Earnings Call: Q2 2018

Jul 25, 2018

Good day, and welcome to the Trivalgo Second Quarter Earnings 2018 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Matthijs Tillman, Head of Investor Relations. Please go ahead. Thank you, Lisa. Good morning, everybody. Welcome to trivago NV's financial results conference call for the Q2 ended June 30, 2018. I'm pleased to be joined on the call today by Rolf Fremgens, Trivago's CEO and Managing Director and Axel Hefe, our CFO and Managing Director. The following discussion, including responses to your questions, reflects management's views as of today, July 25, 2018 only. We do not undertake any obligation to update or revise this information. As always, some of the statements made on today's call are forward looking, typically preceded by words such as we expect, we believe, we anticipate or similar statements. Please refer to today's press release and the company's filings with the SEC for information about factors which could cause our actual results to differ materially from these forward looking statements. You will find reconciliations of non GAAP measures to the most comparable GAAP measures discussed today in our earnings release, which is posted on the company's IR website at ir. Trivago.com. I encourage you to periodically visit our Investor Relations site for important content, including today's earnings release. Finally, unless otherwise stated, all comparisons on this call will be against our results for the comparable period of 2017. With that, let me turn the call over to Rolf. Yes. Welcome, everybody. Many thanks for joining our Q2 earnings call 2018. Last year has been very challenging for us. We grew at a very solid 6% to 7% in the first half of twenty seventeen before we had to adapt to this new environment, which has been quite a test for the company. We are very happy with how our people dealt and continue to deal with it. We were truly but we also truly believe that we will come out stronger than before. About a year ago, we experienced a significant drop in our commercialization as our core advertisers adapted their performance targets. This means that we received significantly less for every euro booking volume that we generated for our advertisers. As a consequence, year over year comparison have been unfavorable for the past 4 quarters, including the current one. This effect will start to ease over the coming quarter as we look the effect that I mentioned before. But let's go first and look at the financial performance of the current quarter. Again, we compared against a very strong quarter, second quarter in 2017. Additionally, lower commercialization and foreign exchange rate headwinds negatively affected our performance in this period. As a consequence, total revenue declined from $298,300,000 in Q2 2017 to $235,000,000 in the Q2 of 2018. For the first half of twenty eighteen, this means a decline from $565,900,000 to 400 and $94,400,000 The decline in revenue reflects a drop in QRs, qualified referrals, from $196,400,000 to $177,100,000 in Q2, which leads to a stable QR development in the first half 2018 compared to the same period in 2017. Revenue per qualified referral decreased from €1,500,000,000 to €1,300,000,000 in the 2nd quarter and from €1,500,000,000 to €1,330,000,000 in the first half of twenty eighteen compared to the same period in 2017, respectively. The geographical mix of revenue shifted again towards the rest of the world markets, which last quarter made about 24% of our overall revenues now. So these numbers are both a signal for us to adapt our strategy. And at the same time, they're also a reflection already of what we have done in the last month. Looking at the high growth rates up until Q3 2017, one thing is often forgotten. Before the IPO, Trivago went only through very small financing rounds, accumulating actually in total not more than $1,400,000 in venture capital. Yes, we were always trying to maximize our growth potential, but at the same time, we also aim to do this without being dependent on external funding. This is a vital part of our culture. Being focused and being resourceful, always only spending what we earn. It was a basis for our core strength, optimizing our product and our marketing channels, becoming a little bit better every single day. That's how we remained a positive or close to positive EBITDA through all these years. In the last four quarters, though, we widened our losses. After the margin drop end of Q2, we tried to partly compensate for the losses in commercialization. We accepted them temporarily to keep our growth traction. In Q1 and the beginning of Q2, this reached a magnitude that we do not see in line with our culture that I described above anymore. As we cannot control the level of commercial evasion, we have to assume that the current levels are not temporary, but reflect the current state of the marketplace. That was a call for us to act and to go back to a philosophy that made us successful. Let me just summarize for you the different effects that you can see in our Q2 numbers. During the last year, we had to cope with the decline in commercialization. This led to lower revenue per qualified referral and a decrease in return on advertising spend. That's the first line that you can see on the slide. At the same time, we adapted our marketing