TripAdvisor 2012 Annual Report Download - page 49

Increasing Mobile Usage. Consumers are increasingly using smartphone and tablet computing devices to
access the Internet. To address these demands, we continue to extend the platform to develop smartphone and
tablet applications to allow greater access to our travel information and resources. Although the substantial
majority of our smartphone users also access and engage with our websites on personal computers and tablets
where we display advertising, our users could decide to increasingly access our products primarily through
smartphone devices. Historically we have not displayed graphic advertising on smartphones and our smartphone
monetization strategies are still developing. Improvement of our mobile offerings is a key company priority
which we believe is necessary to help us maintain and grow our user base and engagement over the long term
and we will continue to invest and innovate in this growing platform.
Click-Based Advertising Revenue. In recent years, the majority of our revenue growth resulted from higher
click-based advertising revenue due to increased traffic on our websites and an increase in the volume of clicks
on our advertisers’ placements. Although click-based advertising revenue growth has generally been driven by
traffic volume, we remain focused on the various factors that could impact revenue growth, including, but not
limited to, the growth in hotel shoppers, CPC pricing fluctuations, the overall economy, the ability of advertisers
to monetize our traffic, the quality and mix of traffic to our websites, and the quality and mix of traffic from our
advertising placements to advertisers, as well as advertisers’ evolving approach to transaction attribution models
and return on investment targets. We monitor and regularly respond to changes in these factors in order to
strategically improve our user experience, customer satisfaction and monetization in this dynamic environment.
Global Economic Conditions. In late 2008 and throughout 2009, weak global economic conditions created
uncertainty for travelers and suppliers, and put pressure on discretionary spending on travel and advertising.
Since 2010 the travel industry has been gradually improving. However, global economic conditions remain
uncertain, and in particular, we anticipate travel expenditures in Europe to continue to be adversely effected by
the economic issues overseas.
Spin-Off
On April 7, 2011, Expedia announced its plan to separate into two independent public companies in order to
better achieve certain strategic objectives of its various businesses. We refer to this transaction as the “Spin-Off.”
Non-recurring expenses incurred to affect the Spin-Off during the year ended December 31, 2011 have been
included within Spin-Off costs in the consolidated and combined statements of operations.
On December 20, 2011, following the close of trading on the NASDAQ Global Select Market
(“NASDAQ”), the Spin-Off was completed, and TripAdvisor began trading as an independent public company
on December 21, 2011. Expedia effected the Spin-Off by means of a reclassification of its capital stock that
resulted in the holders of Expedia capital stock immediately prior to the time of effectiveness of the
reclassification having the right to receive a proportionate amount of TripAdvisor capital stock. A one-for-two
reverse stock split of outstanding Expedia capital stock occurred immediately prior to the Spin-Off, with cash
paid in lieu of fractional shares.
In connection with the Spin-Off, Expedia contributed or transferred all of the subsidiaries and assets relating
to Expedia’s TripAdvisor Media Group, which were comprised of the TripAdvisor Holdings, LLC combined
financial statements, to TripAdvisor and TripAdvisor or one of its subsidiaries assumed all of the liabilities
relating to Expedia’s TripAdvisor Media Group. TripAdvisor now trades on the NASDAQ under the symbol
“TRIP.”
In connection with the Spin-Off, on December 20, 2011, TripAdvisor Holdings, LLC distributed
approximately $406 million in cash to Expedia in the form of a dividend. This distribution was funded through
borrowings under a credit agreement, dated as of December 20, 2011, by and among TripAdvisor, TripAdvisor
Holdings, LLC, and TripAdvisor LLC, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative
agent, and J.P. Morgan Europe Limited, as London agent (this credit agreement, together with all exhibits,
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