Expedia 2015 Annual Report Download - page 19

In general, increased competition has resulted in and may continue to result in reduced margins, as well as
loss of travelers, transactions and brand recognition.
The industry in which we operate is dynamic.
We continue to adapt our business to remain competitive, including investing in evolving channels such as
metasearch and mobile, as well as offering new consumer choices, including inventory types and transactional
models, and increasing supplier inventory on our existing platforms through acquisitions and partnerships. If we
fail to appropriately adapt to competitive or consumer preference developments, our business could be adversely
affected. Our attempts to adapt our current business models or practices or adopt new business models and
practices in order to compete, may involve significant risks and uncertainties, including distraction of
management from current operations, expenses associated with the initiatives, inadequate return on investments,
difficulties and expenses associated with the integration of acquired brands and their inventory onto our
platforms, as well as limiting our ability to develop new site innovations. In addition, adaptations to our business
may require significant investments, including changes to our financial systems and processes, which could
significantly increase our costs and increase the risk of payment delays and/or non-payments of amounts owed to
us from our supplier partners and customers. In addition, these new initiatives may not be successful and may
harm our financial condition and operating results.
Our business could be negatively affected by changes in search engine algorithms and dynamics or
other traffic-generating arrangements.
We increasingly utilize internet search engines such as Google, principally through the purchase of travel-
related keywords, to generate a significant portion of the traffic to our websites and the websites of our affiliates.
Search engines 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 and those of our affiliates
can be negatively affected. In addition, a significant amount of traffic is directed to our websites and those of our
affiliates through participation in pay-per-click and display advertising campaigns on search engines, including
Google, and travel metasearch engines, including Kayak and TripAdvisor. Pricing and operating dynamics for
these traffic sources can change rapidly, both technically and competitively. Moreover, a search or metasearch
engine could, for competitive or other purposes, alter its search algorithms or results causing a website to place
lower in search query results. If a major search engine changes its algorithms or results in a manner that
negatively affects the search engine ranking, paid or unpaid, of our websites and the websites of our affiliates, or
those of our third-party distribution partners, or if competitive dynamics impact the costs or effectiveness of
search engine optimization, search engine marketing or other traffic-generating arrangements in a negative
manner, our business and financial performance would be adversely affected, potentially to a material extent. In
addition, certain metasearch companies have added or intend to add various forms of direct or assisted booking
functionality to their sites. To the extent such functionality is promoted at the expense of traditional paid listings,
this may reduce the amount of traffic to our websites or those of our affiliates.
Our business depends on our relationships with travel suppliers and travel distribution partners.
An important component of our business success depends on our ability to maintain and expand
relationships with travel suppliers, GDS partners and owners and managers of vacation rental properties. A
substantial portion of our revenue is derived from compensation negotiated with travel suppliers, in particular
hotel suppliers, and GDS partners for bookings made through our websites. Each year we typically negotiate or
renegotiate numerous long-term hotel and airline contracts.
No assurances can be given that our compensation, access to inventory, or access to inventory at
competitive rates, will not be further reduced or eliminated in the future, or that travel suppliers will not reduce
average daily rates (“ADRs”), attempt to implement costly direct connections; charge us for or otherwise restrict
access to content, increase credit card fees or fees for other services; fail to provide us with accurate booking
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