Priceline 2011 Annual Report Download - page 3

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• Other gross profit derived primarily from selling advertising on our websites.
For the year ended December 31, 2011, we had gross profit of approximately $3.1 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 2011, consisted of: (1) travel commissions; (2) GDS
reservation booking fees related to certain of the agency services listed above; and (3) customer processing fees. 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 gross profit is
derived primarily from selling 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 an online global travel service network that attracts consumers wishing to make travel
reservations and connects them in an efficient and innovative manner with suppliers of high quality travel services around the
world, including over 210,000 hotel properties. 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, destination services and cruises
through both a traditional, price-disclosed "retail" manner, and through our proprietary demand-collection system known as
Name Your Own Price®. In May 2010, we acquired TravelJigsaw and in late 2011, we re-branded TravelJigsaw as
"rentalcars.com." Through rentalcars.com, we offer retail price-disclosed rental car reservations around the world.
International: Price-Disclosed Hotel Reservation Services. We offer a retail price-disclosed hotel reservation service
through our international operations, which consist primarily of Booking.com B.V., the world’s leading Internet hotel
reservation service, with offices worldwide and priceline.com Mauritius Company Limited (formerly known as the Agoda
Company, Ltd.), an Internet hotel reservation service with operations primarily in Asia ("Agoda"). Booking.com works with
over 185,000 hotels and accommodations in over 160 countries offering hotel reservations on various websites and in 41
languages. For geographic related information, see Note 18 to the Consolidated Financial Statements.
International: Price-Disclosed Rental Car Reservation Services. We offer a retail price-disclosed rental car
reservation service through rentalcars.com, a Manchester, U.K.-based rental car reservation service, which we acquired in
May 2010 ("rentalcars.com"). Rentalcars.com offers rental car reservations throughout the world. Certain members of our
management own a noncontrolling interest in rentalcars.com. See Note 13 to the Consolidated Financial Statements for further
details. For geographic related information, see Note 18 to the Consolidated Financial Statements.
United States: Name Your Own Price® Travel Services. We have developed a unique pricing system that allows
consumers to specify the price they are prepared to pay when submitting an offer for a particular leisure travel service. We then
access databases in which participating suppliers file secure discounted rates not generally available to the public, to determine
whether we can fulfill the customer’s offer and decide whether we want to accept the offer at the price designated by the
consumer. This Name Your Own Price® service uses the flexibility of buyers to enable sellers to accept a lower price in order
to sell their excess capacity without disrupting their existing distribution channels or retail pricing structures. We believe that
our Name Your Own Price® service offers substantial benefits to both buyers and sellers. We often refer to our Name Your Own
Price® services as "opaque" services because not all aspects of the travel service are visible to the consumer before making an
offer.
United States: Price-Disclosed Travel Services. In the United States, we offer customers the ability to purchase
reservations for price-disclosed hotel rooms, rental cars, airline tickets, vacation packages, destination services and cruises at
retail prices. In these transactions, the customer typically selects hotel reservation, rental car, airline flight or other travel
itineraries from an array of results produced in response to the customer’s request. These results usually include the identity of