TripAdvisor 2011 Annual Report Download - page 39

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Table of Contents
Overview
We are the world’s largest online travel company, empowering users to plan and have the perfect trip. Our travel research platform
aggregates reviews and opinions from our community about destinations, accommodations (including hotels, resorts, motels, B&Bs, specialty
lodging and vacation rentals), restaurants and activities throughout the world through our flagship TripAdvisor brand. Our branded websites
include tripadvisor.com in the United States and localized versions of the website in 29 other countries, including in China under the brand
daodao.com. Our-
branded websites globally received more than 50 million unique visitors in January 2012, according to comScore, and we have
built a marketable base of more than 20 million members and over 60 million reviews and opinions. Beyond travel-related content, our websites
also include links to the websites of our advertisers, including travel advertisers, allowing travelers to directly book their travel arrangements. In
addition to the flagship TripAdvisor brand, we manage and operate websites under 18 other travel media brands, connected by the common goal
of providing comprehensive travel planning resources across the travel sector.
Executive Summary
Our financial results are dependent on our ability to drive our click-based advertising revenue and continue to invest in areas of potential
growth, including our social, mobile and global initiatives as well as our subscription-based businesses, which include vacation rentals and
business listings. We have leveraged our position as the largest online travel company to become a critical partner for online advertisers –
including hotels, online travel agencies and other travel-related service providers – by providing our customers with access to our large audience
of highly-qualified, highly-engaged users. The key drivers of our click-based advertising revenue are described below, as well as a summary of
our key growth areas and the current trends impacting our business. In December 2011, Expedia, Inc., or Expedia, spun out the TripAdvisor
business into a stand-alone public company. This transaction is described in more detail in the section entitled “—Spin-Off” below.
Key Drivers of Click
-Based Advertising Revenue
In the year ended December 31, 2011, 79% of our total revenue came from our core cost-per-click, or CPC, based lead generation product.
The key drivers of our click-based advertising revenue include the growth in hotel shoppers, user conversion and lead pricing. Total traffic
growth, or growth in monthly visits from unique IP addresses (as defined below), is reflective of our overall brand growth. We continue to refine
our ability to track and analyze sub-segments of traffic and its correlation to revenue generation and we believe that hotel shoppers is a more
useful indicator of revenue growth. We use the term “hotel shoppers” to refer to users who view a listing of hotels in a city or visitors who view
a specific hotel page.
After hotel shoppers, the second driver of our business is user conversion, which is a measure of how many hotel shoppers ultimately click
on a CPC link that generates revenue for us. User conversion on our site is primarily driven by three factors: merchandising, commerce coverage
and choice. We think of merchandising as the number and location of ads that are available on a page; commerce coverage is whether we have a
client who can take an online booking for a particular property; and choice is the number of clients available for any given property, allowing the
user to shop for the best price. In summary, our CPC revenue depends on the number of hotel shoppers that we can get interested in a property,
whether there is a commerce link available for that hotel shopper to click on for that property and whether there are several commerce choices
available for that property, so the hotel shopper can shop around. The other key driver that we look at is the CPC price that online travel agencies
and hoteliers are willing to pay us for our leads.
Key Growth Areas
We do not intend to alter our growth strategy now that we are a stand-alone public company. We continue to invest in areas of potential
growth, including our social, mobile and global initiatives as well as our subscription-based businesses, which include vacation rentals and
business listings.
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Item 7
Management
’
s Discussion and Analysis of Financial Condition and Results of Operations