Skift Take

TripAdvisor is overly dependent on two customers, and as the competitive picture changes, this could be a big challenge for TripAdvisor.

What would happen if TripAdvisor’s two largest customers, who also are competitors, decided to drop the advertising and lead-generation service with little advance warning?

TripAdvisor revealed in its annual report for 2012, filed with the Securities and Exchange Commission February 15, that its two largest customers accounted for 48% of TripAdvisor’s total revenue in 2012.

The largest customer was Expedia Inc., which chipped in $204 million, or 27% of TripAdvisor’s $763 million in total revenue in 2012, TripAdvisor revealed.

TripAdvisor didn’t identify its second-largest customer, which contributed 21%, or about $160 million, of its total revenue last year. But, it could be Priceline.

TripAdvisor got 77% of its revenue from cost-per-click advertising in 2012, and the company notes that these advertising relationships can be terminated almost at will.

TripAdvisor’s significant others

Referring to its “two most-significant advertising relationships,” TripAdvisor states:

These and our other click-based advertising relationships are strategically important to us and most can be terminated by the advertiser at will or on short notice.


There could be trouble in paradise.

It is doubtful that Expedia or Priceline would just turn off their CPC spending at TripAdvisor because all three companies benefit from it.

But, consider that Priceline is in the process of buying Kayak, and Expedia is on the road to closing on its investment in Trivago, both of which will get increased advertising attention from their patrons.

It should be noted, however, that Trivago won’t be much advertising help for Expedia in the U.S. for now since Trivago’s presence in the U.S. is minimal.

Priceline’s and Expedia’s strategic moves come as TripAdvisor is shaking up its business model by rolling out its own hotel metasearch across its websites and mobile platforms, and this provides new challenges and heightened competition for Priceline, Kayak, Expedia and Trivago.

While Expedia and Priceline likely won’t terminate their TripAdvisor advertising on a whim, the business relationships are undoubtedly changing.

TripAdvisor, which was spun out from Expedia in late 2011, has seen Expedia’s advertising on TripAdvisor decrease from 40% of total revenue in 2009 to 27% in 2012.

The trend is clear.


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Tags: advertising, expedia, priceline, tripadvisor

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