TRIP - Tripadvisor Inc.

[ccplz]

Whether the ad spending can be capitalized depdends on this: If TRIP cuts the ad spending after a few years, will it maintain the growth?

For a "social" network like FB, I think the answer is yes. TRIP is kind of like a social network, so the answer maybe yes. I am not too sure about it though.

 

I think of maintenance capex a bit differently. I don't think it should sustain the same growth rate if they cut growth capex. Rather, the question is what capex/marketing expense is required for TRIP to maintain its competitive position (and hence its earnings power value).

 

Rather than say we should make our own call, I think we should look at the facts. From 2008-2012 EBITDA margins averaged 50% and capex was about 3%. They were able to maintain (and even grow) their competitive position at these levels because of the UGC flywheel.

 

With a much higher revenue base today and economies of scale I don't think its crazy to believe that maintenance capex would be 1% and EBITDA margins would be 42% in a normalized, non-growth scenario.

 

In other words, the advertising expense is not required to maintain their competitive position, but is used to grow their business

 

It makes no sense to just capitalize expenses that are not required to maintain current levels of revenue, or else many companies would look a lot cheaper on an earnings basis.

 

The point is that cash paid out for marketing does not go to shareholders, and they have been ramping up marketing expenses for the past 3 years now. On a FCF basis, it makes no difference whether or not you capitalize marketing, and I think that's how you should look at it.

[muscleman]

Whether the ad spending can be capitalized depdends on this: If TRIP cuts the ad spending after a few years, will it maintain the growth?

For a "social" network like FB, I think the answer is yes. TRIP is kind of like a social network, so the answer maybe yes. I am not too sure about it though.

 

I think of maintenance capex a bit differently. I don't think it should sustain the same growth rate if they cut growth capex. Rather, the question is what capex/marketing expense is required for TRIP to maintain its competitive position (and hence its earnings power value).

 

Rather than say we should make our own call, I think we should look at the facts. From 2008-2012 EBITDA margins averaged 50% and capex was about 3%. They were able to maintain (and even grow) their competitive position at these levels because of the UGC flywheel.

 

With a much higher revenue base today and economies of scale I don't think its crazy to believe that maintenance capex would be 1% and EBITDA margins would be 42% in a normalized, non-growth scenario.

 

In other words, the advertising expense is not required to maintain their competitive position, but is used to grow their business

 

It makes no sense to just capitalize expenses that are not required to maintain current levels of revenue, or else many companies would look a lot cheaper on an earnings basis.

 

The point is that cash paid out for marketing does not go to shareholders, and they have been ramping up marketing expenses for the past 3 years now. On a FCF basis, it makes no difference whether or not you capitalize marketing, and I think that's how you should look at it.

 

https://punchcardblog.wordpress.com/2015/09/24/cable-one-a-starkly-different-approach-to-the-us-cable-industry-2/

I came across this post and I felt like the expected life-time value applies well in the TRIP analysis here for the marketing expenses, though I am not experienced enough to go through the numbers.

 

Basically, the idea is that if you spend 100 dollars to get a hotel on your instant booking, and your expected NPV net earnings under conservative assumptions from this hotel is $200, then you can claim that this marketing expense is well spent. The short term earnings will depressed because you pay all the marketing expense up front but your income stream comes in over the years.

 

Therefore TRIP is more like MBI or AGO, where you look at the "adjusted book value", and decide if the current stock price is way below that adjusted book value, rather than looking at the P/E ratios. Maybe this is the best way to analyze TRIP. What do you think?

With that said, I still have no clue how to calculate this "adjusted book value" myself here.  ;D

[Sionnach]

I think you're exactly right muscleman and I have to disagree with ccplz.

 

What you are trying to determine is the earnings power value of the business on a sustainable, normalized basis.

 

Why? Well because as you said, its all about the cash that goes to shareholders. However, the difference between what ccplz is saying and what muscleman is saying is that its really the NPV of cash to shareholders not the current FCF.

 

We can sort of invert this. Imagine if TRIP did not spend anything on marketing. The FCF to shareholders would certainly be higher. But what would they do with this FCF? Just pay dividends? Repurchase shares? I think TRIP believes the way to achieve the highest ROIC, and therefore the highest NPV per share, would be to increase marketing spend.

 

As muscleman mentioned its analogous to the cable industry building out its infrastructure. The true earnings power of the firm is much higher than indicated by current FCF. As a shareholder, you should be happy that TRIP is increasing marketing spend (as long as you believe they can achieve a reasonable ROIC) not value it less because it is reinvesting in its business.

