TripAdvisor taps mobile platform to drive growth
Smartphone adoption around the world is skyrocketing and changing the way people get travel advice.
The technology revolution of the 1990s led to a considerable shift in the consumer base from offline to online platforms, which benefited online travel companies such as TripAdvisor (TRIP), Expedia (EXPE), and Priceline (PCLN).
With an increasing number of users shifting from personal computers to mobile devices to access the Web, the industry is now in the midst of another transition phase.
To leverage growth opportunities in the mobile space, TripAdvisor has been investing heavily in its mobile platform. It has been focusing on expanding avenues to further increase penetration and make its mobile platform more accessible to users. We expect TripAdvisor's expanding mobile platform to contribute significantly toward increasing traffic flow on its websites.
While the mobile space poses a number of challenges in terms of design and developments, we believe it is worth the investment and would help fuel TripAdvisor's business in the years ahead.
The mobile platform offers huge long-term growth opportunities
Smartphone adoption around the world is skyrocketing and is fundamentally changing the way people get travel advice. According to IDC, mobile travel spend is expected to cross the $2 billion mark by 2014, registering year-over-year growth of above 40%. Additionally, mobile ad spending in the U.S. is expected to grow from $1.5 billion in 2011 to close to $10.8 billion by 2016, according to E-marketer.com.
With the rapid adoption of smartphones and tablets, mobile devices are increasingly becoming a preferred and more convenient option for online searches and shopping. According to a study last year commissioned by Expedia and conducted by comScore, around 48% of users use a tablet or smartphone to plan their trips while 44% use a mobile device to search for their next trip -- 44% of them preferring to do this via an application.
As mobile penetration is slated to increase in the future, we expect to see a higher proportion of online travel searches done using mobile devices. If TripAdvisor is unable to keep up with rapid innovation in this space, it faces the risk of losing out a growing user base of online travel searches via mobile devices.
Mobile platform remains a key strategic area for TripAdvisor to expand its user base
TripAdvisor announced the launch of its mobile website in March 2010 and has since added apps for the iPhone, Android, Nokia, Palm smartphones, as well as the iPad. As of Q4 2012, it had around 45 million monthly unique mobile device visitors, a year-over-year increase of 190%. At the end of the quarter, it reached over 31 million cumulative smartphone and tablet application downloads for the TripAdvisor application. Additionally, TripAdvisor launched 20 new free City Guides across iOS and Android, which increases its coverage to 80 cities.
During Q4, TripAdvisor worked on improving its smartphone user interface and introduced a new meta-display for smartphone traffic. It intends to roll out hotel meta display to all of its mobile users to further fuel its growth in mobile traffic. Similar to the flight product, hotel meta display shows partner prices and availability in line allowing an easy comparison of booking options.
While smartphones currently account for less than 5% of TripAdvisor's click-based revenues, tablets account for approximately 10%-15% of revenues. We expect the proportion to increase in the future but await further results before changing our estimates.
Potential risks -- huge investment, lower monetization benefits
While the mobile platform offers immense growth potential, it poses a number of challenges in terms of design and developments, which require significant investments. Additionally, compared to PCs, the monetization benefits for mobile is much lower compared to PCs.
In its Q4 2012 earnings call, TripAdvisor mentioned that it does not expect the phone monetization rate to increase significantly in 2013. Nevertheless, the company anticipates an increasing proportion of its traffic coming from mobile devices. Thus, enhancing user experience on its mobile platform remains one of its top growth priorities.
Trefis' price estimate of $38.34 for TripAdvisor is at a slight discount to the current market price.
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Finding companies set for solid profit increases at a reasonable price is always a winning strategy. By that standard, here are next year's most appealing firms.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.