With rapid changes in global technology, it is important for online travel companies to stay in line with changing consumer preferences. Leveraging the rising mobile user base and growth in social platforms is one of the key strategy for Travelzoo’s (NASDAQ:TZOO) long term growth. The company has remained committed to investing in new product development which has helped increase its user base from 15 million in 2008 to 26 million in 2012. In addition to its strengthening hotel business, we believe that Travelzoo’s rising mobile traffic and social media integration places it in a good position to further expand its user base by leveraging future growth in the online travel industry.
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Travelzoo is a leading global Internet media company that enables travel and entertainment companies as well as small businesses to efficiently reach out to consumers to sell their products and services. Apart from the Travelzoo websites, the company has several publications and newsletters across the globe. In addition, it operates travel search engine Fly.com and social commerce business Local Deals which provides subscribers with high quality deals for restaurants, spas, shows, concert events, etc.
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Growth In Mobile To Expand The Reach Of Travelzoo’s Products
With the rapid adoption of smartphones and tablets, mobile devices are increasingly becoming the preferred and more convenient option for online searches and shopping. Travelzoo launched its mobile application for Apple and Android devices in 2011, offering the “Top 20″ and “Local Deals” services along with geo-location tools to mobile users. With over 1.6 million downloads for its existing iPhone and Android applications so far, the company is witnessing strong adoption of the its brand on mobile.
Travelzoo now receives over 35% of its traffic via mobile devices compared to 10% in 2011.   Expecting the proportion to further rise in the future, it is focused on developing new mobile products to stay in line with changing customer preferences. It launched its second generation iPhone application earlier this year that aims to provide its on-the-go customers easier access to company products.
eMarketer estimates overall spending on mobile advertising in the US, including display, search and messaging-based ads served to mobile phones and tablets, to have increased to $4 billion in 2012, representing 180% growth compared to 2011. It forecast mobile advertising in the US to rise to $7.19 billion in 2013 and reach $21 billion by 2016.
Travelzoo derives a majority of its revenue from advertising and more than 75% of its business is concentrated in North America. The company aims to create easy-to-use mobile applications that help advertisers extend their reach by delivering relevant and useful ads to users on-the-go. Enhancing and developing new mobile applications and focusing on improving conversion rates on its mobile platform are some of the key strategic areas for Travelzoo.
Social Media Integration To Increase Brand Awareness
According to PhoCusWright, more than 75% of travelers use social networking sites such as Facebook (NASDAQ:FB) to look for shopping-related deals and 30% specifically look out for travel deals. With an audience of over 1 million from combined Facebook and Twitter followers, Travelzoo claims that it has seen considerable progress in the amount of traffic it derives from social media. While its Twitter followers have increased by 47% in the last year, its Facebook fans have witnessed 546% growth during the same period. Travelzoo remains committed to drive audience growth and engagement across the social platform to build its global brand.
Our price estimate of $23.32 for Travelzo0 is at a discount of over 10% to the current market price.Notes:
- Travelzoo’s CEO Discusses Q1 2013 Results – Earnings Call Transcript, Seeking Alpha, April 18, 2012 [↩]
- Travelzoo dives into mobile, brings deals to travelers on-the-go, Tnooz, July 12, 2011 [↩]