 

Basically, there is a underlying cash generating machine in TRIP that I believe can achieve ~42% EBITDA margins and 1% maint. capex. and achieve a sustainable competitive position. This is hidden by the fact that TRIP is reinvesting in its business and that its attraction business is in the "startup" phase with -3% EBITDA margins

[muscleman]

I think you're exactly right muscleman and I have to disagree with ccplz.

 

What you are trying to determine is the earnings power value of the business on a sustainable, normalized basis.

 

Why? Well because as you said, its all about the cash that goes to shareholders. However, the difference between what ccplz is saying and what muscleman is saying is that its really the NPV of cash to shareholders not the current FCF.

 

We can sort of invert this. Imagine if TRIP did not spend anything on marketing. The FCF to shareholders would certainly be higher. But what would they do with this FCF? Just pay dividends? Repurchase shares? I think TRIP believes the way to achieve the highest ROIC, and therefore the highest NPV per share, would be to increase marketing spend.

 

As muscleman mentioned its analogous to the cable industry building out its infrastructure. The true earnings power of the firm is much higher than indicated by current FCF. As a shareholder, you should be happy that TRIP is increasing marketing spend (as long as you believe they can achieve a reasonable ROIC) not value it less because it is reinvesting in its business.

 

Basically, there is a underlying cash generating machine in TRIP that I believe can achieve ~42% EBITDA margins and 1% maint. capex. and achieve a sustainable competitive position. This is hidden by the fact that TRIP is reinvesting in its business and that its attraction business is in the "startup" phase with -3% EBITDA margins

 

Thanks! I am going to look into CABO's life-time value analysis for its customers and see if there is anything I can learn and apply to TRIP here.

The key question is to estimate how much maintenance market expense is required for this business to stay flat. Then use the NPV of life time value to calculate if they are currently spending the marketing expense wisely. Then we will know what stock price makes sense.  :)

 

[Sionnach]

Whether the ad spending can be capitalized depdends on this: If TRIP cuts the ad spending after a few years, will it maintain the growth?

For a "social" network like FB, I think the answer is yes. TRIP is kind of like a social network, so the answer maybe yes. I am not too sure about it though.

 

I think of maintenance capex a bit differently. I don't think it should sustain the same growth rate if they cut growth capex. Rather, the question is what capex/marketing expense is required for TRIP to maintain its competitive position (and hence its earnings power value).

 

Rather than say we should make our own call, I think we should look at the facts. From 2008-2012 EBITDA margins averaged 50% and capex was about 3%. They were able to maintain (and even grow) their competitive position at these levels because of the UGC flywheel.

 

With a much higher revenue base today and economies of scale I don't think its crazy to believe that maintenance capex would be 1% and EBITDA margins would be 42% in a normalized, non-growth scenario.

 

In other words, the advertising expense is not required to maintain their competitive position, but is used to grow their business

 

+1

 

Just on the social network comparison - I have had a bit of the feeling also but can't articulate it.

 

Can any of you draw a proper comparison with a social network type of business? Or does TRIP resemble any other existing business that you know?

 

 

I think I said this before, but its similar to google.

More users gives google more data which gives them better results, greater mindshare, and more users.

More users gives TRIP more reviews which gives them better results, greater mindshare, and more users.

 

The analogy changes with instant booking. The CEO of lendingtree was on Bloomberg this morning and said his business is similar to the OTA business. I don't understand lendingtree, but there might be something there.

 

[Sionnach]

I think you're exactly right muscleman and I have to disagree with ccplz.

 

What you are trying to determine is the earnings power value of the business on a sustainable, normalized basis.

 

Why? Well because as you said, its all about the cash that goes to shareholders. However, the difference between what ccplz is saying and what muscleman is saying is that its really the NPV of cash to shareholders not the current FCF.

 

We can sort of invert this. Imagine if TRIP did not spend anything on marketing. The FCF to shareholders would certainly be higher. But what would they do with this FCF? Just pay dividends? Repurchase shares? I think TRIP believes the way to achieve the highest ROIC, and therefore the highest NPV per share, would be to increase marketing spend.

 

As muscleman mentioned its analogous to the cable industry building out its infrastructure. The true earnings power of the firm is much higher than indicated by current FCF. As a shareholder, you should be happy that TRIP is increasing marketing spend (as long as you believe they can achieve a reasonable ROIC) not value it less because it is reinvesting in its business.

