Priceline 2014 Annual Report Download - page 8

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Priceline.com. Priceline.com offers online travel reservation services primarily in the United States and is headquartered in Norwalk,
Connecticut. Through priceline.com, we offer consumers hotel, rental car and airline ticket reservations services, as well as vacation packages
and cruises. Priceline.com is a leader in the "opaque" travel reservation business through its pioneering Name Your Own Price
®
and Express
Deals
®
hotel, rental car and airline reservation services. We describe our Name Your Own Price
®
and Express Deals
®
travel services as
"opaque" because certain elements of the service, including the identity of the travel service provider, are not disclosed to the consumer prior to
making a reservation. Reservations made through priceline.com's opaque services are subject to various restrictions, depending on the type of
reservation, such as being nonrefundable, not being eligible for frequent flyer or award program points and, in the case of airline tickets,
requiring flexibility with respect to travel times and stops. We believe that the combination of priceline.com's retail and opaque models allows it
to provide a broad array of options to value-conscious consumers.
Agoda.com. Agoda.com is a leading online accommodation reservation service catering primarily to consumers in the Asia-Pacific
region, with headquarters in Singapore and operations in Bangkok, Thailand and throughout the region. Accommodation providers participate in
agoda.com, which operates primarily under a merchant model, by filing rates and information about the property in agoda.com's proprietary
extranet.
Rentalcars.com. Rentalcars.com is a leading worldwide online rental car reservation service and is headquartered in Manchester,
England. Rentalcars.com offers a primarily merchant, online retail and opaque rental car reservation service allowing consumers to make rental
car reservations in more than 28,000 locations throughout the world, with customer support provided in 40 languages. Customers using
rentalcars.com can book a full range of vehicles online through rentalcars.com's website or mobile app, or they can reserve their cars by phone.
KAYAK. KAYAK, headquartered in Stamford, Connecticut, provides an online price comparison service (often referred to as "meta-
search") that allows consumers to easily search and compare travel itineraries and prices, including airline ticket, accommodation reservation and
rental car reservation information, from hundreds of travel websites at once. KAYAK derives revenues from advertising placements on its
websites and mobile apps and from sending referrals to travel service providers and OTAs. KAYAK currently does business primarily in the
United States, though it intends to continue to invest in expanding its international offerings.
OpenTable. In July 2014 we acquired OpenTable, a leading brand for booking online restaurant reservations. Headquartered in San
Francisco, California, OpenTable provides online restaurant reservation services to consumers and reservation management services to
restaurants. OpenTable does business primarily in the United States, though it intends to continue to invest in expanding its international
offerings.
Marketing and Brand Awareness
Booking.com, priceline.com, KAYAK, agoda.com, rentalcars.com and OpenTable have established widely used and recognized e-
commerce brands through aggressive marketing and promotion campaigns. As a result, both our online and offline advertising expense has
increased significantly in recent years, a trend we expect to continue. During 2014 , our total online advertising expense was approximately $2.4
billion , a substantial portion of which was spent internationally through Internet search engines (primarily Google), meta-search and travel
research services and affiliate marketing. We also invested $231 million in offline advertising. We intend to continue a strategy of aggressively
promoting brand awareness, primarily through online means although we also intend to increase our offline advertising efforts, including by
expanding offline campaigns into additional markets. For example, building on its first offline advertising campaign, which it launched in the
United States in 2013, Booking.com has begun offline advertising campaigns in other markets, including Australia, Canada, the United Kingdom
and Germany. We recognize a substantial majority of online advertising expense as incurred at the time a reservation is booked, but recognize
most of our gross profit when the consumer's travel or dining experience is completed. As a result, online advertising expense may not be
recognized in the same period as the associated gross profit.
subject to variability and that are, in some cases, outside of our control, including average daily rates ("ADRs"), costs per click, cancellation
rates, foreign exchange rates, our ability to convert paid traffic to booking customers and the extent to which consumers come directly to our
websites or mobile apps for bookings. From 2011 to 2013 our online advertising grew faster than our gross profit due to (1) year-over-year
declines in online advertising returns on investment ("ROIs") and (2) brand mix within The Priceline Group as our international brands grew
faster than our U.S. brands and spent a higher percentage of gross profit on online advertising. In 2014, these trends continued, but were more
than offset by the inclusion of KAYAK and OpenTable because they spend a lower percentage of gross profit on online advertising than our
other
4