Expedia 2008 Annual Report Download - page 22

System interruption and the lack of redundancy in our information systems may harm our
businesses.
We rely on computer systems to facilitate and process transactions. We have experienced and may in the
future experience system interruptions that make some or all of these systems unavailable or prevent us from
efficiently fulfilling orders or providing services to third-parties. Any interruptions, outages or delays in our
systems, or deterioration in their performance, could impair our ability to process transactions and decrease
our quality of service that we can offer to our travelers. If we were to experience frequent or persistent system
failures, our reputation and brands could be harmed.
In addition, we do not have backup systems or contingency plans for certain critical aspects of our
operations or business processes, many other systems are not fully redundant and our disaster recovery or
business continuity planning may not be sufficient. Fire, flood, power loss, telecommunications failure, break-
ins, earthquakes, acts of war or terrorism, acts of God, computer viruses, physical break-ins, electronic
intrusion attempts from both external and internal sources and similar events or disruptions may damage or
impact or interrupt computer or communications systems or business processes at any time. Although we have
put measures in place to protect certain portions of our facilities and assets, any of these events could cause
system interruption, delays and loss of critical data, and could prevent us from providing services to our
travelers and/or third parties for a significant period of time. Remediation may be costly and we may not have
adequate insurance to cover such costs. Moreover, the costs of enhancing infrastructure to attain improved
stability and redundancy may be time consuming and expensive and may require resources and expertise that
are difficult to obtain.
Intense competition for advertising revenue may adversely affect our ability to achieve or maintain
market share and operate profitably.
Expedia, Inc. websites, including in particular the TripAdvisor Media Network, compete for advertising
dollars with large internet portal sites, such as American Online, MSN and Yahoo!, that offer listing or other
advertising opportunities for travel-related companies. These companies have significantly greater financial,
technical, marketing and other resources and large client bases. We also compete with search engines like
Google and Yahoo! Search that offer pay-per-click advertising services. In addition, we compete with
newspapers, magazines and other traditional media companies that provide offline and online advertising
opportunities. We expect to face additional competition as other established and emerging companies,
including print media companies, enter the online advertising market. Competition could results in reduced
margins on our advertising services, loss of market share or less use of our sites by travel companies and
travelers. If we are not able to compete effectively with current or future competitors as a result of these and
other factors, our business could be materially adversely affected. In addition, the TripAdvisor Media Network
is increasingly reliant on natural and paid search traffic from major search engines, whose per unit costs have
been increasing.
Mr. Diller currently controls Expedia. If Mr. Diller ceases to control the company, Liberty Media
Corporation may effectively control the company.
Subject to the terms of a Stockholders Agreement between Mr. Diller and Liberty Media Corporation,
Mr. Diller holds an irrevocable proxy to vote shares of Expedia stock held by Liberty. Accordingly, Mr. Diller
effectively controls the outcome of all matters submitted to a vote or for the consent of our stockholders (other
than with respect to the election by the holders of common stock of 25% of the members of the Board of
Directors and matters as to which Delaware law requires a separate class vote). Upon Mr. Diller’s permanent
departure from Expedia, the irrevocable proxy would terminate and depending on the capitalization of Expedia
at such time, Liberty could effectively control the voting power of our capital stock. Mr. Diller, through shares
he owns beneficially as well as those subject to the irrevocable proxy, controlled approximately 60% of the
combined voting power of the outstanding Expedia capital stock as of December 31, 2008.
In addition, under a Governance Agreement among Mr. Diller, Liberty Media Corporation and Expedia,
Inc., as amended, each of Mr. Diller and Liberty generally has the right to consent to limited matters in the
event that we incur debt such that our ratio of total debt to EBITDA, as defined in the Governance Agreement,
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