Earnings calls generally get interesting towards the end. While it’s useful to hear how a business is doing, it’s equally revealing to hear how executives respond to analyst questions. Outside of the practiced company line, these questions often highlight some compelling questions.

From the questions to the prepared remarks, here are some takeaways from today’s Q4 2017 earnings call over at Expedia, followed by the full earnings release at the end of this article. Some quotes might be truncated or lighlty edited for brevity and clarity.

Marketing first, revenue later

This is obvious but is always worth noting — especially when a company takes time to remind analysts that the reason for high expenses in Q1 is related to marketing costs to get the bookings needed later in the year.

As such “sales and marketing expense is growing faster than revenue,” says Alan Pickerill, Expedia’s CFO. This is a big part of what Expedia promised to do in its last earnings call shortly after Mark Okerstrom took over as CEO. This massive investment, along with losses at HomeAway and Trivago, has amplified the impact on the company’s profitability, as EBITDA is down year over year.

Cloud migration and supply expansion

Last year, the company announced investment in migrating its services to the cloud, as well as expanding supply globally,

“We feel good about our guidance,” said Okerstrom. Clearly, the framework that Expedia has laid out has analysts concerned that there are even more investments ahead. Which would, of course, put pressure on how much money Expedia would have left after paying its expenses.

Back in Q4 2017, the company committed to around $30 million of investment in its business for bringing its business to the cloud. The executive team re-iterated that the $30 million of spend in 2018 is still the right range.

The company plans to get its lodging stack onto the cloud by the end of 2018. This is a massive project and is a big part of the investments happening. The benefits for the company is that it avoids the need to build out another data center to deal with the size of its business. The company says its also seeing a drop in CapEx related to data centers. A drop from $180 million to $50 million per year, on a pure cloud vs data center basis.

Growth brands versus static brands

One of the questions was related to how the brands are seen by the executive team. This topic was mentioned a few times, given that showcase brands such as Trivago are likely to be flat or negative contribution to the bottom line in 2018, says Alan:

“The global growth brands (EAN, Egencia, Hotels.com, brand Expedia) have been very consistent at 19% growth for the whole year. They make up 85-90% of the mix, so we’ve got a vast majority of our businesses growing in the high teens.”

“The regional brands, such as Hotwire, are flattish. Sometimes better and sometimes worse. They are making a mid single-digit percentage of the mix. All the other room nights have been a headwind for us, which has eased as we’ve cleaned the comps from Orbitz for Business.”

HomeAway bookings accelerated

HomeAway grew room nights booked by 30 percent in the last quarter. This is an impressive performance that underlines how HomeAway has become a core part of Expedia’s longer-term growth strategy. While taking a bit of a profitability hit in this quarter, the booking growth is where it’s at.

“Gross booking acceleration is a combination of a lot of the great stuff HomeAway is doing by focusing on conversions. We also solved the problem of people taking bookings off the platform. This allows us to step on the gas with sales and marketing.”

When asked to assess Expedia’s relationship with larger property managers, Mark Okerstrom said:

“Broadly speaking, the property manager and owner community are adjusting to the changes. They are finding ways to use the platform to benefit them. Generally, things are moving in a constructive direction.

“Of course, we are always trying to find the ways to incent the right behavior and prevent leakage. All changes are intended to create the right marketplace activity so HomeAway can continue on the path its on. We think the relationship is good and constructive and we are happy with the progress there.”

What are the benefits fo the increased supply?

Expedia wants to maintain its positioning as a global platform for all aspects of a trip. This requires the depth and breadth of inventory across whichever destination or city pair a traveler chooses. Beyond availability, Mark answered the question of other benefits to Expedia:

“In terms of benefit of supply and timing, our expectation is that we start to see some impact on room night growth towards the back half of the year. But the real benefit comes in the second year and subsequent years, so you can create the real network effects of having everything a customer could possibly want in a given region. And [then] come back to you again and again via direct and cheaper channels.”

However, Okerstrom closed out his reply saying “there are no guarantees.” It’s a big bet that Expedia is making on supply, and only time will know whether it will pay off.

Is ‘investment’ just deflecting from higher costs of acquisition?

Analysts returned to the higher costs in sales and marketing, asking whether this was simply a spin on the fact that customer acquisition costs are increasing. If CPAs are going up, how are these increased costs seen as investments and not simply costs of getting customers? Mark Okerstrom’s response:

“With respect to direct sales and marketing and advertising, a lot of the trends in Q4 were driven by spend at HomeAway and Trivago. With brand Expedia and Hotels.com, we saw very nice trends in sales and marketing. The way that we think about it going forward is similar to the way we thought about it in the past.”

“Generally, what we have observed, is that the decline in sales and marketing efficiency have really been driven by mix shift. Such as spending more in international markets, which are less efficient but become better over time.”

“We have seen a trend mixing more towards independent hotels. Our travelers are generally brand agnostic.”

“It’s a mix shift that puts pressure on the line item. Our investments are squarely aimed at getting to better sales and marketing efficiency in those markets. We’re looking at it from the individual market and individual channel. level. We have largely offset larger CPA rates with higher conversions.”

On geographies: trends and supply

In response to a question on particular geographies that you are targeting to build supply, Okerstrom revealed how challenging conversions (ie. matching a customer to a property) still remains for brands integrating multiple types of accommodations:

“In terms of HomeAway on the Expedia platform, generally what we see is that if we are able to expand inventory, the overall conversion rates for a destination goes up. And that’s what we see with alternative accommodations.”

“We have not yet cracked the code on getting the degree of proficiency that we want to get to, as far as matching the perfect property with the customer. We think it can be a lot more and we are actively working on product features and sort algorithms to optimize.”

As far as trends, the team was mostly mum, except for this tidbit:

“In terms of geography, international growth is faster than domestic growth. Europe has been a bright spot for us, in particular, Greece and Turkey who are back at full strength. Japan is strong for us, Vietnam where we’re starting to build a presence. The Caribbean has seen a bounce back into the December period.”

Thoughts on Google’s latest?

Google recently announced changes to its Google Travel product, focusing on an improved user experience on mobile. In response to an analyst question, here’s what Expedia CEO Mark Okerstrom said:

“I’d said for the Google changes, its largely more of the same. They continue to foucs on creating a better search experience, to moentize . ti continues t be a great channel for us on the hotel side, and we get grat traffic from them and turn those customers into repeat customers.”

“Over the long term, we have to be mindful of the incredible market power that Google has. It’s just more imporant that we build out products that have a breadth of hotel inventory and use experiences that are localized and can get people through the booking path as soon as possible. That’s how we differentiate from our search partners and create real customer loyalty.”

On changes in Expedia’s Shopping Cart

When it comes to Expedia’s pursuit of a better shopping cart as a competitive advantage, Mark said this:

“It hasn’t really been live with live traffic for all that long. Right now, we’re live in Flight and Car. It looks particularly good in mobile. The implementation is essentially a slide open tray so that as you are shopping you can drop stuff in the tray. And when you pull the tray over its automatically calculating the savings. We’re encouraged by what it’s doing for attachment rates. The big upside comes in hotel, which is coming later this quarter or in Q2.”

On Airbnb management changes

Even the juicy gossip of Airbnb’s recent management shakeup didn’t escape the analysts:

“[The management change] doesn’t really change our overall philosophy. [Vcacation rentals] is just a massive market. We think ourselves, and other competitors in the marketplace, can grow very well over a long period of time.

These management changes, they happen. You don’t know why they happen. We’ve got tremendous respect for the Airbnb team. Who knows the reasons [why they went their own ways]. I’m not reading a lot into it.”