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SEC Filings

20-F
TRIVAGO N.V. filed this Form 20-F on 03/06/2018
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Recent trends in our business
The following trends have contributed to the results of our consolidated operations, and we anticipate that they will continue to impact our future results:
Marketplace dynamics and increased volatility
Changes in marketplace dynamics, particularly as a result of changing bidding strategies and testing by our advertisers, have contributed to the increased volatility of our financial results and to the substantial slowdown in revenue growth that we experienced in the second half of 2017. In the first half of 2017, we benefited from the introduction of our relevance assessment, which is an adjustment to advertisers’ CPC bids based on our assessment of the quality of users’ experience after leaving our website. In the first half of 2017, some advertisers compensated for their lower relevance assessment by submitting higher CPC bids. This development positively impacted Referral Revenue and increased levels of commercialization of our platform. Starting in the final weeks of June 2017, some of our significant advertisers optimized their websites and bidding strategies in response to the introduction of the relevance assessment. As a result, advertisers were able to lower their CPC bids starting in the third quarter of 2017, which resulted in an algorithm-driven pull back in our performance marketing advertising spend in the third quarter of 2017 and was accompanied by a deceleration of our brand marketing expenditure growth. The second half of 2017 was also negatively impacted by lower levels of commercialization and increased volatility on our marketplace due to significant testing activities by our largest advertisers. Some of our largest advertisers also conducted significant testing activities on our marketplace at elevated levels as they looked to optimize their own advertising spend on our platform and those of our competitors. Some advertisers have withdrawn from our marketplace for periods of time in certain geographic markets, including in some of our key markets, and have also deactivated some of their inventory, most frequently inventory that they alone advertised or was inactive. During the fourth quarter of 2017, we also upgraded our relevance assessment, by introducing an automated calculation, new factors to approximate the user experience and general optimizations of the algorithm. Some of the testing referred to above included advertisers’ testing of their landing pages in response to the relevance assessment, which, together with changing advertiser bidding strategies, significantly impacted CPC bids and levels of commercialization on our marketplace. As volatility increased on our marketplace, advertisers had less certainty about marketplace dynamics and less clarity surrounding CPC bids to make informed decisions about their bidding and strategy, which also impacted marketplace dynamics during affected periods.
Changes in our levels of commercialization
Changes in commercialization are reflected in our Referral Revenue and RPQR levels as our advertisers adjust the CPC bids they submit on our marketplace. Although we believe we will ultimately receive a portion of the additional booking value we generate for our advertisers, the fact that a significant portion of our Referral Revenue is generated from brands affiliated with Booking Holdings and Expedia can permit them to obtain the same or increased levels of referrals, customers, bookings or revenue and profit at lower cost. During 2017, we observed a number of trends that impacted levels of revenue share and commercialization of our marketplace:
Our advertisers' testing of their bidding strategies and the extent to which they make their inventories available on our marketplace;
Responses of advertisers to elevated levels of volatility on our marketplace;
Advertiser competition for the placement of their offers;
The fees advertisers are willing to pay based on how they manage their advertising costs and their targeted return on investment; and
Our advertisers’ response to changes made to our marketplace, such as the relevance assessment.

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