Business is booming for TripAdvisor
Published: 05 Sep 2008:When InterActiveCorp acquired TripAdvisor for $210 million four years ago, some feared that corporate ownership would diminish the Internet start-up, which had quickly created a compelling travel Web site featuring user-generated reviews of hotels and tourist attractions.
Instead, TripAdvisor has flourished, buying nine other travel properties in niche markets like cruises and airplane seating. In July, TripAdvisor drew 25.5 million visitors to its network of a dozen Web sites, ranking it first for online travel information, according to the research firm comScore Media Metrix.
IAC placed TripAdvisor under Expedia, an IAC unit, and has invested about $400 million in the company, increasing its work force from fewer than 50 employees to 434. The company recently moved its home office into a former Polaroid complex in Newton Highlands, introduced applications for Facebook and other social-networking sites and is in the process of hiring an additional 50 engineers and salespeople to expand the brand into Europe, India and China.
"There´s no limit to demand for information by people planning a trip," said Stephen Kaufer, co-founder and chief executive of TripAdvisor, who estimated that half its traffic now comes from abroad. "We expect to grow year by year in every dimension."
Since the acquisition, Expedia, which is based in Bellevue, Washington, has provided financial support but allowed TripAdvisor to operate autonomously from Massachusetts, a practice that TripAdvisor, in turn, has extended to its own acquisitions, which include the VirtualTourist, Cruise Critic, SmarterTravel and SeatGuru sites.
TripAdvisor makes the bulk of its money through advertising from travel destinations and booking sites like Expedia, as well as rivals like Orbitz and Travelocity, to which visitors can link from TripAdvisor´s site. The company posted a profit of $129 million on $260 million in revenue for the 12 months to June 30, Expedia reported.
"We´re absolutely committed to growing TripAdvisor as fast as we can and, frankly, to throwing as much capital at TripAdvisor as we can," said Dara Khosrowshahi, chief executive of Expedia. "Very early on, when we invested in the company, they beat everything they told us they were going to do, in terms of finance and operating goals."
Through its acquisitions and organic growth, TripAdvisor has built a lead as a destination over its closest competitor, Yahoo Travel. That site attracted 20.3 million unique visitors in July, according to comScore Media Metrix. But by tightly integrating reviews and booking, Yahoo Travel is betting that TripAdvisor´s lead is not insurmountable.
"TripAdvisor doesn´t have a very easy way for you to book a flight or a hotel," said Pablo O´Brien, director of product management for Yahoo Travel in Sunnyvale, California. "You have to go to another site."
TripAdvisor´s growth has not come without friction. In July, Deirdre Kiely, a former Web content editor for TripAdvisor, filed a complaint on behalf of herself and other content providers asserting that the company violated Massachusetts law by classifying them as independent contractors rather than employees. The plaintiffs write articles and edit reviews of hotels and restaurants for the Web site, according to the complaint.
TripAdvisor executives declined to discuss the case, which is pending in U.S. District Court in Boston. If it is certified as a class-action lawsuit, as the plaintiffs are seeking, it would be a setback not only for TripAdvisor but also for other Internet companies that hire contractors to generate the editorial content displayed on their Web sites.
Regardless of the outcome, TripAdvisor´s blueprint of giving travelers a way to share their experiences is continuing to advance as online spending on leisure travel increases. The market is projected to grow from $86 billion in 2007 to $98.1 billion this year and $110 billion in 2009, according to Forrester Research of Cambridge, Massachusetts.
At the same time, TripAdvisor is building its brand and harvesting traveler reviews through software applications it has developed for social networking sites, like Facebook, that let members swap travel tips and stories and map places they have visited.
"TripAdvisor is to travel reviews what Kleenex is to facial tissues," said Henry Harteveldt, a vice president and principal analyst at Forrester. "They define the category. This is a company that was ahead of its time, but now they´re in the sweet spot. And as social computing becomes big, they´re poised to capitalize on that."
But rivals are building up their own sites and see plenty of running room in the expanding market."There´s definitely opportunity," said Robert Albert, vice president for media at Travelocity, whose IgoUgo site specializes in online trip planning tools.
"TripAdvisor is big, for sure. But there are so many ideas in online travel, and so much hasn´t been done yet. When you consider all the online organizing, sharing and planning that needs to be done, TripAdvisor hasn´t cornered the market."