With TripAdvisor's 2012 advertising revenue being 3.8 times that of Expedia, Orbitz, and Priceline combined, the company has a significant scale advantage according to Seeking Alpha's new report on the competitive landscape for online advertising within the travel industry.
There is a very complicated amount of information to consider with respect to online advertising within the travel industry, specifically as it relates to TripAdvisor. Key components to think about moving forward include continued monitoring of appropriate peer revenue line item segments, monitoring of review and opinion contributions primarily with Expedia, Priceline, Google, Yelp, and OpenTable, and further research information trends from PhoCusWright and eMarketer. Any negative shock to the global macro environment would significantly impact the travel industry.
Based on the peer revenue analysis I would tend to consider an order of travel-related online advertising ranking as follows:
- Yahoo, Microsoft, Baidu, Facebook
Google has a very well integrated web and mobile platform to continue to grow travel-related advertising revenues and I would think that they will be a significant competitor for the long-term. I do not see Yahoo, Microsoft, and Facebook being as focused or as successful as Google based on their products and existing platforms; also they have other major products to focus on. Homeaway competes with TripAdvisor on a couple fronts and Yelp is the closest company generating reviews and opinions. Expedia will be the most relevant online travel agency, and OpenTable will continue to focus on restaurant reviews and opinions and compete within this fragmented group.
From a fundamental perspective, TripAdvisor does not get as high of a ranking. TripAdvisor falls into the bottom tier in five out of the eight categories. Without getting into a ranked list, I would say that TripAdvisor is currently a little ahead of itself from a stock price and valuation standpoint.
Overall, TripAdvisor has established a significant focus with user generated review and opinion contributions which have led to strong growth in online advertising revenues. Mobile application growth and integration with Facebook, vacation rental business and business listings are all great developments to get excited about. At current levels, a word of caution should be heeded. As investors, we need to be aware of the size of the pond, who the bigger fish are, and what if any other organisms are morphing into a new unrealized threat.
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