 

Basically, there is a underlying cash generating machine in TRIP that I believe can achieve ~42% EBITDA margins and 1% maint. capex. and achieve a sustainable competitive position. This is hidden by the fact that TRIP is reinvesting in its business and that its attraction business is in the "startup" phase with -3% EBITDA margins

 

Thanks! I am going to look into CABO's life-time value analysis for its customers and see if there is anything I can learn and apply to TRIP here.

The key question is to estimate how much maintenance market expense is required for this business to stay flat. Then use the NPV of life time value to calculate if they are currently spending the marketing expense wisely. Then we will know what stock price makes sense.  :)

 

I think that would be very insightful. My thinking was that if we can reasonably assume the maintenance capex is 1% and the EBITDA margin is 42% and you think that's sustainable then at $55/sh you're basically paying nothing for any added value from "growth" or in other words, the marketing expense

[rishig]

This is from their 2014 annual report:

 

Selling and Marketing

Sales and marketing expenses primarily consist of direct costs, including SEM and other online traffic acquisition costs,

syndication costs and affiliate program commissions, brand advertising, television and other offline advertising, and public relations.

In addition, our indirect sales and marketing expense consists of personnel and overhead expenses, including salaries, commissions,

benefits, stock-based compensation and bonuses for sales, sales support, customer support and marketing employees.

 

Year ended December 31, % Change

                                                      2014 2013 2012

Direct costs ..................................  $347 $243 $177

Personnel and overhead ....................155  125    89

Total selling and marketing .............. 502    368  266

 

2014 vs. 2013

Direct selling and marketing costs increased $104 million during the year ended December 31, 2014 when compared to the same

period in 2013, primarily due to increased SEM costs, other online traffic acquisition costs, costs related to our television campaign, in

addition to incremental costs from our recent business acquisitions, partially offset by a decrease in spending in social media costs and

other offline advertising costs, excluding television advertising. We spent $33 million on our new television campaign during the year

ended December 31, 2014, which was launched in May 2014. Personnel and overhead costs increased $30 million during the year

ended December 31, 2014 when compared to the same period in 2013, primarily due to an increase in headcount to support business

growth, including international expansion and employees joining us through recent business acquisitions, which also increased stockbased

compensation costs. In total, our restaurant and attraction businesses contributed $25 million to our selling and marketing

expense in 2014, of which $8 million related to personnel and overhead.

 

2013 vs. 2012

Direct selling and marketing costs increased $66 million during the year ended December 31, 2013 when compared to the same

period in 2012, primarily due to increased SEM costs, other traffic acquisition costs and brand advertising costs, and an increase in

offline advertising costs, primarily television advertising of $30 million, partially offset by a decrease in spending in social media

costs. Personnel and overhead costs increased $36 million during the year ended December 31, 2013 when compared to the same

period in 2012, primarily due to an increase in headcount to support business growth, including international expansion and employees

joining us through business acquisitions, and also increased stock-based compensation costs.

 

Question:

1. Does it make sense that an ongoing direct costs such as SEM be capitalized?

2. Does it make sense that marketing overhead which consists of headcount salary be capitalized?

 

[Sionnach]

 

Question:

1. Does it make sense that an ongoing direct costs such as SEM be capitalized?

2. Does it make sense that marketing overhead which consists of headcount salary be capitalized?

 

 

I think these are exactly the right questions to ask and a large part of where the uncertainty in TRIP lies.

 

What I see is that SG&A as a % of revenue has increased from 45% in 2012 to 60% in 2015. Which leads to EBITDA falling from 42% in 2012 to 22% in 2015. Therefore, EBITDA in 2015 would actually be 37% excluding the increase in SG&A.

 

FYI - my math : 37% = 22% + (60%-45%)

[JBTC]

2015 vs. 2014

Direct selling and marketing costs increased $167 million during the year ended December 31, 2015 when compared to the same period in 2014, primarily due to increased SEM costs and other online traffic acquisition costs, increased costs related to our television campaign, and incremental costs related to our 2014 business acquisitions in Attractions and Restaurants.  During the year ended December 31, 2015, we spent $51 million on our television advertising campaign.  Personnel and overhead costs increased $23 million during the year ended December 31, 2015 when compared to the same period in 2014, primarily due to incremental personnel costs related to our 2014 business acquisitions in Attractions and Restaurants.  Our Attraction and Restaurant businesses contributed an incremental $68 million to our selling and marketing expenses for the year ended December 31, 2015, of which an incremental $20 million was related to personnel and overhead. 

