Webjet strikes back at "inaccurate" Morgan Stanley report

At first glance it appeared as if Webjet (ASX: WEB) was the hardest hit in yesterday's landslide sell-off of tourism stocks, but the company was suffering from a bout of another unwanted illness.

Coinciding with the hit Webjet received from the coronavirus panic sale was a report by Morgan Stanley detailing how Google's new travel-booking features would dramatically impact the flight aggregator's earnings.

As a result Webjet shares were the worst hit on Tuesday, falling 11.3 per cent to a five-week low of $12.73.

This morning Webjet has hit back at Morgan Stanley, describing its report as inaccurate and chastising the investment banking company for not consulting the flight booking platform prior to the publication of the report.

The biggest revelation from that Morgan Stanley report was how Webjet is poised to be undercut by Google's own move into the world of flight booking, highlighting that Webjet received nearly two-thirds of its own traffic from organic searches.

The ASX-listed Webjet says this finding by Morgan Stanley is incorrect and does not reflect the source channel mix of the website's customer base.

"Regardless of source, traffic alone is not a proxy for Webjet OTA's bookings or earnings growth, and it has never been presented as such by the company," says Webjet.

"Conversion, booking channel, and attachment rate of ancillary products (as examples) all play a role in bookings and earnings growth, and traffic (and its cost to acquire), as a singular data point, is not the preliminary predictor of future performance."

"Google's intentions, as interpreted in the report, do not present a material threat to the current traffic or bookings volumes due to the fact that the vast majority of bookings are generated through channels where the Webjet brand is the focus for the search, not destination, carrier or other flight related search term."

The aggregator goes on to describe where its booking sources come from; dispelling the inaccuracies posited by Morgan Stanley.

Webjet says approximately 33 per cent of its bookings are derived through direct channels (eg. typing the Webjet URL into a browser, email marketing, apps, etc.), 27 per cent are derived through 'Paid Brand' search (eg. advertising (as pictured below)), and 18 per cent from 'Paid non-brand search' (eg. A customer searches for "flights to bali" and a number of ads are provided at the top of the results set).

The remaining 22 per cent of Webjet's "organic" or "Free" bookings are split into two categories called 'Organic Brand' and 'Organic non-brand'.

'Organic Brand' occurs when a customer types "Webjet" into the search box and receives and organic result, while 'Organic non-brand' results occur when a customer's search term matches the content that is available on the website and the website does not pay to have it displayed because the Google algorithm rates it as relevant (see below in the green box).

"As Google currently operates, Paid results will come first in a customer's search, followed by Google Flights, and lastly organic results are displayed," says Webjet.

"This is the competitive situation that currently exists, and Webjet OTA captures 8 per cent of its bookings from the Organic non-brand category, not the 65 per cent that the report implies. Unfortunately, the analysts research has relied on web-based tools which do not have access to first party data and therefore have questionable accuracy."

"It has been a 20-year focus to ensure that when travellers in Australia and New Zealand consider travel, they think of Webjet. This has been achieved through significant investment in an offline, brand-oriented marketing strategy that has delivered an optimal mix of customer acquisition channels as outlined above."

Shares in Webjet are up 1.78 per cent to $12.59 per share at 11.52am AEDT.

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