TripAdvisor Results Impress With Global, Mobile Growth

Despite macroeconomic headwinds and high operating costs, TripAdvisor (NASDAQ:TRIP) managed to sustain its growth rate in Q3 2012. Posting record revenues of $213 million, the company marked an increase of 18% y-o-y and 8% q-o-q. Additionally, after last quarter’s marginal decline in profits, net income in Q3 registered a robust 9% annual growth.

With continued traffic and content growth on a global basis, the company expects to see strong growth next quarter as well, and we expect this will help it close the fiscal with strong double digit growth. TripAdvisor saw significant  growth in markets outside the US and the UK in Q3 2012, which we believe to be an encouraging trend.

With an expanding user base, increasing monetization of social and mobile platforms and stabilizing margins, we think the company is well-positioned to leverage future growth in online travel.

See our complete analysis for TripAdvisor’s stock

Increase in User Base

With an average 54 million unique visitors worldwide, Tripadvisor registered a 31% y-o-y increase in visitors in Q2 2012. According to comScore, TripAdvisor’s travel community averaged more than 57 million monthly unique visitors in the third quarter, a 6% sequential increase. ^[1] Since TripAdvisor’s business model is primarily driven by the number of unique visitors to its website, we think an increase in the number of visitors in an important indicator of its future growth.

The company now boasts of content in 21 different languages with more than 60 contributions per minute, which equates to over 30 million contributions in a single year. ^[1] As per its recent call transcript, TripAdvisor now has over 36 million members, a 70% y-0-y increase. As the company continues to prioritize traffic diversification, focuses on international expansion, and targets higher hotel shopper growth, we believe it will continue to register growth in its user base.

Monetizing Alternate Platforms

Targeting the mobile space and social media, TripAdvisor has been focusing on expanding its avenues to increase penetration and making its platform more accessible to users. We expect both media to contribute toward increasing traffic on TripAdvisor.

1. Leveraging The Facebook Platform

Facebook remains a meaningful channel for TripAdvisor to grow its brand awareness and increase the number of members. Since the inception of its partnership with Facebook in 2010, TripAdvisor has been looking for new ways to leverage the partnership. In April, the company merged its TripAdvisor and “Cities I’ve Visited” applications into one to better integrate Facebook users’ activity within TripAdvisor. With over 32 million logged-in Facebook users using the TripAdvisor application, it is the second most popular application on Facebook, as per AppData.

TripAdvisor continues to spend on this medium and intends to further leverage Facebook’s social content. With the aim to further build its database of travelers, it expanded its social portfolio with the acquisition of Wanderfly, a travel inspiration site, earlier last month. (Read: TripAdvisor Adds Wanderfly To Its Social Portfolio)

2. Increasing Mobile Traffic

To leverage growth opportunities in the mobile space, TripAdvisor has been investing heavily in its mobile platforms. Last quarter, the company introduced the Facebook log-in functionality and launched its new iPad application. The launch of 30 new free city guides on iOS and Android platforms takes the total coverage to 50 cities.

The investment seems to be paying off with the unique mobile device visitors increasing to over 35 million from 27 million visitors last quarter. The robust growth has led to total TripAdvisor application downloads reaching over 26 million.  Additionally, post the roll-out of an improved tablet interface this quarter, the company has witnessed an improvement in tablet monetization though mobile monetization is still lagging behind.

However, TripAdvisor intends to roll out hotel meta display to all of its mobile users this quarter to further fuel growth in mobile traffic. Similar to the flight product, hotel meta display shows partner prices and availability in line, allowing an easy comparison of booking options.

Top issues and trends highlighted in the Q3 2012 Earnings Release

– Increase in TripAdvisor’s marketable members.

– Declining commission from Expedia.

– Pricing continues to be a headwind.

– Key areas of focus – social, personalization and mobile.

– Strategy to improve monetization rate on the tablet and mobile devices.

– Traffic quality improvement measures.

We are in the process of updating our price estimate of $35.18 for TripAdvisor for the Q3 2012 earnings release.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. TripAdvisor Reports Third Quarter 2012 Financial Results, TripAdvisor’s Events & Presentations, November 1, 2012 [↩] [↩]