For Expedia Inc., what’s not to like about its ever-expanding global media business, where its margins are greater than 50%.
That’s not a typo — 50% margins.
In a presentation Expedia has been delivering this month to investors and analysts, the company says its advertising/media business, including the TripAdvisor Media Network, could be a $1 billion business.
And, yes, Expedia says its media business brings it OIBA (Operating Income Before Amortization) margins of greater than 50%.
Those advertising margins, of course, are way better than Expedia’s hotel business, and Expedia’s margins in its air business should not even be in the conversation.
In the following slide from its presentation, Expedia looks out on the world and sees opportunities for online travel media virtually across the board — in North America, Europe and Asia — with online advertising growth of more than 10% in North America, more than 11% in Europe and more than 15% in Asia, as online adoption, particularly in Europe and Asia, continues to escalate.
Five years from now Latin American will assuredly be in the graphic, as well.
With Expedia’s media businesses taking in some $401 million in revenue through Sept. 30, 2010, the company sees its travel content pages as golden opportunities for CPC, display and Business Listings advertising.
The media business already is 12% of Expedia Inc. global revenue and that percentage is expected to climb.
Take a look at the CPC revenue opportunities that Expedia monetizes on a TripAdvisor.fr page for the Holiday Inn Boston-Brookline.
Yes, there is user-generated and other editorial content on the page above, but the revenue is also pouring in from CPC-monetized Check Rates booking engines, listings of hotel amenities, click-to-call ads and Sponsored Links.
The way in which Expedia/TripAdvisor clutters such pages with ads runs contrary to a trend in many recent travel website redesigns, which emphasize a simple, clean user experience.
Expedia’s focus groups obviously are telling it something different — that it can get away with this hyper-monetization without turning off too many travelers.
And for those critics, including UK-based Kwikchex, which may be clamoring for TripAdvisor to rein in its hotel review system, the Expedia presentation indirectly spells out why such a scenario is not in its plans.
It would take a sea-change in thinking — or new more stringent laws on user-generated content — to get TripAdvisor to accept only verified-guest reviews or slow its review growth in any meaningful way.
As Expedia states, “The bigger and better we get, the bigger and better we get.”
In this “Virtuous Cycle,” as Expedia puts it, more travelers means more user-generated content, which brings more ad revenue and leads to more cash flow for investments. And, this helps Expedia build a “compelling supplier and advertising channel,” which leads to better supplier economics and an improved traveler experience. The result, according to Expedia, is more travelers, leading to more user-generated content … and so on.
It’s interesting that Priceline, Expedia’s chief online travel agency rival, would never have created such a presentation because it’s business is totally different.
Priceline has purposefully stayed out of the media business and undoubtedly sees ad-cluttered pages as diverting the company from its prime mission — converting lookers into transactions.
Then again, less than optimum conversion rates on transactions may work out just fine for Expedia — given those 50% margins in its advertising business.
This Techcrunch post from last month seems a good fit for this article: http://techcrunch.com/2010/11/12/tripadvisor-is-a-great-advertisement/
Sam: Yes, Expedia’s presentation jives with the ad-frenzy that TechCrunch and others have noted. At some point, users will say “enough.” I guess that time hasn’t arrived yet to any great extent.
I guess the misperception here is that we think the average joe knows that some of the elements on a TripAdvisor page are actually CPC modules, when in reality the average joe traveler just views the module as plain old website functionality. Take the check rates module. No where does it say that it is essentially an advertisement for the hotel. Because this module is disguised as website functionality, there is a low likelihood of user backlash. I would bet that if that same module had a little italicized “sponsored link” in the lower right hand corner, users would have a different opinion of the clutter on the page.
the traffic is the most important，I hope it’s useful for us promoting china tours online.
Expedia owns Tripadvisor.
Tripadvisor has already been reported as ILLEGITIMATE web-site in ITALY, FRENCE and to Europe commission.
It’s “strange” that USA, so carefull against terrorism and anonimous behaviours still DOEAS NOT investigate this editor which protect anonimous contents even when are libellious and fake ( above all POSITIVE so to produce misleading advertisment ).
The value given to Tripadvisor it’s the measure of the unfair competition against other turism operators.
When Expedia will decide ( being obliged by judgents of the courts !) to declare the OFFICIAL local representative in Europe and all over the world this “supposed” 1 billion value will DROP dramatically down just facing all the LEGAL costs Expeda-Tripadvisor will have pay to compensate the many thousands hotels damaged in their on-line reputation!
Sunny greetings
Alla Dolce Vita