Expedia 2006 Annual Report Download - page 14

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offline advertising. In addition, our Expedia-branded websites provide content and services to the travel
channel on the MSN.com website in the United States and MSN websites in Canada, France, Germany, Italy,
and the United Kingdom. Our marketing programs and initiatives include promotional offers such as coupons
and gift cards. In addition, we introduced the ThankYou Rewards Network during the fourth quarter of 2006,
whereby travelers earn points for their travel bookings.
We also make use of affiliate marketing. The Expedia.com and Hotels.com-branded websites receive
bookings from consumers who have clicked-through to the respective websites through links posted on affiliate
partner websites. We have agreements with thousands of third-party affiliate partners, including a number of
leading travel companies, pursuant to which we pay a commission for bookings originated from their websites.
Affiliate partners can make travel products and services available through an Expedia-branded website, a co-
branded website or their own private label website. We also provide our affiliates with technology and access
to a wide range of products and services.
Operations and Technology
We provide 24-hour-a-day, seven-day-a-week traveler support by telephone or via e-mail. For purposes of
operational flexibility, we provide this support infrastructure with a combination of in-house and outsourced
call centers which are located in various locations throughout the world.
Our systems infrastructure and web and database servers are hosted by third-party web hosting suppliers
in various locations, mainly in the United States, which provide communication links, as well as 24-hour
monitoring and engineering support. The web hosting facilities have their own generators and multiple back-up
systems. Significant amounts of our computer hardware for operating the websites are also located at these
facilities.
We have developed innovative technology to power our global travel marketplace. For example, our
Expert Searching and Pricing Platform (“ESP Platform”), which our Expedia-branded websites use, includes
two components: (1) a fare-searching engine that enables broad and deep airline fare and schedule searches
and (2) a common database platform that allows our Expedia-branded websites and our travelers to bundle
diverse types of travel services together dynamically, which further enables our Expedia-branded websites to
cross-market and package travel inventory. The ESP Platform has been historically an important contributor to
our growth in the online travel industry.
Another core piece of our technology suite is our Best Fare Search technology. This technology
essentially deconstructs the segment feeds from GDS partners for air flight searches and recommends the best
way to re-assemble multi-leg itineraries so that they are less expensive and more flexible for the traveler.
We are investing in and building a scaleable, extensible, service-oriented technology platform which will
extend across our portfolio of brands. We plan to significantly invest in this platform in 2007 and 2008. We
expect this investment to result in long-term cost savings, improved flexibility and faster go-forward
innovation. This transition should also allow us to improve our site merchandising, browse and search
functionality, add significant personalization features, and ultimately improve our ability to drive higher
return-on-investment in our online and offline advertising. We expect this transition to occur in a phased
approach, with portions of our worldwide points of sale migrating to the new platform beginning in 2007.
We are also adding a significant upgrade to our data aggregation and mining capabilities across Expedia
with the installation of an enterprise data warehouse, which is scheduled to begin yielding traveler-facing
benefits in 2007.
Competition
Our brands compete in rapidly evolving and intensely competitive markets. We believe the relatively low
percentage of total travel sales transacted online in the global travel industry indicates that these markets
represent especially large opportunities for Expedia and those of its competitors that wish to expand their
brands and businesses abroad.
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