Last week, TripAdvisor (NASDAQ:TRIP), the newly spun-off entity of the leading online travel agency Expedia (NASDAQ:EXPE), launched “Local Picks”, a Facebook (NASDAQ:FB) application which provides restaurant recommendation from locals and friends. By leveraging growth in social media, this new application allows users to express their opinions and get a credible review from someone they know and trust.
We estimate that TripAdvisor derives over 90% of its value from click and display advertising division. By making use of mobile and social media channels, the company has a major opportunity to bolster the traffic on its site, and thereby increasing its chances of deriving potentially higher revenues from this division.
Growth in Social Media To Promote Travel
Consumers are increasingly using online social media, such as Facebook, as a means to communicate and exchange information, including travel information and opinions. According to PhoCusWright, Facebook users who are referred to travel booking sites are more likely to book travel than those referred via search engines such as Google (NASDAQ:GOOG). Social media is more successful in promoting not only destinations, but also restaurants, theaters, hotels, tourist attractions, etc., near the destination.
TripAdvisor’s Partnership With Facebook
TripAdvisor entered into a partnership with Facebook in December 2010, and launched a setup that allowed users to receive “Instant Personalization” when visiting the site with an active Facebook account. Using the system, TripAdvisor users can check out their friends’ travel experiences before planning their own trip. Users who are already logged into Facebook can view friends’ reviews of various locations, while checking out the places their friends visited during their travels. With the recent launch of “Local Picks”, a visitor can do all the above while looking for restaurants anywhere around the world.
The application covers more than 850,000 restaurants globally visited by the 50+ million unique visitors on TripAdvisor. While ranking restaurants, the application lays more emphasis on local residents compared to tourists as they are able to provide a better perspective. Apart from reading the full review of a restaurant by Facebook friends, one can also follow the foodie recommendation by well known chefs which are outside their immediate network.
TripAdvisor remains committed in improving the social travel planning experience, and the auto sharing feature enabled by social media helps boost growth for travel. We believe that the company’s growing efforts to leverage growth in mobile and social media channels will help increase the number of unique visitors on its various platforms. We estimate the total number of monthly unique visitors to increase to 75 million this year and reach over 100 million by the end of our forecast period.
Our price estimate of $27.37 for TripAdvisor is at a discount of over 40% to the current market price.