attribution to focus on high quality traffic, the second line that you see. This partly compensated the effect on revenue per qualified referral, but at the same time, led to a negative effect on qualified referral growth. Now over the course of the second quarter, we have raised our profitability targets through all our marketing channels with the aim to go back to profitability on a company level. As a result, we see further impact on qualified referrals, but we also see positive effect on return on advertising spend. In the current quarter over quarter growth rate, you can already see the effects of this change. Revenue per qualified referral growth rate went down in line with what we have seen in previous years. We were able to largely compensate for the commercialization effects through improved traffic quality. Return on advertising spend has improved the development compared to 2017, which is a direct result of our new raised marketing targets. As a consequence of both, qualified referral growth came down. Going deeper into the current quarter, you might be able to see the effects more clearly. You can see that we cut our marketing spend progressively throughout the months of the quarter. The decline in qualified referrals is, of course, also a reflection of the strong comps we had compared to the same months 1 year ago. Additionally, they are a consequence of our increased traffic quality with higher booking conversion, but still you also see a reaction to our new focus on profitability. The return on advertising spend improved significantly during the course of the quarter, and we are now seeing positive effects in the year on year comparison. We will continue on this path as we are very happy with the first device that we are seeing also in the current performance. Clearly, we aim to rebalance the business on a higher profitability level and start growing again after that. Looking at our current asset highlights, their mix and their mix in our marketplace, we also see positive developments. Compared to 2017, we remained a more balanced distribution that is now very stable for the last two quarters. We have currently very good discussions with our advertisers on how to develop the services for them and maximize the efficiency of the marketplace for everybody involved. Let me now hand over, and we are open for your questions. Sorry. Okay. Thanks, Ross. So let's look a bit deeper into the financial performance of the Q2. So in the Q2, revenues came down by 21%, reaching €235,000,000 while for the first half of the year, revenue came down 13%, reaching €494,400,000 The adjusted EBITDA was at 17.7 negative in the Q2 2018 compared to $3,200,000 positive last year. And that as a percentage of total revenue represented a minus 7 0.5% adjusted EBITDA margin versus a positive 1.1% last year. If you look at the return on advertisement spend, we had 113% last year in Q2, came down to 113 110 percent, so a drop of 3 percentage points, while for the first half of the year, we reached 109% compared to 117% last year. Looking at the KPIs globally, there are a couple of effects that are across the regions, and I would like to start with them first. The QRs were negatively affected by our continued focus on traffic quality at the sacrifice of quantity and our focus on profitability and more effective spending leading to a reduction in QRs. Our RPQR were negatively impacted by year on year double digit drop in commercialization and exchange rates also had a negative translation effect on this metric. Both effects were partially mitigated by the improved traffic quality that Rolf mentioned earlier. The ROADs suffered from the drop in commercialization, which has been mitigated by our focus on profitability as of the second half of this quarter. Looking now at Developed Europe. Our qualified referrals came down from $82,100,000 to 63 point $5,000,000 in the 2nd quarter. The first half, the drop was $155,700,000 to 133,500,000 In the RPQRs, we managed to keep them basically flat from €1.47 to 1 €46,000 through a strong improvement in traffic quality, in particular in this region. For the first half, there is a slight decline from €1.50 to 1 €0.48 $4.8 Looking at the ROAS, we improved the profitability in Developed Europe for the total quarter, Q2 from 124 to 127, which is an increase of 3 percentage points. For the first half, we still saw a drop from 131 to 128, so a 3% drop. Looking at Americas, there was a 10% drop in qualified referrals, down to 46,900,000. Dollars In terms of RPQR, looking at RPQR in U. S. Dollars, the drop in commercialization could not be compensated by the improved traffic quality as we've seen it in Europe. So as a consequence, the RPQR in U. S. Dollars dropped from $2.46 to $2.13 or by 13%. The ROAS in Americas dropped by 5 percentage points, reaching 112% in the 2nd quarter and by 9 percentage points, reaching 108% in the first half of the year. Coming to the Rest of the World. We grew from 62 point 4,000,000 qualified referrals in the Q2 of 2017 to 66,700,000 dollars in the Q2 2018, which represents a 7% growth rate. On RPQRs in U. S. Dollars, the improved traffic quality could not fully compensate the drop in commercialization. And as a consequence, the RPQR in U. S. Dollars dropped from $1.04 to $0.97 or 7% in the 2nd quarter. The ROAS came down from 