 

-----------------

 

It seems there isn't enough data to know for sure.

 

For 2015, S&M rose $190mn. Of which, we only know $18mn from TV ads ($51-33) and $43mn from Attraction/Restaurant ($68-25), the two items together accounting for less than 1/3. Surely these are for growth.

 

So it comes down to if you think management has enough reason to raise spending.

 

Does anyone know anything about the management? I'd probably feel better if the PCLN CEO were running TRIP.

 

[rishig]

2015 vs. 2014

Direct selling and marketing costs increased $167 million during the year ended December 31, 2015 when compared to the same period in 2014, primarily due to increased SEM costs and other online traffic acquisition costs, increased costs related to our television campaign, and incremental costs related to our 2014 business acquisitions in Attractions and Restaurants.  During the year ended December 31, 2015, we spent $51 million on our television advertising campaign.  Personnel and overhead costs increased $23 million during the year ended December 31, 2015 when compared to the same period in 2014, primarily due to incremental personnel costs related to our 2014 business acquisitions in Attractions and Restaurants.  Our Attraction and Restaurant businesses contributed an incremental $68 million to our selling and marketing expenses for the year ended December 31, 2015, of which an incremental $20 million was related to personnel and overhead. 

 

-----------------

 

It seems there isn't enough data to know for sure.

 

For 2015, S&M rose $190mn. Of which, we only know $18mn from TV ads ($51-33) and $43mn from Attraction/Restaurant ($68-25), the two items together accounting for less than 1/3. Surely these are for growth.

 

So it comes down to if you think management has enough reason to raise spending.

 

Does anyone know anything about the management? I'd probably feel better if the PCLN CEO were running TRIP.

 

If you look at PCLN, their ad spend has only risen over time (28% of revenues to 40%). This includes SEM, TV ads, dollars on meta-engines such TRIP. Total dollar spend on a quarterly basis is $850M. In addition, sales and marketing dollar spend on quarterly basis is $100M. A large portion of this spend are account managers running around the world forming relationships with hotels. In the case of PCLN, capitalizing these costs would be completely wrong in my opinion.

 

If TRIP has to spend money on SEM, TV ads, and sales and marketing people, question is how different is TRIP's business (i.e. the social element) to believe that these costs will be capped at some point and revenues can rise independent of these costs (i.e. get positive operating leverage). I don't know the answer, but that is a question.

 

Sounds like there are a few on this thread that believe that these costs don't have to rise and revenues can rise (unlike what has happened at PCLN) giving TRIP operating leverage. And this can happen even though PCLN is spending almost 10x of what TRIP spends on SEM, TV ads, and sales and marketing. If you are among those who believe this, can you give a compelling argument of why this would be the case? If you believe this to be true with a very high confidence, then it makes sense to model future operating margins to be much higher.

[JBTC]

Googleadvisor is back - new and improved!

 

https://googleblog.blogspot.hk/2016/03/new-ways-to-plan-your-vacation-while-on.html

 

Will this finally hurt TRIP?

 

[muscleman]

Googleadvisor is back - new and improved!

 

https://googleblog.blogspot.hk/2016/03/new-ways-to-plan-your-vacation-while-on.html

 

Will this finally hurt TRIP?

 

Maybe... Google is trying to copy everyone's ideas just like what Microsoft did 15 years ago, and Google's internal operations are becoming more MSFT like. More bureaucratic, and harder to get things done. Too many technical politicians.

 

Will it work? At least I can tell you that MSFT almost failed on every idea that they copied.

[KCLarkin]

If you look at PCLN, their ad spend has only risen over time (28% of revenues to 40%). This includes SEM, TV ads, dollars on meta-engines such TRIP. Total dollar spend on a quarterly basis is $850M. In addition, sales and marketing dollar spend on quarterly basis is $100M. A large portion of this spend are account managers running around the world forming relationships with hotels. In the case of PCLN, capitalizing these costs would be completely wrong in my opinion.

 

The main principle behind GAAP accounting is to match revenue and costs. If you spend $500 to acquire a customer that signs an iron-clad 5 year contract for $200 per year, you would lose $400 in the first year. If you applied a FCF multiple to year 1 (-$400), you would get an absurd result. Alternatively, if you applied a FCF multiple to year 2 (+$200), you would over-value the company.

 

Whether costs are increasing or not is not relevant in determining whether capitalizing expenses makes sense.

