Inside Google’s feud with the battered online travel industry

Behind closed doors, Google is engaged in a bitter standoff with the online travel industry. The issue is global but German travel companies have been particularly outspoken.

Activity booking platform GetYourGuide, hotel finder Trivago, and Airbnb rival HomeToGo have been feuding with the search giant about their unpaid advertising bills since the beginning of the coronavirus pandemic.

Online travel companies were particularly exposed to the devastating economic impact of the Covid-19 outbreak as lockdowns brought worldwide mobility to a near standstill. New bookings dried up and the sites had to refund tens of millions of dollars to customers that were unable to travel.

In a joint letter, a group of German travel start-ups asked Google, which has helped the businesses thrive over the years by promoting their websites in its search results in exchange for a fee, to share the burden.

The letter didn’t work as the companies hoped it would. CNBC has been able to confirm through multiple sources and materials that Google demanded advertising bills were paid in full.

“Google refused to do anything and instead asked us to pay immediately in the midst of the pandemic,” said GetYourGuide Chief Executive Johannes Reck, who persuaded SoftBank to invest $500 million in his Berlin-based company last year.

Reck told CNBC that Google’s behavior during the coronavirus “is the match that has ignited a much greater fire.”

Google played down the allegations and said it is working with its travel partners to help protect their businesses.

“We’ve taken a number of measures including helping them surface their cancellation policies in our travel search products,” a spokesperson for the company said.

As times got tough, a group of German firms wrote a letter to Google on April 30 — two days after parent company Alphabet posted quarterly earnings with $41.1 billion in revenue — asking the search giant to postpone collecting their bills. The letter was authored by the German Start-ups Association (The Bundesverband Deutsche Startups) and signed by eight travel start-ups including GetYourGuide and Trivago.

Unlike Facebook and Microsoft‘s Bing search engine, Google has not been overly accommodating when it came to delaying or reducing unpaid bills, according to three of the companies that signed the letter.

All of the companies that signed the letter paid Google in full in June or July.

“We’re absolutely not satisfied with the support Google offered during this ongoing crisis” Patrick Andrae, HomeToGo’s co-founder and CEO, told CNBC.

Axel Hefer, chief executive at Trivago, told CNBC that Trivago has “missed a collaborative spirit from Google.”

He added: “As one of the largest players in the travel ecosystem and probably one of the very few still generating profits right now, I would have expected more solidarity.”

Facebook offered some online travel companies an immediate 60-day delay in payments and proactively provided credits to test new ad products during recovery, thereby offsetting some of the incurred losses.

Bing immediately offered payment delays of at least 90 days, with ongoing review, should the recovery not start.

GetYourGuide is one of the firms that is particularly upset with Google. Valued at over $1.5 billion, the start-up wouldn’t be the size it is today if it weren’t for the U.S. search giant. But the relationship has become increasingly frosty in recent months. 

In February and March, GetYourGuide spent over 4 million euros ($4.7 million) in advertising on Google’s platforms, acquiring customers who canceled and were refunded. After that, bookings dropped to less than 1% of 2019 levels.

Following April’s open letter, there was a media storm, and Reck said Google “shut up for a couple of weeks.”

However, on May 8, Google asked GetYourGuide for full payment on all ad bills with no credit or discounts for any canceled and refunded bookings.

On May 15, Philipp Schindler, senior vice president and chief business officer at Google, held a call with online travel companies. He promised a generous recovery package and acknowledged that travel is in dire straits. The package included payment support, credits on non-Adwords platforms and other benefits. He also said Google was struggling, too.

Nothing happened immediately afterward. But in the week of May 25, as Germany eased its lockdown measures and travel picked up slightly, Google started asking travel companies to commit to a payment plan, saying their accounts would be suspended if they didn’t comply.

When asked about a possible suspension, a Google spokesperson told CNBC: “We treat payment terms with our customers or partners as confidential and we’re not able to disclose details.” 

Conversely, the online travel firms needed to secure Google Search ads more than ever at this time. Google has a 90% market share on search engine traffic in Europe and more than 75% of travelers in Europe consult Google before they travel, Reck said. As soon as GetYourGuide started to advertise again, Google essentially said “pay now,” or commit to this payment plan, according to Reck.

The payment plan allowed GetYourGuide to delay payments by a maximum of six months but the company would have only been able to do so much advertising with Google while fulfilling the payments. “That didn’t make sense because you don’t want to constrain yourself in the rebound,” said Reck. 

Reck and Dominik Schwarz, chief inbound officer at HomeToGo, told CNBC that Google is trying to become a more dominant player in travel.

Arguably, it all started in 2010, when Google bought ITA, the leading platform for flight data.

“Google has better travel data than any other company on the planet,” said Reck. “We see Google aggressively moving forward trying to get content from other companies in the travel space in order to build their own products.”

HomeToGo filed a complaint to the European Commission last year.

“While all companies in the industry compete over delivering the best experience and the best product for travelers, Google decided to take a big share of the whole market for free,” said Andrae. “Google achieves this by implementing a huge and eye-catching advertising space on the general search after the paid results, rerouting traffic at no costs and that otherwise would go to competitors right into their own product, cutting off other providers from being seen at all.”

The European Commission, the EU’s executive arm, has yet to decide whether to investigate the case and it has not offered further comment.