Travelzoo 2014 Annual Report Download - page 49

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Recent trends in consumer adoption and use of mobile devices create new challenges.
Widespread adoption of mobile devices, such as the iPhone, Android-enabled smart phones, and tablets such as the iPad,
coupled with the improved web browsing functionality and development of thousands of useful “apps” available on these
devices, is driving substantial traffic and commerce activity to mobile platforms. We have experienced a significant shift of
business to mobile platforms and our advertising partners are also seeing a rapid shift of traffic to mobile platforms. Our major
competitors and certain new market entrants are offering mobile applications for travel products and other functionality,
including proprietary last-minute discounts for hotel bookings. Advertising and distribution opportunities may be more limited
on mobile devices given their smaller screen sizes. The gross profit earned on a mobile transaction may be less than that earned
from a typical desktop transaction due to different consumer purchasing patterns. For example, hotel reservations made on a
mobile device typically are for shorter lengths of stay and are not made as far in advance as hotel reservations made on desktop.
Further, given the device sizes and technical limitations of tablets and smartphones, mobile consumers may not be willing to
download multiple applications from multiple travel service providers and instead prefer to use one or a limited number of
applications for their mobile travel activity. As a result, the consumer experience with mobile applications, as well as brand
recognition and loyalty, are likely to become increasingly important. We have made progress creating mobile offerings which
have received strong reviews and have shown solid download trends. We believe that mobile bookings present an opportunity
for growth. Further development of our mobile offerings is necessary to maintain and grow our business as consumers
increasingly turn to mobile devices instead of personal computers and to mobile applications instead of a web browser. Further,
many consumers use a mobile device based web browser instead of an application. As a result, it is increasingly important for
us to develop and maintain effective mobile websites optimized for mobile devices to provide customers with appealing easy-
to-use mobile website functionality. If we are unable to continue to rapidly innovate and create new, user-friendly and
differentiated mobile offerings and efficiently and effectively advertise and distribute on these platforms, or if our mobile
applications are not downloaded and used by travel consumers, we could lose market share to existing competitors or new
entrants and our future growth and results of operations could be adversely affected.
Recent trends showing that consumers are becoming more interested in a “pull” marketplace than a “push” marketplace
have created new challenges.
We have been successful with a “push” marketplace by inspiring people to take trips or purchase travel deals that they
had not planned. We have noticed that consumers, however, have been seeking a “pull” marketplace to allow consumers the
ability to search and browse for specific needs on specific dates. As we continue to invest in products, such as the hotel
booking platform, to make it easier to search for our travel deals and move towards a “pull” marketplace, our results of
operations could be adversely affected. Our required investment to make our website, mobile site and apps easier to search and
more simple to buy or book deals create a risk that our costs and product development expenditures may exceed our revenues in
the short and long term, which may materially impact our financial condition. We anticipate that our financial results will be
impacted as we continue to invest in our growth through increased spending in improving our products to accommodate a
“pull” marketplace.