With the rapid change in global technology, it is important for online travel companies to stay on top of changing consumer preferences. Leveraging the growth in social platforms and the rapidly expanding mobile user base remain key priorities for TripAdvisor’s (NASDAQ:TRIP) long term growth strategy.
With over 100 million reviews and 47 million marketable members, TripAdvisor is a leading online platform for travel-related reviews. TripAdvisor’s websites attract more than 200 million unique visitors every month. With a presence in 30 countries worldwide, it covers 2 million tourism businesses in over 116,000 destinations.
TripAdvisor’s business model is primarily driven by the number of unique visitors to its website and an increase in its user base is an important indicator of its future growth. 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 significantly towards increasing traffic on TripAdvisor.
Improving Mobile Platform To Help Leverage Growth In Mobile Devices
Mobile devices are increasingly becoming a preferred and more convenient option for online searches and shopping. According to IDC, mobile travel spend is expected to cross the $2 billion mark by 2014, registering y-o-y growth of above 40%. Additionally, mobile ad spending in the U.S. is expected to grow from $1.5 billion in 2011 to close to $10.8 billion by 2016.
TripAdvisor is the world’s second most downloaded mobile travel application after Google Earth.  Mobiles and tablets combined account for approximately 30% of the company’s global traffic. At the end of Q1 2013, TripAdvisor reached close to 36 million downloads for the TripAdvisor application and currently gets around 62 million monthly unique mobile device visitors, a y-o-y increase of 300%. 
TripAdvisor launched a significant update of its mobile application earlier this year and is working on a similar product refresh for the tablet applications. Additionally, it has entered into a partnership with Samsung (PINK:SSNLF), making it the only travel application to come pre-installed onto the new Samsung Galaxy S4, which is expected to sell 10 million units per month. 
Lower monetization rate is a drawback - While the monetization levels of tablets are already approaching that of desktops, smartphone monetization remains low at around 20%, as per TripAdvisor. However, the company expects the rate to improve in the future as it pays more attention to optimizing the meta experience and the meta pricing on the phone.
Social Media Growth To Drive Traffic On TripAdvisor
According to PhoCusWright, Facebook users who are referred to travel booking sites are more likely to make bookings than those referred via search engines such as Google (NASDAQ:GOOG). It also reports that more than 75% of the travelers use social networking sites to look for shopping related deals and 30% specifically look out for travel deals.
TripAdvisor entered into a partnership with Facebook (NASDAQ:FB) in 2010, and since then has introduced a number of ways to leverage the collaboration. With over 32 million logged-in Facebook users, TripAdvisor’s Facebook app reached the number one spot in terms of monthly active users in Q4 2012, and was the only travel app in the top 20 applications. Facebook remains a meaningful channel for TripAdvisor to grow its brand awareness and increase the number of visitors on its websites.
In 2012, TripAdvisor managed to more than double the members acquired through Facebook. At 44 million, its marketable members increased by almost 100% y-o-y. Presently, 35% of TripAdvisor’s new reviews are derived from its Facebook connected members.
Our price estimate of $53.73 for TripAdvisor is at a discount of over 10% to the current market price.Notes:
- TripAdvisor plans for more mobile freebies, Asia One, June 11, 2013 [↩]
- TripAdvisor Management Discusses Q2 2013 Results – Earnings Call Transcript, Seeking Alpha, May 7, 2013 [↩] [↩]