|TRIVAGO N.V. filed this Form 6-K on 04/25/2018|
booked are priced. Accordingly, we have observed that advertisers tend to adjust their CPC bidding based on the relative strengthening or weakening of the euro as compared to the local functional currency in which the booking with our advertisers is denominated.
After a period of increased marketplace volatility and testing activities by our largest advertisers in recent quarters, the relative proportions of our revenues generated by our largest advertisers remained relatively stable in the first quarter of 2018 compared to recent periods. We continued to experience sustained lower levels of our commercialization as our largest advertisers appeared to have increased their return on investment targets for their spend on our marketplace compared to the first quarter of 2017, which in turn has a negative effect on our share of the overall booking revenues generated from referrals on our platform (commercialization). This was evidenced in our RPQR, which declined, even as the optimizations we have been making to our platform and product and our attribution model appeared to continue to improve traffic quality we generated for our advertisers. Should the trend towards lower levels of our commercialization continue, our revenue may cease to grow or may decline, as is likely to be the case in the second quarter of 2018, as advertisers share less of their booking revenues with us. This may occur even though we are making improvements to our platform that we believe are improving the traffic quality generated for our advertisers and are generating qualified referrals, customers, bookings or revenue and profit for our advertisers at rates similar to or even greater than those in the past. Reflecting this dynamic environment, we now expect growth in total revenue for 2018 to be flat, and adjusted EBITDA for 2018 to be between negative €25 and negative €50 million.
The decline in commercialization was particularly pronounced compared to a strong first quarter of 2017, which benefited from positive revenue effects from the introduction of the relevance assessment. In the first quarter of 2018, we also experienced negative impacts on our referral revenues and RPQR from foreign exchange rate effects, in particular due to the relative weakening of the U.S. dollar and certain currencies in the Asia Pacific region to the euro. (The average exchange rate of U.S. dollars for euros increased 15.4% in the first quarter of 2018 as compared to the first quarter of 2017, calculated using the average for the particular period of the daily foreign exchange reference rates published by the European Central Bank.)
In the first quarter of 2018, as noted above, we also continued to implement measures aimed at optimizing our platforms and product, with the intention of increasing user retention and booking conversion, while reducing the number of click-outs required to ultimately make a booking. These are relatively small, incremental changes to our product that we believe, when considered together, will result in improvements to our product and platforms. Since we make these changes by optimizing for traffic quality instead of volume, these changes will tend to have a negative impact on Qualified Referrals, but we believe they will have a long-term positive impact on RPQR (although RPQR may still decline if our commercialization declines).
We continue to implement our new model for allocating our marketing spend, which we refer to as our attribution model, with the aim of optimizing our investment mix going forward by focusing less on revenue generated in each user session and more on the end-to-end booking value of the user that we generate through our platform. The model focuses on whether a user who comes to us from a performance marketing channel proceeds to book a hotel. In the first quarter of 2018, we continued to roll out this new attribution model in our SEM channel.
We earn substantially all of our revenue when users of our websites and apps click on hotel offers in our search results and are referred to one of our advertisers. We call this our Referral Revenue. We also earn subscription fees for certain services we provide to advertisers, such as Hotel Manager Pro, although such subscription fees do not represent a significant portion of our revenue.