TripAdvisor 2015 Annual Report Download - page 34

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application,wherecoverageisavailable.InadditiontotheflagshipTripAdvisorbrand,wenowmanageandoperate23othertravelmediabrands,connectedby
thecommongoalofprovidingusersthemostcomprehensivetravel-planningandtrip-takingresourcesinthetravelindustry.
Executive Summary
Ourlong-termfinancialresultsareprincipallydependentonourabilitytogrowclick-basedadvertisingrevenue,orCPCrevenue.Weareinvestinginareas
ofpotentialCPCrevenuegrowth,includingenablinguserstotransactdirectlyonoursite,orinstantbooking,internationalexpansionandinnovationsinthemobile
userexperience.Wearealsoinvestingindisplay-basedadvertising,BusinessListings,Attractions,RestaurantsandVacationRentals.Asthelargestonlinetravel
website,webelieveweareanattractivemarketingchannelforadvertisers—includinghotelchains,independenthoteliers,onlinetravelagencies,destination
marketingorganizations,andothertravel-relatedandnon-travelrelatedproductandserviceproviders—whoseektoselltheirproductsandservicestoourlarge
userbase.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,current
trendsimpactingourbusinessandourreportingsegments,whichcurrentlyconsistsofourHotelsegmentandOthersegment.
Key Drivers of Click-Based Advertising Revenue
FortheyearsendedDecember31,2015,2014and2013,64%,70%and74%,respectively,ofourtotalrevenuecamefromourCPCproduct.Allofour
CPCrevenueisincludedinourHotelsegment.ThekeydriversofourCPCrevenueincludethegrowthinmonthlyuniquehotelshoppersandparticularlyrevenue
perhotelshopper.
·Hotel shoppers: Webelievetotaltrafficgrowth,orgrowthinmonthlyvisitsfromuniquevisitors,isreflectiveofouroverallbrandgrowth.
Additionally,wetrackandanalyzesub-segmentsofourtrafficandtheircorrelationtorevenuegenerationandutilizedataregardinghotelshoppers
asakeyindicatorofrevenuegrowth.Weusetheterm“hotelshoppers”torefertovisitorswhovieweitheralistingofhotelsinacityoraspecific
hotelpage.Thenumberofhotelshopperstendstovarybasedonseasonalityofthetravelindustryandgeneraleconomicconditions,aswellasother
factorsoutsideofourcontrol.Giventhesefactors,aswellasthetrendtowardsincreasedusageonmobiledevices(forwhichusagetrendscontinue
toevolve)andinternationalgrowth,quarterlyandannualhotelshoppergrowthisdifficulttoforecast.Averagemonthlyuniquehotelshopperson
TripAdvisorsitesincreased16%fortheyearendedDecember31,2015over2014andincreased10%fortheyearendedDecember31,2014over
2013,accordingtoourinternallogfiles.TheincreaseinhotelshoppersfortheyearendedDecember31,2015isprimarilyduetosuccessinour
onlinemarketingstrategy,agrowingnumberofhotelshoppersvisitingourwebsitesonmobiledevices,aswellasfavorablecomparativesforsearch
engineoptimization(“SEO”)duetoloweraveragemonthlyuniquehotelshoppergrowth,duringthemajorityoftheyearendedDecember31,
2014.Increasingthenumberofhotelshoppersonoursitesremainsatopstrategicpriority.
·Revenue per hotel shopper: Revenueperhotelshopperisdesignedtomeasurehoweffectivelyweconverthotelshoppersintorevenueon
TripAdvisor-brandedwebsites.Revenueperhotelshopperismadeupofthreefactors—thenumberofmonthlyuniquehotelshopperson
TripAdvisor-brandedwebsites,therateofconversionofahotelshoppertoapaidclickorabookinginthecaseofourinstantbookingfeature,and
thepriceperclickorcommissionperbookingthatwereceive.
 o Conversion: ConversionofahotelshoppertoapaidclickorbookingonaTripAdvisorsiteisdrivenprimarily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partnerwhocantakeanonlinebookingforaparticularproperty;andwe
definechoiceasthenumberofpartnersavailableforanygivenproperty.Hotelshoppersvisitingviamobilegenerallymonetizeata
significantlylowerratethanhotelshoppersvisitingviadesktopandtablet.
 o Cost per click (CPC): Costperclickistheeffectivepricethatpartnersarewillingtopayforahotelshopperlead,andisdetermined
throughacompetitivebiddingprocess.CPCsaregenerallylowerininternationalmarketsaswellasonmobile.
Revenueperhotelshopperdecreased6%fortheyearendedDecember31,2015incomparisonto2014,andincreased15%fortheyearended
December31,2014incomparisonto2013,accordingtoourinternallogfiles.Thedecreaseinrevenueperhotelshopperfortheyearended
December31,2015over2014,isprimarilyduetopricingpressureexperiencedduring2015particularlyinthesecondhalfoftheyear;which
includestheimpactfrom(i)productchanges,suchasourdecisiontoacceleratetherolloutofourinstantbookingfeaturetoourUSandUKmarkets
onalldevicesinthethirdquarterof2015,(ii)theprolongedweaknessoftheEuro,whichhasdecreasedourCPCs,and(iii)agrowingnumberof
hotelshoppersvisitingourwebsitesonmobiledevices.Revenueperhotelshopperincreased15%fortheyearendedDecember31,2014over2013,
largelyduetoourimplementationofhotelmetasearchcompletedinJune2013,which
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