 

--

 

Of course, GAAP has decided that capitalizing marketing and R&D is just too hard. For most companies, this doesn't matter too much since amortization is approximately the same as current expense. But for certain rapidly growing companies (e.g. Geico or SAAS), you are unfairly penalizing them for "pre-paying" expenses.

 

--

And GAAP does perversely capitalize these expenses in some cases. If BRK bought PCLN tomorrow, these "customer relationships" intangibles would suddenly appear on the balance sheet and be amortized over several years.

 

--

Personally, I don't explicitly make these adjustments but acknowledge that a FCF or earnings multiple can be misleadingly high for rapidly growing companies.

[rishig]

If you look at PCLN, their ad spend has only risen over time (28% of revenues to 40%). This includes SEM, TV ads, dollars on meta-engines such TRIP. Total dollar spend on a quarterly basis is $850M. In addition, sales and marketing dollar spend on quarterly basis is $100M. A large portion of this spend are account managers running around the world forming relationships with hotels. In the case of PCLN, capitalizing these costs would be completely wrong in my opinion.

 

The main principle behind GAAP accounting is to match revenue and costs. If you spend $500 to acquire a customer that signs an iron-clad 5 year contract for $200 per year

 

The ad dollars spent by PCLN are mostly on SEM - they are probably the biggest customer of the search engine companies. This is definitely not a capitalized expenditure. The money PCLN spends on SEM this year does not benefit the year after. Stop spending these dollars and you will lose your place on the search engine results. Any SEM related expenditures by TRIP should be treated the same. I argue the same for TV ad dollars. And marketing expenditure on headcount is the same in my opinion.

[snailslug]

The ad dollars spent by PCLN are mostly on SEM - they are probably the biggest customer of the search engine companies. This is definitely not a capitalized expenditure. The money PCLN spends on SEM this year does not benefit the year after. Stop spending these dollars and you will lose your place on the search engine results. Any SEM related expenditures by TRIP should be treated the same. I argue the same for TV ad dollars.

 

Some portion of this expenditure should be capitalized, because some percentage of the customers acquired via SEM or TV end up downloading the app, signing up for the email newsletter, or bookmarking the site in their browser, so these folks don't need to be re-acquired and have some customer lifetime value over and above the initial transaction. You can argue about whether that's 5% or 50% of the expenditure, but it's very clearly non-zero.

[KCLarkin]

The ad dollars spent by PCLN are mostly on SEM - they are probably the biggest customer of the search engine companies. This is definitely not a capitalized expenditure. The money PCLN spends on SEM this year does not benefit the year after. Stop spending these dollars and you will lose your place on the search engine results. Any SEM related expenditures by TRIP should be treated the same. I argue the same for TV ad dollars. And marketing expenditure on headcount is the same in my opinion.

 

No, those expenses should still be "capitalized" or deferred, just like pre-paid expenses. The question is, when is the revenue recognized? Maybe the amortization period is 30 days. Or 3 years. But the principle of matching expenses to revenue is pretty much immutable.

 

In principle, you can't say that the SEM shouldn't be capitalized, just because the advertising is ephemeral. Again, it depends on when the benefit is recognized. If you are Salesforce, you might spend $500 in SEM to acquire a client. But the revenue from that client will be earned over the next 10 years.

 

But the accounting profession has decided this is too hard and expenses immediately. Unless there is an acquisition. Then they are suddenly capable of valuing "client relationships".

 

Anyway, according to GAAP, you are correct. But just beware that you will tend to penalize rapidly growing companies with recurring revenue streams.

[rishig]

The ad dollars spent by PCLN are mostly on SEM - they are probably the biggest customer of the search engine companies. This is definitely not a capitalized expenditure. The money PCLN spends on SEM this year does not benefit the year after. Stop spending these dollars and you will lose your place on the search engine results. Any SEM related expenditures by TRIP should be treated the same. I argue the same for TV ad dollars. And marketing expenditure on headcount is the same in my opinion.

 

No, those expenses should still be "capitalized" or deferred, just like pre-paid expenses. The question is, when is the revenue recognized? Maybe the amortization period is 30 days. Or 3 years. But the principle of matching expenses to revenue is pretty much immutable.

 

In principle, you can't say that the SEM shouldn't be capitalized, just because the advertising is ephemeral. Again, it depends on when the benefit is recognized. If you are Salesforce, you might spend $500 in SEM to acquire a client. But the revenue from that client will be earned over the next 10 years.

