TripAdvisor 2013 Annual Report Download - page 19

metasearch, we continue to offer and improve features such as user reviews, photos, mapping, and
filtering to assist users in finding the right hotel for their trip.
•Investing in Traffic Growth. Attracting more visitors to our sites is at the core of our strategic plan and
we dedicate significant time and financial resources towards amplifying our global brand. We do this
through online and offline marketing channels to maximize the number of users who navigate to our
site either directly, also known as domain direct traffic, or from the marketing channel directly. Offline
advertising channels we have used in the past to amplify our brands include: permanent branding
campaigns such as TripAdvisor-branded travel awards, certificates, stickers and badges and television
advertising. Online advertising channels we have used in the past to amplify our brand include, but are
not limited to: customer relationship management email campaigns, or CRM; social networks; organic
search through search engine optimization, or SEO; paid search through search engine marketing, or
SEM; and referrals from partners whose sites contain links to TripAdvisor content, badges or widgets.
At approximately 11% of global online travel uniques, according to comScore Media Metrix, we
believe that we have a large opportunity to continue growing visitors. In order to achieve this objective,
we intend to invest in the aforementioned channels, as well as any new channels that we may identify
in the future.
•Enhancing International Offerings. We are focused on strengthening our broad global footprint as we
believe that international markets represent a long-term strategic opportunity for us. We are continuing
to improve localization and grow our user base in Europe, Asia and South America, especially in
emerging markets, such as Brazil, Russia and China. In addition, we currently have two lead product
offerings in the Chinese market—DaoDao and Kuxun—both headquartered in Beijing. We continue to
invest heavily and operate at a loss in the Chinese market and will continue to enhance our
international offerings.
•Growth through Strategic 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 grow our business and expand our product and
service offerings through acquisitions that either complement our existing businesses or provide
additional resources, products and/or services that will improve the user experience.
Our Business Model
Our platforms connect users wishing to plan and have the best travel experiences with providers of travel
accommodations and travel services around the world. 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, allowing users to
book room nights on our transactional sites, and other revenue including content licensing.
•Click-Based Advertising Revenue. Our largest source of revenue is click-based advertising, which
includes links to our partners’ booking sites and contextually-relevant branded and unbranded text links.
Our click-based advertising partners are predominantly online travel agencies and direct suppliers in the
hotel, airline and cruise product categories. 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. Most of our click-based advertising contracts can be terminated by the advertisers at will or on short
notice. For the years ended December 31, 2013, 2012 and 2011, we earned $696 million, $588 million
and $500 million, respectively, of revenue from click-based advertising.
•Display-Based Advertising Revenue. We 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 are predominately direct
suppliers in the hotel, airline and cruise categories and online travel agencies, we also accept display
advertising from 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
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