TripAdvisor: Continued Expansion To Fuel Revenue Growth

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TripAdvisor (NASDAQ: TRIP) strengthened its position in the travel media industry in 1Q2012 with 40 reviews pouring in each passing minute. The company has significant penetration into the travel review market with more than 60 million reviews. TripAdvisor’s scale and reach makes it a definitive resource for travelers and a critical partner for travel merchants in an ever-growing and under-penetrated online travel market. We believe TripAdvisor will further dominate the travel media market with its focus on Facebook integration and its foray into the mobile sector, and therefore we rate TripAdvisor as a Buy.

Continued Revenue Diversification by Product & Geography:

Continued diversification in geography continued in 1Q2012, as the rest of the world (ROW) contributed 33% of total revenues, up from 30% in 2011, signifying a larger platform and less dependence on US revenues . Product diversification followed the same trend, with subscriptions consisting of 9% of total revenue, up from 8% in 2010. TripAdvisor continued its foray into foreign markets, with international (excluding UK) revenue growing 34% Y/Y (52.3 million vs. 39 million) in 1Q2012. TripAdvisor looks to benefit from increasing geographical diversity, providing it with greater stability while growing its product portfolio and helping it to attract more customers long term.


<img src="/media/images/user_12976/trip1_large.png" />

*Source: TripAdvisor’s financial data

Content Syndication Opportunities:

Content syndication can become a key growth driver for TripAdvisor in the long term. TripAdvisor currently has 400+ content syndication partners and more than 50,000 partner sites that license and use content from the TripAdvisor site. A further expansion in this area may help TripAdvisor increase its global user reach and visibility, besides generating licensing revenues.

<img src="/media/images/user_12976/trip2_large.png" />
<img src="/media/images/user_12976/trip3_large.png" />

Source: Bank of America Merrill Lynch Technology Conference

Mobile Extending Powerful TripAdvisor Platform and Expanding Reach

The mobile platform for TripAdvisor could led to more organic growth for the travel information giant. TripAdvisor has taken an opportunity to enter into the mobile sector and is pushing favorable results, as page views in 1Q2012 increased 250% Y/Y.The platform had around 21 m monthly uniques in 1Q2012. We believe this could grow further with the increase in smartphone usage and may result in an additive revenue for TripAdvisor in the long term.

TripAdvisor, with its 19 travel websites in 30 countries worldwide, 60 millions reviews, and 40 new contributions coming in each minute, leads the travel media industry. This puts it well ahead of Yelp (NYSE: YELP), its nearest competitor, with around + 25 m user reviews. And, with over 570,000 hotels and accommodations reviews on its site, it beats both Expedia (NASDAQ: EXPE) and Priceline (NASDAQ: PCLN) which both have less than 250,000 hotel reviews. TripAdvisor is enjoying its place as the leader of a large, addressable market in an era of increasingly dominated by social media platforms. We believe that TripAdvisor will post significant positive growth rates as its visibility and market penetration increase, and therefore we rate this stock as a buy.

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