marketing plans."

Airbnb makes its move
Before the pandemic, Airbnb had been a big spender on performance marketing, including affiliate marketing and paid search, helping it drive traffic. After slashing performance marketing spend during Covid, Airbnb reported its "strongest ever" fourth-quarter results, powered by increased marketing efficiency, it said On a call with analysts last month, Airbnb's CFO Dave Stephenson explained: "In 2019, before the pandemic, we shifted our marketing strategy to be more brand-driven and even less dependent on search engine marketing. We made that shift and it has proven to have been the right shift, not only in 2019 but in 2020 and 2021."

Shedding further light, Airbnb CEO Brian Chesky, said that PR is the most important communication challenge for Airbnb and that shift from performance marketing was "very important to the corporate story". He said: "PR is actually probably the most important channel to build the brand of Airbnb. That's because Airbnb has an offering that's really unique, and so people are deeply passionate about it, they tell one another and Airbnb has become a noun and a verb used all over the world."

Airbnb joins others in shifting out of performance
Airbnb is not alone in making the move out of performance marketing- P&G, Uber and eBay have made similar shifts and all have publicly said it was the right thing to do. When Head & Shoulders and Gillette owner P&G shifted $200m out of digital ad spending, it said there wasn't a negative impact on its financial performance. Similarly, when eBay turned the taps off on its paid search ad spend, it said it saw no reduction in sales; likewise, whenUber turned off $120m ad spend to boost app installations, the level of app installations did not falter.

Airbnb in a privileged position
Airbnb, P&G, eBay and Uber share the common factor that they are globally recognised brands. For example, Airbnb is not a run-of-the-mill brand but a multi-billion pound a year revenue business used by millions every day. As an indication of its global recognition, as Chesky points out, Airbnb has become both "a noun and a verb in pop culture". And unlike most brands, the vast majority of Airbnb searches occur organically. In fact, the high brand awareness of Airbnb- and these other global brands is likely- to have seen them paying for free organic traffic.

The move by Airbnb-like eBay, Uber and P&G- is not without risk, as they are exiting the ad space on Google. That said they all have the brand recognition to be able to cut performance marketing spending without much fear that it will have dire consequences for their brand, experts say. But, they say, most brands are not in such a privileged position.

Some stats
The importance of performance marketing to brands was underscored in a recent survey. According to WARC's Marketer's ToolKit 2021, a global survey of marketing professionals, the bulk ( 70 per cent) of those expecting budget cuts predicted that the cuts would be to brand advertising while performance marketing was expected to be almost the least affected areas of investment. Acclaimed marketing authors Les Binet and Peter Field believe the key to success for brands is to aim for a 60:40 split between brand building and short-term activation. Some argue that in recent times many brands have been underestimating the importance of brand building at the expense of brand marketing. They point out marketers are not able to track and measure effectively brand building, as brand trackers are simply not fit for purpose.

What the experts say
There is little double that advertisers and agencies would have taken note of Airbnb's move, given that performance has been a rapidly growing area in recent times, with brands undertaking data-targeted campaigns on the likes of Amazon and Google. Most experts agree a blend of performance and brand building is key, but finessing the mix can be tricky. Ciaran Deering, head of online, The Grove Media, the media agency, said: "For long term business growth, you need to build a brand, and this is best done in tandem with performance advertising.'' But Deering pointed out that this twin approach required a significant marketing budget. "The majority of UK advertisers spend less than £3m per year on media and simply can't afford to sustain both brand and direct response media investment.'' Brands with smaller budgets - particularly those that are heavily reliant on advertising for lead generation - have to focus on direct response advertising. "However with a sufficient response budget, it is possible to achieve a level of brand awareness amongst a smaller pool of 'in-market' consumers."

Airbnb's shift appears to have worked but not for all brands
Smith says Airbnb's approach appears to have worked for it but advises other brands to err on the side of caution. He said: "Airbnb did what it thought was best for the brand at the time - as did many other businesses during the toughest parts of the pandemic. But there always needs to be some caveats to a complete strategy shift. You've got to respond to the market and have the agility to consider mixing spend when it comes to advertising and marketing channels. It's no secret that performance isn't what it was 10 years ago, but that's because of its incredible success and more brands investing in it - the louder the space, the harder it is to be heard. ''But that doesn't mean it should be written off - the goalposts have moved, and we have to work harder to get the same or better results than previously. The same can be said of brand marketing. If certain channels or strategies didn't evolve, there would be no competition, and no fun. While Airbnb took a holiday from performance, its competitors were right there to take back any bit of market share they could. Any category can be disrupted, as Airbnb has proven. Marketing is becoming harder; that's obvious. But you need to do right by your brand and focus on what's going to deliver the results you need."

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