TripAdvisor 2013 Annual Report Download - page 49

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
TripAdvisor is the world’s largest online travel company. Our mission is to help people around the world
plan and have the perfect trip by giving them access to the reviews and opinions of the millions of travelers who
make up our global online community. TripAdvisor aggregates reviews and opinions about destinations,
accommodations (including hotels, B&Bs, specialty lodging and vacation rentals), restaurants and activities
throughout the world. Our platform also enables consumers to book hotels, vacation rentals, airline tickets,
vacation packages, destination services and even cruises.
Our branded websites include tripadvisor.com in the United States and localized versions of the website in
33 other countries, including China under the brand daodao.com. Our TripAdvisor-branded websites globally
reached more than 260 million monthly unique visitors during the year ended December 31, 2013, according to
Google Analytics. We feature over 125 million reviews and opinions on more than 775,000 hotels and
accommodations and approximately 550,000 vacation rentals—as well as more than 2 million restaurants and
400,000 attractions in 139,000 destinations throughout the world. Beyond travel-related content, our websites
also include links to the websites of our customers, including travel advertisers, allowing travelers to directly
book their travel arrangements. In addition to the flagship TripAdvisor brand, we now manage and operate 20
other travel media brands, connected by the common goal of providing comprehensive travel planning resources
across the travel sector.
Executive Summary
At present, our financial results are principally dependent on our ability to grow click-based advertising
revenue. We continue to invest in areas of potential click-based revenue growth, including international and
mobile initiatives, while also investing in our Display-based advertising, Business Listings and Vacation Rentals
businesses. We aim to leverage our position as the largest online travel company to become an increasingly
important partner for advertisers—including hoteliers, online travel agencies and other travel-related service
providers—by providing our customers with access to a large audience of highly-qualified, highly-engaged users.
The key drivers of our click-based and display-based advertising revenue are described below, as well as a
summary of our key growth areas and the current trends impacting our business.
Key Drivers of Click-Based Advertising Revenue
For the years ended December 31, 2013, 2012 and 2011, 74%, 77% and 79%, respectively, of our total
revenue came from our core CPC-based lead generation product. The key drivers of our click-based advertising
revenue include the growth in monthly unique hotel shoppers and revenue per hotel shopper.
•Hotel shoppers: Total traffic growth, or growth in monthly visits from unique visitors, is reflective of
our overall brand growth. We track and analyze sub-segments of traffic and their correlation to revenue
generation and utilize hotel shoppers as an indicator of revenue growth. We use the term “hotel
shoppers” to refer to users who view a listing of hotels in a city or visitors who view a specific hotel
page. Hotel shoppers tend to be seasonal and also tend to vary based on general economic conditions.
Our number of hotel shoppers increased 36% for the year ended December 31, 2013 over 2012 and
increased 32% for the year ended December 31, 2012 over 2011, according to our log files.
•Revenue per hotel shopper: Revenue per hotel shopper is a metric we use to analyze how effectively
we are able to monetize hotel shoppers based on a combination of user conversion and pricing. User
conversion is a measure of how many hotel shoppers ultimately click on a CPC link that generates
revenue for us. User conversion on our site is primarily driven by three factors: merchandising,
commerce coverage and choice. We define merchandising as the number and location of ads that are
available on a page; we define commerce coverage as whether we have a client who can take an online
booking for a particular property; and we define choice as the number of clients available for any given
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