92% in Q2 2017 to 87% in the Q2 of this year or by 5 percentage points. Looking at our overhead costs. Our cost of revenue in the Q2 of 2017 were $1,400,000 which came down to $1,300,000 in the same period of this year. The other selling and marketing expenses went up from $14,300,000 to $16,700,000 or 16.8%. The technology and content investment came up from $12,000,000 to 15,700,000 dollars or 30.8 percent and the G and A investments came up from €9,200,000 to €12,200,000 or 30 4.1%. Overall, our costs and expenses increased from €36,800,000 to $45,900,000 or 24.7 percent. If you look at our headcount development, the increase that we've seen in 2017 and also in the Q1 2018 has reverted. So we saw a drop from 16 20 employees to 1566 employees. And we expect a stable to a slightly down headcount number in the second half of twenty eighteen. Coming to the guidance for 2018, it is important to reiterate where we currently stand. After years of rapid growth, we have faced some challenges regarding the commercialization of our marketplace. Mid of last year, that still persists. Focusing on revenue growth historically and in the past few quarters at the expense of our profitability, we reached a level in Q1 2018 that we did not think was sustainable. As a consequence, we have decided to shift our focus towards profitability for the time being, which we started to implement around mid quarter. We are so far happy with the results that our change in focus has resulted in and believe that we are on a good trajectory. We will only guide on adjusted EBITDA going forward, reflecting our change in focus. Overall, our recent performance makes us more confident for 2018 than we were before, and therefore, we raised our adjusted EBITDA guidance. We now expect an adjusted EBITDA from minus €15,000,000 to minus €30,000,000 On our other KPIs and P and L line items, we expect following development year over year for the second half of twenty eighteen. Revenue is expected to be down in both quarters. Return on advertisement spend is expected to be up with stronger profitability in the 4th quarter. Operational expenditure is expected to be flat in the second half of twenty eighteen compared to 'seventeen, while we expect our headcount to be flat to slightly down going forward. Our RPQR is expected to decline slightly on a group level for both quarters going forward. To summarize, we are confident that we have taken the right actions to consolidate the business and adjust to the changed market environment. Now I hand over to Rolf for the closing remarks. Actually, we are now going for the questions, I think. Okay. We're now open for questions. I'm sorry. Thank Now we will take our first question from Douglas Oddmuth from JPMorgan. Please go ahead. Your line is open. Great. Thanks for taking the questions. 2, if I could. First, last quarter, you talked about a leg down in profitability targets from the large OTAs in late 1Q. So I was just curious if you could give us an update there through the course of the quarter and if you're seeing anything different into the back half? And then second, can you talk about any other ways that you're looking to drive traffic, anything that might be different perhaps from your paid channels, if there's something you can do more organically or on a non paid front? Thank you. Okay. Let me start with your first question. There we've seen since our last earnings call stable dynamics in the marketplace. So there is no update. I think regarding the second question, new marketing channels. So I think we made a lot of improvement in all the performance marketing channels during the last year, focusing more on booking volume. And that and we see the results coming in now. But regarding new traffic channels, we got more engaged into Google Hotel Ads. And this is we ramped this up during the Q2, and we're seeing very nice positive results already. Okay. Thank you, guys. Now we will take our next question from Naved Khan from SunTrust. Please go ahead. Your line is open. Hi, thanks. Thanks a lot. It's Naved Khan of SunTrust. Just a quick clarification on your pullback in advertising. I guess you're pulling back on both brand as well as performance channels. In terms of just us trying to think about which one maybe you might be pulling back more on, How should we be thinking about it? Is it that you're pulling back more on performance or is it equal? No. I mean, we're looking at all the channels at the same time. So we have been becoming way more profitable now in the performance channels over the last months. And the same is true for our brand marketing. So it's basically on the same level because I mean, there were specific levels of efficiency before that we thought makes sense. And I mean, basically, you try to optimize on all channels at the same time. You get basically to the same kind of percentual cuts more or less. Okay. And then just on the outlook. So revenue under the new outlook is going to be down year on year. Can you give us a sense of the magnitude? How should we be thinking about that? Should it be low single digits, mid to high? Can you just give us more color there? Yes. So we don't give any guidance for other metrics other than adjusted EBITDA. But it will be down and I guess you have some data points in the 1st and second quarter and the color that