TripAdvisor 2015 Annual Report Download - page 15

Priceline(andtheirsubsidiaries),accountedforacombined46%oftotalrevenue.Whileweenterintomasteradvertisingcontractswithourpartners,thetermsof
theseagreementsgenerallyaddressmatterssuchasprivacyandcompliance,paymenttermsandconditions,terminationandindemnitiesandmostofthese
contractscanbeterminatedbyourpartnersatwilloronshortnotice.Ifanyofoursignificantadvertisersweretoceaseorsignificantlycurtailadvertisingonour
websites,wecouldexperiencearapiddeclineinourrevenueoverarelativelyshortperiodoftimewhichwouldhaveamaterialimpactonourbusiness.
Our businesses could be negatively affected by changes in Internet search engine algorithms and dynamics, or search engine disintermediation.
WerelyheavilyonInternetsearchengines,suchasGoogle,togeneratetraffictoourwebsites,principallythroughthepurchaseoftravel-relatedkeywords.
Searchengines,includingGoogle,frequentlyupdateandchangethelogicthatdeterminestheplacementanddisplayofresultsofauser’ssearch,suchthatthe
purchasedoralgorithmicplacementoflinkstoourwebsitescanbenegativelyaffected.Inaddition,asearchenginecould,forcompetitiveorotherpurposes,alter
itssearchalgorithmsorresultscausingourwebsitestoplacelowerinsearchqueryresults.Ifamajorsearchenginechangesitsalgorithmsinamannerthat
negativelyaffectsthesearchenginerankingofourwebsitesorthoseofourpartners,orifcompetitivedynamicsimpactthecostoreffectivenessofSEOorSEMin
anegativemanner,ourbusinessandfinancialperformancewouldbeadverselyaffected,potentiallytoamaterialextent.Furthermore,ourfailuretosuccessfully
manageourSEOandSEMstrategiescouldresultinasubstantialdecreaseintraffictoourwebsites,aswellasincreasedcostsifweweretoreplacefreetrafficwith
paidtraffic.
Inaddition,totheextentthatGoogleorotherleadingsearchormetasearchenginesthathaveasignificantpresenceinourkeymarkets,disintermediate
OTA’sortravelcontentprovidersbyofferingcomprehensivetravelplanningorshoppingcapabilities,orreferthoseleadstosuppliersdirectly,ortootherfavored
partners,therecouldbeamaterialadverseimpactonourbusinessandfinancialperformance.Totheextenttheseactionshaveanegativeeffectonoursearch
traffic,whetherondesktop,tabletormobiledevices,ourbusinessandfinancialperformancecouldbeadverselyaffected.
We continue to work aggressively on rolling out our “instant booking” feature despite anticipated and potential unanticipated challenges and risks which could
have a negative impact on our business and financial performance.
Instantbookingisafeaturethatenablesuserstobookahotelreservationdirectlywithahoteloronlinetravelagencypartnerwhileremainingonthe
TripAdvisorwebsite.WehavebeengraduallyrollingthisfeatureoutintheU.S.sinceJune2014,and,in2015,acceleratedtherolloutofinstantbookingforhotels
acrossourU.S.andU.K.platformstoallusersonalldevices.Weplantocontinuerollingoutthisfeaturetoadditionalinternationalmarketsin2016.Webelieve
thatallowinguserstobookdirectlyonlinewithoutleavingtheTripAdvisorsitewillresultinabetteruserexperienceaswellas,ultimately,additionalrevenueto
theCompany.However,thereareadditionalrisksassociatedwiththisfeature.
Oursuccessdependsinlargepartonourabilitytomaintainandexpandrelationshipswithpartnersinthetravelindustry,includinghotelchains,online
travelagenciesandtravelsuppliersandotheronlinetravelpartners.Weareworkingwithsomeofthesepartnersto“power”theinstantbookingfunctiononour
websiteandbelievethatthesepartnerswillalsobenefitfromthisfeature,throughincreasedreservationsandmoredirectrelationshipswithtravelers.Some
partners,however,mayviewthisnewfunctionalityasdirectlycompetitiveandtakeactionthatcouldadverselyaffectourbusinessandfinancial
performance.Theycouldreduceoreliminateadvertisingrevenuepaidtous,chargefororotherwiserestrictaccesstocontent,furtherreducetheiraveragedaily
rates,decidenottomaketheirtravelinventoryavailabletous,ordecidenottoprovideaccuratebookinginformation.Anyoftheseactionscouldhaveanadverse
impactonourbusiness.
The roll out of our new “instant booking” feature may not meet our expectations and may subject us to additional and ongoing operational risks.
Currentlyourinstantbookingfeatureismonetizingatalowerrevenueperhotelshopperratecomparedtoourmetasearchfeature.Whileweexpecttoclose
thismonetizationgap,primarilybycontinuingtostreamlineourbookingpathtoenhanceuserexperience,persistentlypromotingtheTripAdvisorbrandasa
bookingchannelandcontinuingtoseekpartnerswithstrongbrandingandsupplychannels,thereisnoguaranteethattheseinitiativeswillultimatelybesuccessful
and,ifnot,ourrevenuemaybemateriallyadverselyaffected.
Ourinstantbookingrevenuerecordedundertheconsumptionmodelisrecognizedatthetimethetravelercompleteshisorherstay.Comparatively,revenue
underthetransactionmodelisrecordedatthetimetheuserbooksthestayandrevenuefromourmetasearchfeatureisrecordedwhenatravelermakestheclick-
throughtothetravelpartners’websites.Basedonourinternaldata,wecurrentlyestimatetheaveragetimebetweenauserbookingastaytoconsumingastayis
approximatelythreetofiveweeks,subjecttoseasonalvariations.Infutureperiods,greatercontributionofrevenuefromourinstantbookingconsumptionmodel
wouldresultinadditionalrevenuerecognizedatthetimeofaconsumedstayandthusashiftinthetimingofourrevenuerecognition.
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