 

But the accounting profession has decided this is too hard and expenses immediately. Unless there is an acquisition. Then they are suddenly capable of valuing "client relationships".

 

Anyway, according to GAAP, you are correct. But just beware that you will tend to penalize rapidly growing companies with recurring revenue streams.

 

I understand the general point you are trying to make. But, I am talking specifically about PCLN/TRIP where the benefit of ad dollars spent in this quarter show up within a quarter or two. The benefits do not extend over the year in my opinion. In the digital world, the revenue streams are not as *recurring* for PCLN if you stop spending the $4B in ad/marketing spend.

[KCLarkin]

I understand the general point you are trying to make. But, I am talking specifically about PCLN/TRIP where the benefit of ad dollars spent in this quarter show up within a quarter or two. The benefits do not extend over the year in my opinion. In the digital world, the revenue streams are not as *recurring* for PCLN if you stop spending the $4B in ad/marketing spend.

 

It's a bit hard to compare PCLN (transactional) versus TRIP (UGC). In theory, TRIP should have stickier content and a longer client amortization period.

 

If they are acquiring hotels for IB, the benefits would last more than a year. Frankly, I've always went directly to Tripadvisor.com or booking.com. I assume the people going in via SEM are very transactional, so you are probably right, but I think there is enough here to get me interested in a deep-dive.

[JBTC]

I understand the general point you are trying to make. But, I am talking specifically about PCLN/TRIP where the benefit of ad dollars spent in this quarter show up within a quarter or two. The benefits do not extend over the year in my opinion. In the digital world, the revenue streams are not as *recurring* for PCLN if you stop spending the $4B in ad/marketing spend.

 

It's a bit hard to compare PCLN (transactional) versus TRIP (UGC). In theory, TRIP should have stickier content and a longer client amortization period.

 

If they are acquiring hotels for IB, the benefits would last more than a year. Frankly, I've always went directly to Tripadvisor.com or booking.com. I assume the people going in via SEM are very transactional, so you are probably right, but I think there is enough here to get me interested in a deep-dive.

 

Ideally we want to know -

 

1) Of the 350mn unique monthly visitors, how many come via Google vs. going straight to TRIP?

2) What's the growth rate of each?

 

In the absence of data, one probably needs to take a view here. I was assuming that once people find TRIP, over time they go there direct. But I am a heavy traveler so my experience is biased.

 

[snailslug]

 

1) Of the 350mn unique monthly visitors, how many come via Google vs. going straight to TRIP?

 

 

We also would like to know how much is organic google search vs. paid SEM ads.

[Sionnach]

I understand the general point you are trying to make. But, I am talking specifically about PCLN/TRIP where the benefit of ad dollars spent in this quarter show up within a quarter or two. The benefits do not extend over the year in my opinion. In the digital world, the revenue streams are not as *recurring* for PCLN if you stop spending the $4B in ad/marketing spend.

 

It's a bit hard to compare PCLN (transactional) versus TRIP (UGC). In theory, TRIP should have stickier content and a longer client amortization period.

 

If they are acquiring hotels for IB, the benefits would last more than a year. Frankly, I've always went directly to Tripadvisor.com or booking.com. I assume the people going in via SEM are very transactional, so you are probably right, but I think there is enough here to get me interested in a deep-dive.

 

I think this is an important point. TRIP has a much stronger flywheel because of the UGC. This allows them to acquire customers at the lowest cost (marketing spend per visitor). I think this also means that TRIP would have a lower maintenance capex/SG&A than PCLN.

 

If PCLN didn't spend on marketing, I think a lot of people would just go to EXPE and forget about PCLN. If TRIP didn't spend on marketing, I think the flywheel would keep on rollin'.

 

The SEM ad questions are important to consider as well. I would agree that most, if not all, of that ad spending is definitely required for TRIP

[ccplz]

Ugc?

[JBTC]

Ugc?

 

user generated content

 

[muscleman]

Does anyone know why 2015's provision for income tax is only 17% of pretax income, but 2014 and 2013's tax rate is around 27-29%?

 

[KCLarkin]

I've started working on this. It looks pretty interesting but I don't really understand why their SEM budget is exploding. Normally with these types of sites, the ROI isn't high enough to justify SEM. You need to rely on organic traffic. If PCLN monetizes a shopper at 7x TRIP, then TRIP shouldn't be able to outbid PCLN or EXPE for traffic. This only makes sense if shoppers are very sticky for TRIP. Maybe mobile app installs?

 

Have they explicitly said why they are advertising so heavily?