trivago-business-model

Trivago Business Model In A Nutshell

Trivago is a search and discovery travel platform part of Expedia Group. Trivago is widely known as a trusted hotel comparison service. Trivago doesn’t charge based on bookings but rather through a cost-per-click (CPC) model, monetized when a hotel searcher clicks one of its advertiser listings. This referral revenue comprises most of Trivago’s income. Trivago also has another minor revenue stream via subscriptions to its Business Studio, a tool that helps hoteliers track impression and click data associated with their properties.

Origin story

Trivago is a technology company founded and headquartered in Dusseldorf, Germany in 2005.

Sensing a gap in the online hotel market, university friends Stephan Stubner, Rolf Schrömgens, and Peter Vinnemeier created the first German hotel search engine. The search engine is in fact a hotel aggregator, allowing consumers to compare 2.5 million hotel listings from over 100 travel-related websites across the internet. Some of these websites include Airbnb, Agoda, and Booking.com.

Shortly after launch, Trivago began to gain momentum after partnering with several online travel agencies (OTAs). Such was the success of Trivago that seven years after its inception, Expedia acquired a majority stake for $632 million. In 2016, the company became the first German start-up to list on the NASDAQ stock exchange.

Trivago business model

While Trivago is a trusted hotel comparison service, it does not profit from enabling searchers to book a room through the company directly.

Instead, Trivago makes money in two other ways.

Let’s take a look at each.

Commissions

Through the cost-per-click (CPC) model, Trivago earns money whenever a hotel searcher clicks one of its advertiser listings. This referral revenue comprises most of Trivago’s income.

Using the CPC model, the exact amount of revenue generated is dependent on the ad budget of the advertiser, the keywords they want to be displayed for, and the bids of competing companies. Here, the advertiser in question may be an individual hotel, a hotel chain, or an online travel agency.

A Trivago algorithm ensures that relevant advertisements are matched with relevant user searches. This increases the click-through rate (CTR) of listed ads and drives more revenue as a consequence.

Subscriptions

The second albeit far less significant source of revenue for Trivago is subscription fees.

The company charges hoteliers access to a product called Business Studio. This tool helps hoteliers track impression and click data associated with their properties. It also helps them create promotional offers and better understand their target audience. Ultimately, a business that enhances its marketing and positioning experience can better consumers with targeted messages. This has significant benefits both the business itself and also for Trivago.

Trivago notes that the basic version of Business Studio is free of charge. However, access to most of the premium features is only available in the Business Studio PRO package. The company, which claims the package can deliver 21% more clicks and 45% more bookings, provides a quote on request only.

Key takeaways:

  • Trivago is an online hotel aggregate company founded in Dusseldorf, Germany. It was created by three university friends who identified that there was a gap to be filled in the online hotel search industry.
  • Trivago makes most of its money through the cost-per-click (CPC) advertising model. When a hotel listing on their site is clicked by a consumer, the hotel pays a small commission back to Trivago.
  • Trivago collects a much less significant amount of revenue from their Business Studio product, which is mostly free. However, the product does teach hotel businesses to optimize their ad placements and drive more revenue for Trivago from CPC advertising.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"