TripAdvisor 2011 Annual Report Download - page 12

Download and view the complete annual report

Please find page 12 of the 2011 TripAdvisor annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 125

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125

Table of Contents
Business Model
We derive substantially all of our revenue from the sale of advertising, primarily through click-based advertising and, to a lesser extent,
display-based advertising. The remainder of our revenue is generated through a combination of subscription-based offerings, transactions
conducted via our flash sale website, SniqueAway, and other revenue including content licensing. In the year ended December 31, 2011, we
earned $500 million of revenue from click-based advertising, $86 million in revenue from display-based advertising and $51 million in revenue
from subscription-based offerings, transaction revenue and other revenue.
Strategic Relationships
Expedia Brands
In recent years our commercial arrangements with Expedia businesses, pursuant to which Expedia has purchased click-based advertising
from us, have primarily been on a revenue-share basis. For the year ended December 31, 2011, approximately $211 million, or 33%, of our total
revenue was derived from Expedia businesses. At the time of the spin-off from Expedia, or the Spin-Off, new commercial arrangements with
Expedia-owned brands, including Expedia.com and Hotels.com were implemented. The new arrangements have
8
•
Acquisitions
. We have a history of successfully acquiring and integrating companies that expand our footprint either geographically
or in market sectors that are complementary to our flagship properties. We intend to continue to seek acquisition targets.
•
Click
-
Based Advertising Revenue
. Our largest source of revenue is click
-
based advertising, which includes our
“
check rates
”
feature
as well as contextually-relevant branded and unbranded textlinks. Our click-based advertising partners are predominantly online
travel agencies and direct suppliers in the hotel, airline and cruise product categories. The “check rates” feature enables users to
compare pricing and availability for a particular hotel across different on-line travel agents’ and hotel partners’ booking engines and
thereby delivers a highly-targeted audience deep into the booking paths of their websites. Click-based advertising is generally priced
on a cost-per-click, or CPC, basis, with payments from advertisers based on the number of users who click on each type of link.
Advertisers who increase their CPC rates generally get improved positioning of, and thereby an increased number of clicks from,
their click-based advertising on our websites. Most of our click-based advertising contracts can be terminated by the advertisers at
will or on short notice.
•
Display
-
Based Advertising Revenue
. We also earn revenue from a variety of display-based advertising placements on our websites
through which our advertising partners can promote their brands in a contextually-relevant manner. While our display-based
advertising clients include direct suppliers in the hotel, airline and cruise categories and online travel agencies, we have also
broadened our advertiser base to include destination marketing organizations, casinos, resorts and attractions, as well as advertisers
from non-travel categories. We generally sell our display-based advertising on a cost per thousand impressions, or CPM, basis. Our
display-based advertising products also include a number of custom-built products including the sponsorship of certain site features
and functionality, as well as certain customized co
-
branded features.
•
Subscription
-
Based, Transaction and Other Revenue
. We also offer advertising via a subscription model that is sold for a flat fee
per time period. Managed by our Trip for Business division, this advertising product, Business Listings, is currently offered to hotels,
B&Bs and other specialty lodging properties and allows subscribers to list a website URL, email address and phone number on
TripAdvisor-
branded websites as well as to post special offers for travelers. Our Vacation Rentals division allows individual vacation
property owners or managers to pay a subscription fee to list properties on our Holiday Lettings and FlipKey websites, as well as on
select TripAdvisor-branded websites. Other sources of revenue include selling discounted hotel room nights and coupons on our
flash sale website, SniqueAway, and licensing our content to third
-
party sites.