Management at Expedia disclosed on Wednesdays earnings call that the company dealt with incremental weakness in SEO volumes and a related shift to high-cost marketing channels.
Piper Jaffrays Michael Olson said that the issues highlighted in Wednesdays report seem likely to stick around for a while, presenting a medium- to long-term challenge for the company.
In our view, the most concerning trend is the reduced efficiency of SEO marketing as Google pushes free links further down the page, he wrote.
Davidson analyst Tom White lowered his rating to neutral as well, writing that he doesnt see any demand source alternatives that are likely to move the needle anytime soon. White worries that Expedias offerings, loyalty efforts, and value proposition dont come off as sufficiently unique, which could make it hard for Expedia to drive enough direct traffic to offset its search-engine challenges.
Wells Fargos Brian Fitzgerald also jumped to the sidelines, arguing that the more structural changes are compounded with brand-specific issues.
Cowen & Co.s Kevin Kopelman commented that the three online-travel companies have provided very poor disclosures on the size of their SEO exposures, but his analysis found that TripAdvisor seems most exposed to search-engine business.
Kopelman also calculates that the effective exposure from SEO on earnings before interest, taxes, depreciation, and amortization is 95% for TripAdvisor, 50% for Expedia, and 15% for Booking, with those figures representing the amount of Ebitda that each company would lose if SEO revenue turned to zero.
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