Priceline (PCLN) CEO Darren Huston told Bloomberg that Facebook (FB) and Twitter (TWTR) are useless to his company as ad platforms. He spends $1.8 billion on online ads every year, and about 90 percent of that goes to Google (GOOG) ads, Bloomberg reported.
These kinds of statements — when advertisers with big money say publicly they don’t get results — are embarrassing to Facebook and Twitter. Although both companies have huge and well-established ad businesses, their salesforces still struggle against this vestigial doubt that those tiny little ads on their platforms actually work.
For insiders, it’s nonsense. Almost all advertising running on both Facebook and Twitter is, in one way or another, tied directly to its return on investment (ROI), often in the form of “direct-response” (DR). In DR campaigns, the campaign continues to run as long as it generates sales. As long as the sales continue to come in, the ad spigot stays on.
So why can’t Priceline make this work? What Bloomberg doesn’t say is that it’s likely that few customers consult Facebook or Twitter for travel advice before making their plans. Travel is a search-heavy activity, and when it comes to search Google is the king. So it’s kinda obvious that spending travel ad dollars on Facebook or Twitter won’t get you very far. Here’s Huston’s full quote:
“For Facebook and Twitter, we have endless amounts of money,” Huston said yesterday in an interview at Bloomberg’s New York headquarters. “But we haven’t found anything there.”
… “Google of course respects us as an advertiser,” said Huston, whose company accounts for about 3 percent of Google’s ad revenue. “They’d like to get more of my money.”
The interview actually tells us more about Google’s business. Google isn’t very transparent when it comes to breaking out its revenue streams. So the really curious nugget is that Priceline’s online ad budget is a staggering $1.8 billion a year, which is the equivalent of 3 percent of Google’s entire ad business, according to Bloomberg.
It makes you wonder how many other companies have such huge online budgets that they form a meaningful percentage of Google’e entire business.
In Q4, Google booked $16.9 billion in revenue, almost all of it from ads.