Priceline 2010 Annual Report Download - page 76

2
x Commissions earned from price-disclosed hotel room reservations, rental cars, cruises and other travel
services;
x Transaction gross profit and customer processing fees from our Name Your Own Price® hotel room
reservations, rental car and airline ticket services, as well as our vacation packages service; and
x Transaction gross profit and customer processing fees from our price-disclosed merchant hotel room
and rental car reservation services;
x Global distribution system (“GDS”) reservation booking fees related to both our Name Your Own
Price® airline ticket, hotel room reservation and rental car services, and price-disclosed airline tickets
and rental car services; and
x Other gross profit derived primarily from selling advertising on our websites.
For the year ended December 31, 2010, we had gross profit of approximately $1.9 billion comprised of
“agency” gross profit, “merchant” gross profit, and “other” gross profit. Agency gross profit is derived from travel
related transactions where we are not the merchant of record and where the prices of our services are determined by
third parties. Agency gross profit, which represented the substantial majority of our total gross profit in 2010,
consisted of: (1) travel commissions; (2) customer processing fees; and (3) GDS reservation booking fees related to
certain of the agency services listed above. Merchant gross profit is derived from transactions where we are the
merchant of record and therefore charge the customer’s credit card for the travel services provided, and consisted of:
(1) transaction gross profit representing revenue charged to a customer, less the cost of revenue amount charged by
suppliers in connection with the reservations provided through our Name Your Own Price® hotel room reservation,
rental car and airline ticket services, as well as through our price-disclosed vacation packages services;
(2) transaction gross profit representing the amount charged to a customer, less the amount charged by suppliers in
connection with our merchant price-disclosed services; (3) customer processing fees charged in connection with the
sale of our Name Your Own Price® airline tickets, hotel room reservations and rental cars and our merchant price-
disclosed services; and (4) ancillary fees, including GDS reservation booking fees related to certain of the services
listed above. Other revenues are derived primarily from advertising on our websites.
Priceline.com Incorporated was formed as a Delaware limited liability company in 1997 and was converted
into a Delaware corporation in July 1998. Our common stock is listed on the NASDAQ Global Select Market under
the symbol “PCLN.” Our principal executive offices are located at 800 Connecticut Avenue, Norwalk, Connecticut
06854.
The Priceline Group Business Model
We own and operate a global travel service network that attracts consumers wishing to make travel
reservations and connects them in a unique and innovative manner with suppliers of high quality travel services
around the world. We offer customers the ability to make hotel reservations on a worldwide basis primarily under
the Booking.com, priceline.com and Agoda brands. In the United States, we also offer customers the ability to
purchase other travel services, including airline tickets, rental car days, vacations packages, cruises and destination
services through both a traditional, price-disclosed “retail” manner, and through our proprietary demand-collection
system known as Name Your Own Price®. Through TravelJigsaw, which we acquired in May 2010, we offer retail
price-disclosed rental car reservations in 80 countries around the world. These services are made available over the
Internet through websites that we own or control, and are provided by major travel suppliers, including more than
150,000 hotel properties worldwide.