TripAdvisor 2013 Annual Report Download - page 26

Item 1A. Risk Factors
You should consider carefully the risks described below together with all of the other information included
in this Annual Report. The risks and uncertainties described below are not the only ones we face. Additional risks
and uncertainties not presently known to us or that we currently believe are immaterial may also impair our
business, results of operations or financial condition. If any of the following risks occur, our business, financial
condition, operating results and cash flows could 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. If people do not perceive our products to be useful, reliable and trustworthy, we
may not be able to attract or retain users or otherwise maintain or increase the frequency and duration of their
engagement. There can be no assurances that we will continue to obtain content in a cost-effective manner or in a
manner that timely meets rapidly changing consumer demand. Any failure to obtain such content or organize and
distribute such content in any manner that will engage users 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 or our user-based content versus other sites’ user-based content, could negatively
impact our business and financial performance.
We derive substantially all of our revenue from advertising and any significant reduction in spending by
advertisers could harm our business.
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. Most of our advertisers can terminate their contracts
with us at will or on short notice. Our ability to grow advertising revenue with our existing or new advertising
partners is dependent in large part on our ability to generate revenue for them. Advertisers will not continue to do
business with us if their investment in such advertising does not generate sales leads, customers, bookings, or
revenue and profit on a cost-effective basis, or if we do not deliver advertisements in an effective manner. If we
are unable to remain competitive and provide value to our advertisers, they will likely stop placing ads on our
websites, which would harm our revenues and business. In addition, we cannot guarantee that our current
advertisers will fulfill their obligations under existing contracts, continue to advertise beyond the terms of
existing contracts or enter into any additional contracts with us.
Click-based advertising accounts for the majority of our advertising revenue. Any changes we make to our
business model may impact our advertising revenue in ways 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 could have an
adverse impact on our CPCs which would, in turn, have an adverse effect on our business, financial condition
and results of operations.
16