Google defends its travel debt collection practices
Google deserves to be paid for the advertising services rendered. The company could have used the coronavirus crisis to engender much-needed goodwill among its legions of advertisers, with some degree of flexibility during the months the music died. Lost opportunity.
Dennis Schaal, Skift
Google feels the heat on its reluctance to discount unpaid advertising bills from travel advertisers which arose out of the economic collapse induced by Covid-19, and its payment collection practices, which include except new advertisement for non-payment.
Google thinks that German and French companies that have publicly appealed to Google In recent months to take their first quarter bills off their bill when their ad spend turned into a mountain of canceled bookings, they’ve been looking for special treatment and one-off offers.
Google released a new statement on its billing practices on Wednesday.
“We fully recognize the huge challenges facing the travel industry and have worked closely with travel advertisers to help them protect their businesses and envision recovery,” Google said. “The issue of collection of payments only applies to a very small number of travel agencies, and virtually all of our industry partners do not have overdue invoices with us. “
Unlike companies such as InterContinental Hotels Group, Facebook and Amazon, which would be willing to give discounts to partners or accept payment plans for their overdue bills, Google has decided to maintain a debt relief plan. unique – virtually nothing.
“In the interest of fairness, we apply the same rules equally to all of our customers who request relief, both in travel and in the many other industries that have been affected by the pandemic,” Google said.
Let’s do the math
When Google said that “only a very small number of travel agencies” face its debt collection efforts, that may be true as a percentage of Google’s travel advertisers – but bad debt could easily add up to 50 to 50%. $ 100 million.
Consider that Google’s parent company, Alphabet disclosed in its second quarter report that its allowance for credit losses on accounts receivable was $ 788 million as at June 30 – and that this was an increase of $ 513 million in the first six months of 2020 influenced by the coronavirus. The comparable number as of Dec.31 was only $ 275 million, and Google noted that credit trends can be volatile, so these numbers are only estimates.
Skift Research estimated that in 2019, Google generated 12% of its $ 135 billion in total advertising revenue from travel. That would have represented some $ 16.2 billion in travel ad spend on Google last year.
It would then be easy to see that at least $ 50 million of Google’s $ 513 million bad debt that was accrued in the first six months of 2020 could be tied to struggling travel advertisers.
If you factor in that travel has probably been the hardest-hit industry – or one of the most battered – among Google’s advertisers, then perhaps the estimated $ 50 million bad debt level should. be considerably higher.
These would be very small numbers for Google, but it would undoubtedly mean a lot of pain for many travel companies, with their existences in jeopardy.
For more context, Expedia Group calculated that its bad debt and estimated future losses due to factors related to Covid-19 increased by $ 82 million in the first six months of 2020. [See the Accounts Receivable and Allowances section of this document.]
Impact on a small tour operator
While the biggest travel companies, such as Booking Holdings and Expedia Group, are likely up to date with their Google invoices, a number of advertisers have had their advertising cut and their accounts transferred to debt collectors.
We have previously detailed the case from a well-known travel brand that tried to arrange payment for its overdue bills with Google, but was pushed back. The travel agency then saw all of its ads disabled, despite being a Google customer for many years. This hampered the travel advertiser’s collection efforts and its ability to reimburse Google, and the debtor was pressured by Accenture on Google’s behalf to pay the debt.
Skift has been in contact this week with a small tour operator that handles a few thousand customers a year, but saw all of its reservations canceled when the coronavirus shut down travel.
“They took the full force of the disruption from Covid – cancellations and 100% refunds,” a representative for the tour operator said. “They asked for some leeway with their Google bill in April, which was flatly refused and referred to a collection agency.”
Thinking they had enough to manage to go into recovery mode, the tour operator paid their Google bill late.
“The really sick twist is that when Google deposited those meager $ 200 ad credits into advertisers’ accounts, it automatically reactivated their suspended ad campaigns, without notice or warning,” the tour operator’s partner said. “So they ran out of credit and started accumulating new charges before they got a bill, and found they were being billed again.”
Google has provided small and medium-sized businesses – across industries, not just travel – with a total of $ 340 million in credits for future ads.
You can also argue that a debt is an obligation and that Google deserves to be paid.
But like Expedia Group and Booking Holdings, a deep-pocketed Google hasn’t given advertisers a break for their overdue bills. Google has done other things, like rolling out a tool for airlines on when to restart routes, introducing a commission program for hotels around the world so they can pay Google for stays rather than clicks ads, and has made numerous changes to its research products to help consumers make informed travel planning decisions in the coronavirus era.
An industry observer has argued that some of the travel agencies in Germany, for example, which have asked Google the most to give them a break on past bills, are heavily funded by venture capital funds or are owned to large parent companies that are well positioned to give them relief.
On the other hand, it’s the small online travel agencies, meta-search companies, independent hotels, and tour operators that find themselves stuck between Google and a tough place.