TripAdvisor 2012 Annual Report Download - page 25

that we do not expect. If our partners do not receive the benefits they expect from their advertising spend with us,
they may reduce their spending. In addition, if new, more effective advertising models were to emerge, there can
be no assurance that we will have the ability to offer these models, or offer them in an effective manner. To the
extent new technology platforms, such as smartphone and tablet computing, begin to take market share from
established platforms, there can be no assurance that our existing advertising models will operate successfully on
these new platforms, or work as effectively as on the desktop computer platform.
Furthermore, our CPC pricing for click-based advertising depends, in part, on competition between
advertisers. If our large advertisers become less competitive with each other, merge with each other or with our
competitors, focus more on per-click profit than on traffic volume, or are able to reduce CPCs, this would have
an adverse impact on our CPCs which would, in turn, have an adverse effect on our business, financial condition
and results of operations.
We rely on a relatively small number of significant advertisers and any reduction in spending by or loss of
those advertisers could seriously harm our business.
We derive a substantial portion of our revenue from a relatively small number of significant advertisers. If
any of our significant advertisers were to cease or to significantly curtail advertising on our websites, we could
experience a rapid decline in our revenue over a relatively short period of time. For example, for the year ended
December 31, 2012, our two most significant advertising customers accounted for a combined 48% of total
revenue.
Changes we make to our user experience and business model may not yield the benefits we expect and may
have adverse impacts that we did not anticipate.
We are continually working to improve our user experience and business model in order to drive user traffic
and conversion rates. We can give no assurances that the changes we make will yield the benefits we expect and
will not have adverse impacts that we did not anticipate. If we reverse any of the changes we make to our user
experience or business model we may incur additional costs, reputational harm and a decline in user traffic and
advertising revenue.
Our success depends upon the acceptance, and successful measurement, of online advertising as an
alternative to offline advertising.
We believe that a significant discrepancy exists between the percentage of the advertising market allocated
to online advertising and the percentage of consumer time spent on online media consumption as opposed to
offline advertising and media consumption. Long-term growth of our business will depend heavily on this
distinction between online and offline advertising narrowing or being eliminated, which may not happen in a
manner or to the extent that we currently expect. We compete with traditional media for advertising dollars, in
addition to websites with higher levels of traffic. If online advertising ceases to be an acceptable alternative to
offline advertising, our business, financial condition and results of operations will be negatively impacted.
Because the online marketing industry is relatively new and rapidly evolving, it uses different methods than
traditional media to gauge its effectiveness. Some of our potential customers have little or no experience using
the Internet for advertising and marketing purposes and have allocated only limited portions of their advertising
and marketing budgets to the Internet. The adoption of Internet advertising, particularly by those entities that
have historically relied upon traditional media for advertising, requires the acceptance of a new way of
conducting business, exchanging information and evaluating new advertising and marketing technologies and
services. As a result, we are continually evaluating changes to aspects of our business model to keep pace with
the expectations of users and advertisers, and these changes may not yield the benefits we expect. In particular,
we are dependent on our clients’ adoption of new metrics to measure the success of online marketing campaigns.
We may also experience resistance from traditional advertising agencies who may be advising our clients. Any
15