TripAdvisor.com (TRIP), the renowned travel website, helps devise varied travel itineraries and propagates trusted advice, reviews from a bunch of people. The website offers appropriate planning features with seamless links to booking tools. The TripAdvisor branded sites account for a colossal travel community across the globe, with an enormous 260 million unique monthly visitors, and over 125 million reviews and opinions covering more than 3.1 million accommodations, restaurants, and attractions. These sites operate in 34 countries across the globe (referred to as daodao.com in People’s republic of China). TripAdvisor also incorporates TripAdvisor for Business, a dedicated segment catering to the tourism industry which is accessed by millions of monthly visitors.
In the year 2000, TripAdvisor.com initiated as a ‘Pure Play’ B2C online travel website, where consumers can gather travel information from reviews and other information about travel destinations worldwide. By implementing an innovative approach of a user-generated content business model, TripAdvisor brought forth the radical concept of conversational media, altering the role of consumers from a passive audience into a more interactive audience, which made the website a convenient platform for consumers and travelers to exchange their extravagant travel experiences on hotels, restaurants, site attractions and interact on travel forums.
The Enterprise Revenue Model
TRIP’s primary source of revenue is an exclusive cost-per-click (CPC) model, wherein consumers regularly visit the website to analyze reviews of hotel and travel destinations posted by other authentic users, and then, they are given the option to book the said hotel through various online travel agencies (OTA). The OTA, then, pays TRIP a pre-determined fee for every single click of the consumer which further gets re-directed to the OTA’s website to check out details on the hotel rate deal. Other revenue is from display ads and some subscription-based services. Segment wise revenue generation is as follows (Source: TripAdvisor Q3 Results):
- Click-based advertising (74%)
- Display advertising (12%)
- Subscription revenue (14%)
Traveling Made Easier: TripAdvisor Mobile App
TripAdvisor set afloat its mobile website in March 2010 and forayed into mobile world by adding variable apps for the iPhone, Nokia (NOK), Android phones, Windows phone, as well as the iPad too. TripAdvisor released new native apps on iOS and Android and also rolled out a major iPad app refresh. Downloads of TripAdvisor’s apps – including TripAdvisor, City Guides, SeatGuru, Jetsetter and GateGuru – reached to an enormous 69 million times. The average unique monthly visitors via smartphone and tablet devices grew over 175% year-over-year to approximately 108 million for the quarter ended this September 30, 2013. TripAdvisor calculated more than 39 million monthly Facebook (FB) visitors to its website and Facebook app during the quarter, and remains the numero uno travel app on Facebook, according to AppData.
All Won Goodwill Now At Stake
Despite positive vibes, the question of integrity still hovers around the reviews posted on its websites. Investigations were also carried on by the Advertising Standards Agency (ASA) in September 2011 following the upsurge in criticism of its apparent failure to monitor fake comments posted on its website. As a result, in February 2012, ASA banned the company from claiming or implying that the reviews on its website were from genuine travelers and their substantive expeditions. On a similar note, a businessman in Brixham, UK in the month of July, 2013 posted reviews of a fraudulent restaurant in order to showcase the fabrications and failures of TripAdvisor website.
Any further bogus review will certainly tarnish the image and, simultaneously, lead to a potential decline in TripAdvisor’s active user-base, thus, questioning its credibility for new users. However, the company has taken certain prerogative measures to restrict this issue of mock review, and thus, has also achieved good expertise at apprehending people who intentionally afflict the system. TripAdvisor states that all the reviews and posts pass through a vigorous screening process prior to full-fledged posting and, synchronously, it has installed adept technology aimed at detecting those who intend to circumvent this process. At the same time, it procures regular reports from the TripAdvisor community making them vigilant enough them of any malicious activity. Additionally, according to a survey conducted by TripAdvisor in 2011, around 98% of its users trust the reviews and have validated their credibility on its website.
A Rise In Competition Dislodges Profits
TripAdvisor faces fierce competition in the travel review space from sites such as Yelp (YELP), TravelPost and HolidayCheck and also from several online travel agencies such as Expedia (EXPE) and Priceline (PCLN), which seek reviews from travelers who book on their websites. In addition, Google Places, that provides reviews and listings of local businesses overshadows TripAdvisor to a large extent. Though Google’s ‘Hotel Finder’ is still in a nascent stage, but, it executes the exact services as TRIP performs, and yet even more than that. Hotel Finder displays all available hotels, proprietary hotel reviews, and allows comparing room rates across the various OTAs as well as hotel websites – all similar to TRIP’s functionality. It also displays links to other review websites as well (i.e. expedia.com, bookings.com, etc.). This in turn undermines TripAdvisor’s explicit ability to obtain prominent placement in paid or unpaid search results which can impact its rapid traffic growth.
Meta Display Under-Performs Expectations
Meta Display is a contemporary feature introduced by the company on its website that aggregates hotel pricing and availability information from top advertisers (mainly online travel agencies and hotel chains). This allows users to do all the comparisons on TripAdvisor’s website itself. Earlier, users had to click-through to an advertiser’s website in order to view hotel pricing and availability information. The new Meta feature displays this information from top advertisers on TripAdvisor’s website. While this strategy has lowered the number of leads sent by TripAdvisor to its advertisers; however, the leads are more qualified and have better conversion rates, as now travelers are more probable to click on the advertiser’s link for booking rather than seeking information.
Although the Meta Display feature enhances the overall user experience, it leads to an under-performance due to low conversion rates. There has been reduced growth in click-based advertising revenue by 9%-12% in Q3 2013. As a result of click-based advertising, revenue ($189 million) increased by only 13% year-on-year, sluggish since the company spun-off from a leading online travel agency, Expedia. The management attributed this to leakages in the Meta Display system, which results from users who check pricing and availability information on TripAdvisor but do not click on to advertiser websites to make bookings. Instead, they directly visit the advertiser’s website to complete their bookings. Hence, the search, effectively gets converted into a transaction but, unfortunately, TripAdvisor does not get its due credit.
The losses incurred in click-based advertising were neutralized by profits of display-based advertising, which reported an escalated increase of 29% as compared to what it stood at a year ago and in the same quarter.
The segment wise generated revenue in third quarter in 2013 is as follows:
|Segment||Revenue (in million $)||Increase %, compared to Q3,2012|
|Subscription, transaction and other||35.3||68%|
On A Voyage Of Growth
TripAdvisor’s performance cannot be judged as satisfactory as far as the data of last three months is taken into consideration. There has been a hefty turmoil regarding the price movements of TripAdvisor, the same has been brought forth in this graphical representation of the data of last three months.
Figure: Price movement of TRIP
But after considering the major implications regarding the growth prospects and future proforma of the market and TripAdvisor’s enthusiasm to emerge as a winner in this turbulent phase of competition, it can be inferred that TripAdvisor will, definitely, proliferate, propagate its user-base and rise with flying colors. The US tourism industry is quite mature but the international market is still in the budding stage, hence, there prevails a wide opportunity which TRIP will, certainly, en-cash with its significant attendance on social media and Mobile App platforms. As per the reports accumulated by Greenlight in the month of February 2013, TripAdvisor was the most visible website on Google for foreign hotel inquest. TripAdvisor accomplished a 68% share of voice in long-haul searches, and 52% in short-haul searches, thus, defeating its competitors.
It is advisable to preserve the stocks in lieu of maximized returns in near future as TripAdvisor is on a voyage of growth, expansion and aggrandizement.