we gave for the monthly trajectory in the Q2 to get a sense what to expect. Okay. And then one last question, if I may. So other players in the online travel ecosystem have also been spending aggressively on TV. Do you see any impact on your own ROIs in that channel or not really? How should we kind of think about it ourselves? I mean, the TV market is obviously a very, very large market. And the impact of other travel players coming in and out doesn't have an impact on the pricing of the advertisement. And also doesn't have an impact, we don't see an impact on our returns. So I think it's still a super large market and the effects on like one of the players growing on a small percentage share of the overall market it's not really impacting us a lot. So we don't at least we cannot measure it. We cannot measure the effects on us. Okay, great. Thanks a lot. And our next question comes from James Lee from Mizuho Securities. Please go ahead. Your line is open. Yes. Thanks for taking my questions. A couple of questions here. Any reason you got involved in Google Hotel Ads a little bit deeper this quarter? Are there any specific advantage for you for using this product? Maybe, for example, you can bid by property, maybe one advantage there? And also, can you help us understand, see what kind of trends are you seeing in July specifically? Supposedly Expedia will likely step up the spending in the back half as they spend a lot of inventory here in Europe. And are you seeing any activities there? Thanks. Okay. So on Google Hotel Ads, I mean, it's basically we have started to test in the channel some time ago. And the further we test, obviously, the further we scale the channel. And in the Q2, we were just at a point in our testing where we could significantly scale it up, in particular in the U. S, which is a very large market. And that's why it is the Q1 where it has a noticeable impact. But it is more driven by our pace of testing and scaling up rather than the market environment. Regarding the trends in July, I think Axel said that before. So we see a quite stable marketplace environment. So there's no general update. We see that all our advertisers are very engaged. They want to work with us. We don't see yet any advertiser like stepping up, spending more, being more aggressive. So that's at least something that we can right now not see. Okay. If I can ask a follow-up question here. Looks like roll ads in Europe has improved a little bit and in Americas and rest of the world is declining. Can you help us understand what you're doing right in Europe specifically and what you need to do specifically in Americas and also in rest of the world for that role as to move in the right direction? Yes. It's more I think it's more timing of our measures that you can see there. So the drop in QRs was a bit stronger in developed Europe as well. So we are just improving our targets quicker and we're able to implement that more quickly than in the other regions relatively speaking to last year. So there's no fundamental difference. It's just a timing and in the year over year comparison. Okay, thanks. And our next question is from Mark May from Citi. Please go ahead sir. Your line is open. Thank you. I had a couple of questions related to RPQR. It's been down only kind of low single digits in developed Europe the last few quarters. It's actually been trending up in Americas for the last couple of quarters. In your prepared remarks, however, you mentioned that, we continue to experience lower levels of commercialization. Was that comment in the prepared remarks just related to year on year? Or are you seeing it on a go forward basis because you don't necessarily see it in the numbers themselves the last couple of quarters, it's been relatively stable in your major markets? Yes. So the RPQR really has I mean, in euro terms has really these three effects that come out in the different regions slightly differently. So there is a double digit year over year drop in commercialization. So that's we made the last comment the same comment in Q1 2018. So that's definitely a drag for all the regions. And then we've got we have counter effect that is the improved focus on traffic quality, which on the year over year has different effect in the different regions. I guess you compare it to different periods with different quality starting points and improvements there. Then obviously, you have for the U. S. And for rest of the world, you've got the currency effect in the Q2, which is slightly different to the Q1. And that's why you come out basically flat in Europe and slightly negative in Americas and in Rest of the World. And if you look at it overall, including the mix effect of the different regions, we think that for the whole company, the RPQR will be slightly down, adding up all these effects in the year over year comp and the mix effect between the two regions. But forgetting the year on year, just from a sequential perspective, RPQR seems to be relatively stable. Is that kind of your expectation? So what happens is the RPQR is very dependent on traffic quality. So basically, of course, like you have like a if you have a higher traffic quality coming in, you would expect the RPQR to go up. So and so it's very highly dependent on traffic quality. What we did during the last year in parallel was we