TripAdvisor 2012 Annual Report Download - page 23

Item 1A. Risk Factors
An investment in our Common Stock involves risks. You should consider carefully the risks described below
together with all of the other information included in this Annual Report on Form 10-K. This Annual Report on
Form 10-K contains forward-looking statements that contain risks and uncertainties. Please refer to the section
entitled “Cautionary Note Regarding Forward-Looking Statements” on page 1 of this Annual Report on Form
10-K in connection with your consideration of the risk factors and other important factors that may affect future
results described below.
If we or our partners are unable to successfully monetize our user traffic, or if our partners choose not to
advertise with us, or choose to reduce their spending with us, our financial performance could be materially
adversely affected.
Even if we succeed in driving traffic to our websites, neither we nor our partners may be able to monetize
this traffic or otherwise retain consumers. We maintain relationships with our click-based advertising partners,
predominantly online travel agencies and direct suppliers in the hotel and airline product categories, and include
their data and content in our search results. The loss of existing relationships with our partners, or an inability to
continue to add new ones, may result in our hotel metasearch display providing incomplete pricing, availability
and other information, which could reduce user confidence and have an adverse impact on traffic. A metasearch
product is an interface that displays availability and pricing information from multiple sources on one page. Our
revenues are based significantly on CPC pricing and volume of clicks by our users. We expect that click volume
may decrease as a result of our transition to hotel metasearch display, but that CPC pricing levels will rise. To the
extent that the expected increase in CPC pricing levels does not sufficiently offset the expected drop in click
volume, our financial performance may be materially adversely affected. We cannot guarantee that our partners
will continue to advertise with us. If our partners choose not to advertise with us, or choose to reduce their
spending with us, our financial performance may be materially adversely affected.
If we are unable to continue to increase visitors to our websites and to cost-effectively convert these visitors
into repeat users or contributors, our advertising revenue could decline.
The primary asset that we use to attract traffic to our websites and convert these visitors into repeat users is
the content created by users of our websites, particularly such content’s volume, unique nature and organization.
Our success in attracting users depends, in part, upon our continued ability to collect, create, organize and
distribute high-quality, commercially valuable content in a cost-effective manner at a scale that connects
consumers with content that meets their specific interests and enables them to share and interact with the content
and supporting communities. There can be no assurances that we will continue to receive content in a cost-
effective manner or in a manner that timely meets rapidly changing consumer demand, if at all. Any failure to
obtain such content could adversely affect user experiences and reduce traffic driven to our websites, which
would make our websites less attractive to advertisers. Any change in the cost structure pursuant to which we
obtain our content currently, or in travelers’ relative appreciation of user-based versus expert content, could
negatively impact our business and financial performance.
Our businesses could be negatively affected by changes in search engine algorithms and dynamics, or search
engine disintermediation.
We rely heavily on Internet search engines such as Google, including through the purchase of travel-related
keywords, to generate traffic to our websites. We obtain a significant amount of traffic via search engines and,
therefore, utilize techniques such as SEO and SEM to improve our placement in relevant search queries. Search
engines, including Google, frequently update and change the logic that determines the placement and display of
results of a user’s search, such that the purchased or algorithmic placement of links to our websites can be
negatively affected. Moreover, a search engine could, for competitive or other purposes, alter its search
algorithms or results causing our websites to place lower in search query results. If a major search engine
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