TripAdvisor 2015 Annual Report Download - page 14

Wepostourcodeofbusinessconductandethics,whichappliestoallemployees,includingallexecutiveofficers,seniorfinancialofficersanddirectors,on
ourcorporatewebsiteatwww.tripadvisor.com.OurcodeofbusinessconductandethicscomplieswithItem406ofSECRegulationS-Kandtherulesof
NASDAQ.WeintendtodiscloseanychangestothecodethataffecttheprovisionsrequiredbyItem406ofRegulationS-K,andanywaiversofthecodeofethics
forourexecutiveofficers,seniorfinancialofficersordirectors,onourcorporatewebsite.


Ite m 1A. Risk Factors
You should consider carefully the risks described below together with all of the other information included in this Annual Report as they may impact our
business, results of operations and/or financial condition. 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visitorstoourwebsitesandconvertthesevisitorsintorepeatusersisourabilitytocollect,create,organizeand
distributehigh-quality,commerciallyvaluablecontentthatmeetsusers’specificinterestsandenablesthemtousethecontentandinteractwiththesupporting
communities.Therecanbenoassurancesthatwewillcontinuetoobtaincontentinacost-effectivemannerorinamannerthatmeetsrapidlychangingconsumer
demand.Anyfailuretoobtainandmanagesuchcontentinamannerthatwillengageusers,orafailuretoprovidecontentandproductsthatareperceivedasuseful,
reliableandtrustworthy,couldadverselyaffectuserexperiencesandreducetraffic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,intravelers’relativeappreciationofuser-basedversusexpertcontent,inthe
qualityofourcontentversusothersites’contentoranyotherchangesthatcouldreducetraffictoourwebsiteswouldnegativelyimpactourbusinessandfinancial
performance.
We derive a substantial portion of our revenue from advertising and any significant reduction in spending by advertisers could harm our business.
Wederiveasubstantialportionofourrevenuefromthesaleofadvertising,primarilythroughclick-basedadvertisingand,toalesserextent,display-based
advertising.Weenterintomasteradvertisingcontractswithouradvertisingpartners,however,theseagreementsaregenerallylimitedtomatterssuchasprivacy
andcompliance,paymenttermsandconditions,terminationandindemnitiesandmostcanbeterminatedbyourpartners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.Ifweareunabletoprovidevaluetoouradvertisingpartners,theywilllikelystopplacingadsonourwebsites,whichwouldharmourrevenuesandbusiness.
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.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.
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click-basedadvertisingrevenuewhichwould,inturn,haveanadverseeffectonourbusiness,financialconditionandresultsof
operations.
Expendituresbyadvertisersalsotendtobecyclical,subjecttovariationbasedonbudgetaryconstraints,projectcancellationordelay,andtoreflectoverall
economicconditionsandbuyingpatterns.Ifweareunabletogenerateadvertisingrevenueduetofactorsoutsideofourcontrol,ourbusinessandfinancial
performancewouldbeadverselyaffected.
We rely on a relatively small number of significant advertising partners and any reduction in spending by or loss of these partners advertisers could seriously
harm our business.
Wederiveasubstantialportionofourrevenuefromarelativelysmallnumberofadvertisingpartnersandrelysignificantlyonourrelationships.For
example,fortheyearendedDecember31,2015,ourtwomostsignificantadvertisingpartners,Expediaand

11