shifted our marketing before we had our marketing focusing on the revenue that we generated. Now our complete our marketing is completely focused on the booking value that we generate. So we that's why we today buy way more qualitative traffic than we bought 1 year ago. And that leads to the effect that we have now less traffic, but with a higher quality And that drives RPQR up. And so and that compensates for the effect of on the other side that we have a dip in commercialization. So these effects balance out. We know it's super hard to see in the numbers, but these two effects always balance out. Got it. And final related question. In the second half, starting now, you're going to be even more focused on efficient marketing spend and traffic quality. So should we expect to see an even more meaningful improvement in RPQR? On I mean, the focus on profitability, I think, mainly has an impact on the return on advertisement spend and then obviously on the QRs because we are more targeted on the profitable spend. On the RPQR, if you look at the year over year comps, we implemented the attribution model in the end of July last year. So and then gradually over the 3 quarters Q3, Q4, Q1 then in SEM. So there isn't the comp effect, there is definitely still a positive effect coming from the increased focus on quality, but it is coming down over time. Yes, so I think that's worth to keep in mind when modeling the next couple of quarters. I think the difference of these two effects is so let me say the difference of these two effects is that until today, basically, we shifted basically to higher traffic quality. What you see right now is that we raised now on the few standards, we raised our overall targets. So that's just a different effect. That doesn't ultimately mean that just due to that, that the RPQR would go up. It's different than that is the last four quarters. And our next question is from Brian Niwach from Morgan Stanley. Please go ahead. Your line is open. Thanks so much. Thanks for taking my questions. I have 2, just a couple of big picture questions. The first one on the long term top line growth. Will, can you just talk to sort of 1 or 2 strategies or areas where you see potential improvement to drive faster referral growth? And then secondly, on the top line, how should we think about how long it could take the attribution model to really drive a material impact on revenue per qualified referral? And then I know you're making a lot of great changes to the business model and sort of rethinking about growth. In the past, you've talked about long term profitability and targets. How do you think now about sort of the long term profitability or margin profile of the business and the new regime? Let me answer on the strategies to drive growth. So I think if you're looking back at trivago, like how we manage the business, there is not this silver bullet where we say, okay, we go this direction and then there will be more growth. So what we constantly do is improving our product, we're improving our marketing channels, we constantly gain more efficiency in the product, in the marketing channel. And that's the way how we grown the business to the point where it is today. So there was often the past, there was no silver bullet. There was like really like very analytical like understanding of the marketing channels going deep into the numbers, understanding it, improving. And that is actually ongoing. So I know that it's always hard to see in the numbers. But if you compare it and compare the level where we are today, having in mind the challenges that we had to face last year, this improvement is still underneath going and happening. And we think that now on a new profitability level, this will also drive the growth in the future, and we're seeing it also right now also if you're not seeing it in the numbers. So and we think right now, we had a year where we had to cope with the situation. I think the next upcoming quarters will be also us rebalancing the business, becoming more profitable. And then from a profitable base, start growing again. But right now, we took the decision to say, okay, we want to step in and we want to become more profitable first. Coming to your second question, the impact of of the attribution rollout, I mean, we see that in the RPQR already. I mean, so the reason why we are basically flat in the RPQR despite a double digit drop in commercialization is both the product focus on more booking conversion and it's also the focus in marketing through the attribution model. So I think the positive effect we're seeing there already. And as I said before, I mean, on the DEA channel, the year over year, it's basically fully in. It has been a year since we really launched it there for SEM. We really rolled it out more gradually over 3 quarters. So there is still some effect in the year over year that will come out of it. But it has been quite some time since we rolled it out. So the positive effects are there and we can see them and they support already the RPQR. On your third question, the long term profitability target is, from our perspective, not changed. So we still think that 25% adjusted EBITDA margin is a margin that we can achieve in the long term. So there's not really an update on that number from our perspective. Okay, thanks. And our next question