Gaining Big on Mobile & Social Media
Shweta is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Recently, Liberty Interactive (NASDAQ: LINTA) announced the purchase of 4.8 million shares of the web travel operator TripAdvisor (NASDAQ: TRIP). Liberty paid a huge premium of ~63% on the last trading price. Following this transaction, Liberty now owns a stake of 22% in the company along with 57% of the voting rights. Also, Barry Diller is stepping down as the chairman (although he will remain a director) of TripAdvisor and Liberty will announce the next replacement for this position. I don't think this event will have any impact on TripAdvisor's operations. Investors seem to like this news, as the shares were up by ~9% following this announcement. The heavy premium paid by Liberty gives an indication of TripAdvisor's solid growth potential in 2013.
From another perspective, Liberty will gain majority control of TripAdvisor that would create a tax-free option for the company. It will give Liberty an opportunity for further strategic changes in the company’s capital structure and to plan buybacks. This deal will strengthen Liberty's portfolio too, as it already has stakes in several companies such as QVC, Evite, Bodybuilding.com, HSN, and Expedia. The company is even targeting a larger stake in Expedia (NASDAQ: EXPE) to boost its portfolio.
Expedia's was on a roll in 2012 with an upside of ~110%. The company spun-off its TripAdvisor group of sites to focus more on to its core segments such as Hotels.com, Hotwire.com, travel agency Egencia, etc. More recently, Expedia acquired a 61.6% stake in a German search website Trivago for ~$630 million. The acquisition is expected to close in early 2013 and will allow Expedia to expand its reach in the European markets. This move was highly important for the company in order to expand internationally, as its main competitor Priceline.com is gaining huge business from Bookings.com in Europe and Agoda.com in Asia. This deal will also help Expedia to enhance its corporate travel portfolio along with its various cost-efficiency measures.
Coming back to TripAdvisor, the company is all set to benefit from the continuous shift in hotel bookings towards the online platform. With this shift, the clients’ shopping behavior has also changed drastically and now the online reviews have become a significant aspect of the travel bookings. TripAdvisor is a clear winner in this segment with reviews on around 650k hotels globally. Let us see some growth factors for the company in detail.
Focus Areas for the Future
Facebook Platform: TripAdvisor currently remains in the top three most popular apps on Facebook with ~58 million users, along with FarmVille 2 and Instagram. This is a meaningful platform for the company to improve its brand engagement and to increase the number of new members. The company’s other app on FB 'Cities I've Visited' pushes data about the travel history of a user among his friends list. It creates a 'marketable member ' for TripAdvisor who can be potential users of the website in the future. This also helps the users in better travel planning with increased brand awareness. TripAdvisor recently launched a new app on FB for the hotel owners to update their pages with TripAdvisor's reviews and ratings. Under this app, owners can create a separate tab for TripAdvisor on their FB pages and allow users to read and write more reviews. This would further strengthen the company's position in the reviews segment. The Facebook apps have really helped the company to increase its user base, as users connected via FB are around 27% more engaged on its website and they contribute more to the review writing. I believe Facebook will continue to generate more revenue for the company with its increased user base and brand recognition.
Mobile Platform: Along with the Facebook strategy, the company is investing heavily in Mobile apps to leverage the increasing growth opportunities in the mobile space. This platform has shown tremendous growth in the last year. In 3Q12, the mobile app downloads were around 26 million and average monthly visitors via mobile devices were at 35 million; showing an astounding increase of ~130% y/y. In its revenues from the mobile platform, ~75% comes from tablets which creates the need to focus its strategies more on to Smartphones. Therefore, the company has already begun testing of a new hotel shopping meta- display for smartphone traffic. This will provide partners’ prices, availability status, easy comparison of other options, and an overall better experience to its users. It will further improve the monetization from this platform.
To sum it up, I feel the widely accepted ongoing shift towards the online platform will continue for several years in the future. This will definitely serve as a tailwind for TripAdvisor. The company is targeting the mobile space and social media to make its platforms more accessible to their users. I expect both the platforms to play a significant role in increasing the overall website traffic and contribute to the revenues of the company.
ShwetaDubey has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own