Travelzoo 2007 Annual Report Download - page 36

We believe that several factors are causing and will continue to cause travel companies to increase their
spending on Internet advertising of offers:
The Internet Is Consumers’ Preferred Information Source. Market research shows that the Internet has
become consumers’ preferred information source for travel (source: DoubleClick Touchpoints III consumer
survey, 2005).
Benefits of Internet Advertising vs. Print Advertising. Internet advertising provides travel companies
advantages compared to print advertising. These advantages include real-time listings, real-time updates, and
performance tracking. See “— Benefits to Travel Companies” below.
New Advertising Opportunities. The Internet allows travel companies to advertise their sales and
specials in a fast, flexible, and cost-effective manner that has not been possible before.
Suppliers Selling Directly. We believe that many travel suppliers prefer to sell directly to consumers
through suppliers’ Web sites versus selling through travel agents. Internet advertising attracts consumers to
suppliers’ Web sites.
Problems Travel Companies Face and Limitations of Newspaper Advertising
We believe that travel companies often face the challenge of being able to effectively and quickly market and
sell their excess inventory (i.e. airline seats, hotel rooms, or cruise cabins that are likely to be unfilled). The success
of marketing excess inventory can have a substantial impact on a travel company’s profitability. Almost all costs of
travel services are fixed. That is, the costs do not vary with sales. A relatively small amount of unsold inventory can
have a significant impact on the profitability of a travel company.
We believe that travel companies need a fast, flexible, and cost-effective solution for marketing excess
inventory. The solution must be fast, because travel services are a quickly expiring commodity. The period between
the time when a company realizes that there is excess inventory and the time when the travel service has become
worthless is very short. The solution must be flexible, because the travel industry is dynamic and the demand for
excess inventory is difficult to forecast. It is difficult for travel companies to price excess inventory and to forecast
the marketing effort needed to sell excess inventory. The marketing must be cost-effective because excess inventory
is often sold at highly discounted prices, which lowers margins.
We believe that newspaper advertising, with respect to advertising excess inventory, suffers from a number of
limitations which do not apply to the Internet:
• typically, ads must be submitted 2 to 5 days prior to the publication date, which makes it difficult to advertise
last-minute inventory;
• once an ad is published, it cannot be updated or deleted when an offer is sold out;
• once an ad is published, the travel company cannot change a price;
• in many markets, the small number of newspapers and other print media reduces competition, resulting in
high rates for newspaper advertising; and
• newspaper advertising does not allow for detailed performance tracking.
Our Products and Services
We provide airlines, hotels, cruise lines, vacation packagers, and other travel suppliers with a fast, flexible, and
cost-effective way to advertise their sales and specials to millions of Internet users. Our publications include the
Travelzoo Web sites, the Travelzoo Top 20 e-mail newsletter, and the Newsflash e-mail alert service. The Company
also operates SuperSearch, a pay-per-click travel search engine and the Travelzoo Network, a network of third-party
Web sites that list deals published by Travelzoo. While our products provide advertising opportunities for travel
companies, they also provide Internet users with a free source of information on current sales and specials from
hundreds of travel companies.
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