is from Peter Stadler from Welles Fargo Securities. Please go ahead. Your line is open. Good morning. A couple for me, if I may. In the past, when you've talked about that Hotel Direct opportunity, you typically refer to it as a long term project. Wondering if you could revisit what the primary obstacles are for you in building that channel. Trivago has got pretty tremendous exposure. I mean, your advertising spend is down, but I think most of us would agree it's still a high visibility brand. So not sure it would be awareness, but would love to hear some additional input on that. What are the primary obstacles? And then a follow on to that would be, does the launch of Google Hotel Ads and the improvement in that product, does that represent an incremental and significant competitive threat to you guys long term in terms of building the Hotel Direct revenue channel? Thank you very much. Okay. So on the Hotel Direct. Direct. Okay. So on your first question on Starting with your first question on hotel direct. The way we are approaching it is that we've got this 3 step conversion funnel. So we've got the free to use product, which is our hotel manager, which more than 400,000 hotels are using. And we've got a paid product that is used by more than 40,000 hotels, which is giving them a lot more access to data. And then the ultimate step is to get them directly on our platform. So when you look at that funnel, I mean the biggest obstacle actually between step 23 is not so much having the access to the customer or to the hotel, which we have already, but it's also the technical connection that the hotel has. So there the hotels need to have certain technical infrastructure in place to directly connect to us and that takes some time and also some effort from the hotel. And it's similar to for a lot of these hotels, I mean they've got no online presence or they just have one online presence through one OTA to go from one OTA to own website to multiple OTAs requires some investment. And that is really what makes it more a long term opportunity. So it's not only under our control, how well we actually for more for more and more hotels investing into their technology and their connectivity. So that's really, really, I guess, what makes it more our mid- to long term project. On the hotels that we have access to already that are connected, it is something that is more under our control and that has more short term, midterm impact. On Google Hotel Ads, the way I guess what you need to keep in mind is Google Hotel Ads is used by a user as a choice of Google. So Google decides how much visibility the product is getting, which is very different to our usage because our usage, a user needs to decide to come to our site. So one is a conscious decision and the other one is partially influenced by a tool that you use anyhow. So just the sheer size of the channel from our perspective is not a good proxy of the competitiveness from a user perspective. And the channel has been growing in the past, but us now having access to that channel, we think is an opportunity for us because they are a significant pool of traffic that we in the past didn't have access to, which was a disadvantage. So up to the point where we are represented equally in that channel, in all our large markets, we see it as an opportunity. But overall, it's clear that Google and Google Hotel Ads is from a user perspective, one of our direct competitors. Thank you. And our next question is from Tom White. Please go ahead sir. Your line is open. Great. Thanks for taking my questions. Just one more on RPQR. In Europe, it was basically flat. You guys talked about the improvement in traffic quality. I guess on the traffic quality improvements, is that something that we can expect to have a more pronounced impact on RPQR in the other regions? Is it just a question of sort of timing when you kind of rolled out those initiatives? Or is there something structural that maybe means that Europe kind of sees the bulk of the benefits from traffic quality? And then just another sort of follow-up on kind of hotel direct. I guess, I'm just kind of curious to hear your views on revenue diversification in general. Is that a big focus area for you? Wondering kind of other products maybe that you guys might be thinking about or either new ad formats just to kind of expand your base of advertisers a bit? Curious to hear your thoughts there. Thanks. Yes. So on your first question on the stable RPQRs in developed Europe versus the drop in the other regions. I mean the way to think about it is that just the measures that we implemented to improve traffic quality had in the year over year a stronger impact on Europe. And as a consequence, the QRs dropped stronger and the traffic quality went up more. So but that doesn't mean that Developed Europe is basically a front runner in a trend for the other regions. I think it is more specific to the region and the traffic mix that we had there last year versus what then resulted in a different impact of the initiatives that we launched. So I guess it's better to look at it region by region rather than from interfering from the development in one region to something that will happen in the other regions. Yes. Thanks for the question regarding revenue diversification. No, we're not planning to go in other