Travelzoo 2010 Annual Report Download - page 49

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Our publications and products include the Travelzoo websites (www.travelzoo.com, www.travelzoo.ca,
www.travelzoo.co.uk, www.travelzoo.de, www.travelzoo.es, www.travelzoo.fr, among others), the Travelzoo
Top 20 e-mail newsletter, and the Newsflash e-mail alert service. We operate SuperSearch, a pay-per-click
travel search tool and the Travelzoo Network, a network of third-party websites that list deals published by
Travelzoo. We also operate Fly.com, a travel search engine that allows users to quickly and easily find and compare
the best prices on flights from hundreds of airlines and online travel agencies. In August 2010, we launched Local
Deals, a new service that allows our subscribers to purchase vouchers for deals from local businesses such as spas
and restaurants through the Travelzoo website. Vouchers are redeemable at the local businesses during the
promotional period. We receive a percentage of the face value of the voucher from the local business. More
than 2,000 travel, entertainment and local companies use our services.
On October 31, 2009, we completed the sale of our Asia Pacific operating segment to Azzurro Capital Inc. and
its wholly-owned subsidiaries, Travelzoo (Asia) Limited and Travelzoo Japan K.K. The results of operations of the
Asia Pacific operating segment have been classified as discontinued operations for all periods presented. We have
not had significant ongoing involvement with the operations of the Asia Pacific operating segment and have not had
any economic interests in the Asia Pacific operating segment since the completion of the sale. Starting November 1,
2009, the Travelzoo websites in Asia Pacific (cn.travelzoo.com, www.travelzoo.co.jp, www.travelzoo.com.au,
www.travelzoo.com.hk, www.travelzoo.com.tw, among others), the Travelzoo Top 20 e-mail newsletters in Asia
Pacific and the Newsflash e-mail alert service in Asia Pacific are published by Travelzoo (Asia) Limited and
Travelzoo Japan K.K., under a license agreement with the Company. See Note 11 to the accompanying consolidated
financial statements.
Our revenues are advertising revenues, consisting primarily of listing fees paid by travel companies,
entertainment companies and local businesses to advertise their offers on Travelzoo’s media properties.
Revenues are principally generated from the sale of advertising in the U.S. Listing fees are based on audience
reach, placement, number of listings, number of impressions, number of click-throughs, number of referrals, or
percentage of the face value of vouchers sold. Insertion orders are typically for periods between one month and
twelve months and are not automatically renewed. Merchant agreements for Local Deals advertisers are typically
for the period of the voucher redemption period.
We have two operating segments based on geographic regions: North America and Europe. North America
consists of our operations in Canada and the U.S. Europe consists of our operations in France, Germany, Spain, and
the U.K. For the year ended December 31, 2010, our operations in Europe accounted for 22% of revenues and our
operations in North America accounted for 78% of revenues.
When evaluating the financial condition and operating performance of the Company, management focuses on
the following financial and non-financial indicators:
• Growth of number of subscribers of the Company’s newsletters and page views of the homepages of the
Travelzoo websites;
• Operating margin;
• Growth in revenues in the absolute and relative to the growth in reach of the Company’s publications; and
• Revenue per employee as a measure of productivity.
Critical Accounting Policies
We believe that there are a number of accounting policies that are critical to understanding our historical and
future performance, as these policies affect the reported amounts of revenue and the more significant areas
involving management’s judgments and estimates. These significant accounting policies relate to revenue
recognition, the allowance for doubtful accounts, and liabilities to former stockholders. These policies, and our
procedures related to these policies, are described in detail below.
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