Expedia 2010 Annual Report Download - page 47

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We intend to continue leveraging this investment when launching additional points of sale in new countries,
introducing new website features, adding supplier products and services including new business model offerings,
as well as proprietary and user-generated content for travelers.
Our scale of operations enhances the value of technology innovations we introduce on behalf of our
travelers and suppliers. As an example, our traveler review feature — whereby our travelers have created
millions of qualified reviews of hotel properties — is able to accumulate a larger base of reviews due to the
higher base of online traffic that frequents our various websites. In addition, our increasing scale enhances our
websites’ appeal to travel and non-travel advertisers.
We intend to continue investing in and growing our international points of sale. We anticipate launching
points of sale in additional countries where we find large travel markets and rapid growth of online commerce.
Future launches may occur under any of our brands, or through acquisition of third party brands, as in the case of
Egencia, eLong, Kuxun and Venere.
Breadth of Product Offering. We offer a comprehensive array of innovative travel products and services to
our travelers. We plan to continue improving and growing these offerings, as well as expand them to our
worldwide points of sale over time. Travelers can interact with us how and when they prefer, including via our
24/7 1-800 telesales service, which is an integral part of the Company’s appeal to travelers. We offer travelers
access to over 130,000 hotels and over 300 airlines in over 200 countries around the world.
Over 60% of our revenue comes from transactions involving the booking of hotel reservations, with less
than 15% of our worldwide revenue derived from the sale of airline tickets. We facilitate travel products and
services either as stand-alone products or as part of package transactions. We have emphasized growing our
merchant hotel and packages businesses as these result in higher revenue per transaction; however, we are
working to grow our global agency hotel business through our Venere, Expedia and Hotel.com brands. We also
seek to continue diversifying our revenue mix beyond core air and hotel products to car rental, destination
services, cruise and other product offerings. We have been working toward and will continue to work toward
increasing the mix of advertising and media revenue from both the expansion of our TripAdvisor Media
Network, as well as increasing advertising revenue from our worldwide websites such as Expedia.com and
Hotels.com, which have historically been focused on transaction revenue. In 2010, advertising and media
revenue accounted for approximately 13% of worldwide revenue.
Seasonality
We generally experience seasonal fluctuations in the demand for our travel products and services. For
example, traditional leisure travel bookings are generally the highest in the first three quarters as travelers plan
and book their spring, summer and holiday travel. The number of bookings typically decreases in the fourth
quarter. Because revenue in the merchant business is generally recognized when the travel takes place rather than
when it is booked, revenue typically lags bookings by several weeks or longer. As a result, revenue is typically
the lowest in the first quarter and highest in the third quarter. The macroeconomic downturn in the latter part of
2008 also affected our general revenue seasonality trends in the fourth quarter of 2008. In addition, the continued
growth of our international operations or a change in our product mix may influence the typical trend of our
seasonality in the future.
Critical Accounting Policies and Estimates
Critical accounting policies and estimates are those that we believe are important in the preparation of our
consolidated financial statements because they require that we use judgment and estimates in applying those
policies. We prepare our consolidated financial statements and accompanying notes in accordance with generally
accepted accounting principles in the United States (“GAAP”). Preparation of the consolidated financial
statements and accompanying notes requires that we make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the
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