services. We're not planning to go into other verticals. So we really want to build the best hotel search that is out there. And we don't think that we have done that so far, so we can do way better than we do right now. So there's a huge potential for the company to do this better and to create like great value in the market. And that's what we want to go for. And we do whatever is necessary to do so. And Hotel Direct is one of the opportunities we have there to create a better hotel search because we want that the consumer has a choice to go to any OTA, but also at the same time go to a hotel direct and have the chance to book directly with the hotel. And on the other side, we also want to offer individual hotels a chance to compete on their property with the global OTAs. And that is to create a better hotel search. And that's why we're going into that direction, but we are not planning to go into other directions. Okay. Just one follow-up on that. So no new products or new verticals, but what about kind of new ad formats for kind of the core hotel vertical? 1 of your competitors is obviously experimenting with kind of more kind of sponsored media type ad units to try and kind of diversify their advertiser base a bit. Is that In the I don't think that it will go in the direction that you were thinking about. So I think we have tested around different display opportunities for hotels in the past, and we will also do so in the future. But there will be no kind of like sponsor placements or something like that, for example. And our next question comes from Lloyd Van Vliet from Deutsche Bank. Please go ahead. Your line is open. Hey, guys. This is Chris on for Lloyd. So it sounds like you guys aren't going to be moving into any new verticals within the space, even though you have a lot of some of the other online travel platforms moving into areas like attractions. So just really as it relates to the brand or to your direct traffic, how do you increase your mix of direct traffic going forward if you're not going to be moving into any of these new verticals? We improved it in the same way that we improved it in the past. So you could have asked this question 5 years ago, and you would have gotten the same answer, and we were like a fraction of the size that we are today. So we think this is a super huge market. We're having only we're having a small change of it. The market is still going more and more from offline to online. So we currently don't see that there is like a limitation in the market size and that we have a limitation to grow in this market. And if you then if you get to a limitation, then we can think about going into other verticals. But right now, it's rather about how can we improve our product. And I think companies like Booking.com have shown that over the last year, like how large the market is and with being just in one vertical. And of course, now they're thinking about like diversifying, but we are not yet the size of booking.com. If we are the size, then we can, of course, think about it. And our next question is from Kevin Kopelman from Cowen and Company. Please go ahead. Your line is open. Hi. Thank you very much. So when you look at the actions that you took to increase your profit focus, do you consider those fully implemented as of June or did you make additional cuts to your ad spend in July? So do we consider it to be fully implemented? I guess the strategy is implemented. And I guess what the strategy means is that we are challenging every dollar we spend and sets at high profitability targets. So that will not stop in July, but it's obviously dynamic, yes. So So I think we will see further improvements coming out of it. But we might adjust or will adjust the targets continuously to what we see in the market. Yes. I think the question is, do you ask if it was implemented for the full June? Definitely not, yes, because it happened also during June. Was it implemented beginning of July? I also don't think that all the we were everywhere across the board there where we wanted to be. So I think there's still an effect also in July. Because of course, like when you're looking at performance marketing channels, you have you cannot just jump from in profitability, you have to adapt the profitability targets step by step. And perhaps just to add to that on the TV side, you have you also have commitments. So that obviously where you have less flexibility and that's why I said, we will basically challenge every spend that is coming up new. So it will be a continuing process. Yes. And then another timing question, which is how do you think about the comps for Q3 and Q4? Do you see them as easing? And do we have to wait until October until you see that somewhat easing in year to year results? Or does it happen sooner than that? Of course, it's only a partial comp, but thanks. So the comps in the second half of the year are significantly easier than the first half of the year. And so that's definitely the case. Whether they are easing from the 3rd to the 4th quarter, I mean, we remember last year in October, we gave some color on the marketplace dynamics at that point in time. But that's a bit intra year over year comps. But yes, I mean, it's not to the same amount or degree that we saw in the first half twenty seventeen versus first half twenty eighteen. Yes. Thank