Travelzoo 2013 Annual Report Download - page 66

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31
Overview
Travelzoo Inc. (the “Company”, or “Travelzoo”) is a global Internet media company. We inform over 26 million
subscribers in North America, Europe and Asia Pacific, as well as millions of website users, about the best travel and
entertainment deals available from thousands of companies. Our deal experts source, research and test-book offers,
recommending only those that meet Travelzoo’s rigorous quality standards. We provide travel, entertainment and local
businesses with a fast, flexible, and cost-effective way to reach millions of consumers. Our revenues are generated primarily
from advertising fees. In Asia Pacific, the Travelzoo business is operated by Travelzoo (Asia) Limited and Travelzoo Japan
K.K. under a License agreement with Travelzoo Inc.
Our publications and products include the Travelzoo websites (www.travelzoo.com, www.travelzoo.ca,
www.travelzoo.co.uk, www.travelzoo.de, www.travelzoo.es, www.travelzoo.fr, among others), the Travelzoo Top 20 e-mail
newsletter, and the Newsflash e-mail alert service. We operate SuperSearch, a pay-per-click travel search tool, and the
Travelzoo Network, a network of third-party websites that list deals published by Travelzoo. We also operate Fly.com, a travel
search engine that allows users to quickly and easily find the best prices on flights from hundreds of airlines and online travel
agencies. In addition, our Travelzoo websites include our Local Deals and Getaway products that allow our subscribers to
purchase vouchers for deals from local businesses such as spas, hotels and restaurants. Vouchers are redeemable at the local
businesses during the promotional period. We receive a percentage of the face value of the voucher from the local businesses.
In 2009, we sold our Asia Pacific operating segment, including our wholly-owned subsidiaries, Travelzoo (Asia) Limited
and Travelzoo Japan K.K., to Azzurro Capital Inc. We have not had significant ongoing involvement with the operations of the
Asia Pacific operating segment and have not had material economic interests in the Asia Pacific operating segment since the
completion of the sale. Starting November 1, 2009, the Travelzoo websites in Asia Pacific (cn.travelzoo.com,
www.travelzoo.co.jp, www.travelzoo.com.au, www.travelzoo.com.hk, www.travelzoo.com.tw, among others), the Travelzoo
Top 20 e-mail newsletters in Asia Pacific and the Newsflash e-mail alert service in Asia Pacific have been published by
Travelzoo (Asia) Limited and Travelzoo Japan K.K., under a license agreement with the Company. There is a reciprocal
revenue-sharing agreement among the entities operating the Travelzoo business in Asia Pacific and the Company related to
cross-selling audiences. In addition, as part of the sale of the Asia Pacific operating segment in 2009, the Company obtained an
option, which expires in June 2020, to repurchase the Asia Pacific business pursuant to the terms of the option agreement.
More than 2,000 companies use our services, including Air New Zealand, Apple Vacation, British Airways, Harrah’s
Entertainment, Expedia, Fairmont Hotels and Resorts, Hilton Hotels, Interstate Hotels & Resorts, JetBlue Airways, Key Tours
International, Liberty Travel, Marriott Hotels, Royal Caribbean, Spirit Airlines, Starwood Hotels & Resorts Worldwide,
Travelocity, United Airlines, and Virgin Atlantic.
We have two operating segments based on geographic regions: North America and Europe. North America consists of our
operations in Canada and the U.S. Europe consists of our operations in France, Germany, Spain, and the U.K. For the year
ended December 31, 2013, European operations were 29% of revenues. Financial information with respect to our business
segments and certain financial information about geographic areas appears in Note 12 to the accompanying consolidated
financial statements.
When evaluating the financial condition and operating performance of the Company, management focuses on financial
and non-financial indicators such as growth in the number of subscribers to the Company’s newsletters, operating margin,
growth in revenues in the absolute and relative to the growth in reach of the Company’s publications measured as revenue per
subscriber and revenue per employee as a measure of productivity.
How We Generate Revenue
Our revenues are advertising revenues, consisting primarily of listing fees paid by travel, entertainment and local
businesses to advertise their offers on Travelzoo’s media properties. Listing fees are based on audience reach, placement,
number of listings, number of impressions, number of clicks, number of referrals, or percentage of the face value of vouchers
sold. Insertion orders are typically for periods between one month and twelve months and are not automatically renewed.
Merchant agreements for Local Deals and Getaway advertisers are typically for twelve months and are not automatically
renewed. We have three separate groups of our advertising products: Travel, Search and Local.