Expedia 2012 Annual Report Download - page 14

relationships. Our traveler loyalty programs include Welcome Rewards®on Hotels.com global websites and
Expedia Rewards on Expedia.com. The cost of these two loyalty programs is recorded as a reduction of revenue
in our financial statements.
We also make use of affiliate marketing. The Expedia.com and Hotels.com-branded websites receive
bookings from consumers who have clicked-through to the respective websites through links posted on affiliate
partner websites. Affiliate partners can also make travel products and services available on their own websites
through a Brand Expedia or Hotels.com co-branded offering or a private label website. Our EAN business
provides our affiliates with technology and access to a wide on range of products and services. We manage
agreements with thousands of third-party affiliate partners, including a number of leading travel companies,
pursuant to which we pay a commission for bookings originated from their websites.
Operations and Technology
We provide 24-hour-a-day, seven-day-a-week traveler sales and support by telephone or via e-mail. For
purposes of operational flexibility, we use a combination of outsourced and in-house call centers. Our call centers
are located throughout the world, including extensive outsourced operations in the Philippines, El Salvador and
Egypt. We invested significantly in our call center technologies, with the goal of improving customer experience
and increasing the efficiency of our call center agents, and have plans to continue reaping the benefits of these
investments going forward.
Our systems infrastructure and web and database servers are housed in various locations, mainly in the
United States, which have communication links as well as 24-hour monitoring and engineering support. The web
hosting facilities have their own generators and multiple back-up systems. Significant amounts of our owned
computer hardware for operating the websites are located at these facilities. For some critical systems, we have
both production and disaster-recovery facilities.
Competition
Our brands compete in rapidly evolving and intensely competitive markets. We believe the relatively low
percentage of total travel sales transacted online, particularly in international markets, indicates that these
markets represent especially large opportunities for Expedia and those of our competitors that wish to expand
their brands and businesses abroad to achieve global scale. We also believe that Expedia is one of only a few
companies that are focused on building a truly global, travel marketplace.
Our competition, which is strong and increasing, includes online and offline travel companies that target
leisure and corporate travelers, including travel agencies, tour operators, travel supplier direct websites and their
call centers, consolidators and wholesalers of travel products and services, search engines, such as Google and
Bing, and certain travel meta-search engines. We face these competitors in local, regional, national and/or
international markets. In some cases, competitors are offering favorable terms and improved interfaces to
suppliers and travelers which make competition increasingly difficult.
We believe that maintaining and enhancing our brands is a critical component of our effort to compete. We
differentiate our brands from our competitors primarily based on the multiple channels we use to generate
demand, quality and breadth of travel products, channel features and usability, price or promotional offers,
traveler service and quality of travel planning content and advice as well as offline brand efforts. The emphasis
on one or more of these factors varies, depending on the brand or business and the related target demographic.
Our brands face increasing competition from travel supplier direct websites. In some cases, supplier direct
channels offer advantages to travelers, such as long standing loyalty programs, and better pricing. Our websites
feature travel products and services from numerous travel suppliers, and allow travelers to combine products and
services from multiple providers in one transaction. We face competition from airlines, hotels, rental car
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