you. And then, so on the add the changes to your sort of ROAS or strategies on our spend, do you see it as you had sort of this change in the environment and you were temporarily sustaining losses and then you kind of adjusted your ROA targets for that or are you looking at bigger changes that are that actually puts you in a place that is different than when we go back like a year or more? Yes. So I think there are basically, I mean, 2 effects that have an impact on your question. One is the market environment. If your commercialization drops double digit, obviously, that is structurally taking out in the comparison profitability out of you. And so you need to compensate for that. But overall, when we say for the time being, we focus on profitability, that is a different focus than last year and the year before, where our clear focus was revenue development. So I think those are the 2 components to consider where we are heading. Yes. And then one last question, if I can. So in the past, you targeted about a fifty-fifty mix between TV ads and performance spend. And as of your most recent changes, where do you see that mix? Yes. So as Rolf said earlier, so the optimization is across all the channels. So we still think that the basic mix of roughly fifty-fifty is the right mix. But it's important to say we don't manage for the mix. So I mean this is rather an outcome than it's a variable that we want to achieve. So we go for profitability goals and everything else is an outcome. So it's not something that we We didn't disclose that. We didn't disclose that. Okay. We think that's probably the right mix. Thank you. And our next question is from Shyam Patel from Susquehanna. Please go ahead. Your line is open. Hi, this is Brendan on for Shyam. Just two quick ones. Just first on alternative accommodations, can you guys update us on sort of your progress there and when you expect it to potentially have a noticeable impact on the business? And then what are like the some of the hurdles or things you need to sort out for it to do so? And then just on competition, you guys have kind of addressed this already in different pieces, different questions. But can you share any thoughts on bookings recent ramp up in meta acquisitions and sort of Google's more targeted efforts in the metasearch space, kind of what impact you've seen or expect to see from those 2? Sure. So let me start with your first question on our increased visibility of alternative accommodation. I mean, since we launched the HomeAway integration in November and we are very clear that we are gradually increasing the visibility and at the same time testing through the various parts of the business to make sure that the change in inventory mix doesn't have negative impact on our existing core business. And we are on track with increasing that visibility. So we are now at 800,000 plus items or accommodations that we consider alternative accommodation, and there are already destinations where it is very significant. But we continue to believe that it is very important to stay disciplined and not rush it and gradually increase visibility to make sure that all the different components of the business ecosystem are digesting the change in inventory mix. Yes. I think in just to the second question regarding competition, BCom acquiring Hooters combined. So I think, first of all, it's a sign that Become believes in Meta. So I think they have the best visibility in the market, and they have the best visibility on the business model. So they seem to believe into the business model. And I think that is also like a good sign for us. And in total, I think also looking at what Google is doing. So I think in general seeing that competitors like Booking, like Google, also move into our direction. It's just like also confirming us that we are moving in the right direction. And still, we have to compete and be better. And I think at the end, it's all about the product. Are you able to improve your product faster than your competition? And clearly, we have Google as a competitor, but we have Google as a competitor also, I think, already for the last, let me, the last 8 years, 9 years or so. So and I think we have done pretty well. And we are we keep on improving the product, and we want to build the best better search or the best total search. Great. Thank you. It appears that there's no further questions at this time. I would like to turn the conference back to you, Ralf, for any closing or additional remarks. Yes. Thanks a lot. So many thanks for joining the call. The last four quarters were challenging for us. We had to adapt to the new environment. And let me really say, I'm super thankful of how our people in Trivago reacted to it. They have seen the necessity to act and to adapt, but they also stay true to our culture and true to our belief, which is equally important. In total, I see this last year as a development that brought us, I think, again, closer to our core, to our core beliefs and also closer to what we want to be in the future. I think now we really have to take these learnings that we made in the last year and build upon the first positive signs that we now see. Our clear goal is to rebalance the business on a higher profitability level and start growing after that. Thanks a lot for joining the call, and goodbye.