TripAdvisor’s Business Model: What Investors Need to Know
In 1999, TripAdvisor founders Stephen Kaufer and his wife, Caroline Lipson Kaufer, decided to take a vacation. The vacation would have turned out to be a disaster if they hadn’t decided to check out the place online.
Nov. 30 2015, Published 5:43 p.m. ET
The beginnings
In 1999, TripAdvisor founders Stephen Kaufer and his wife, Caroline Lipson Kaufer, decided to take a vacation. The vacation would have turned out to be a disaster if they hadn’t decided to check out the place online. But finding a review proved to be a tiresome process. That’s when Caroline recommended starting a site that would make this kind of search easier.
The initial business idea wasn’t to build a user-generated site for swapping user reviews. The aim was to build a website that would provide professional reviews—like guidebooks or magazines or newspapers. But the new company did add a button that allowed users to add their own reviews. Little did they know that this would attract many customers and soon surpass the professional reviews on the website.
SEO strategies
When the company’s site started picking up traffic, they tried experimenting with a number of advertising methods and finally chose to work on a cost-per-click model, similar to Google’s search ads. Along with this decision, the company’s technical team developed highly efficient SEO (Search Engine Optimization) techniques, and TripAdvisor (TRIP) began to show up at the top in about every travel-related web search.
With more and more fresh and high-quality content getting added to the site, it got high search ranks. This helped the company build even stronger traffic on Google (GOOGL), which helped it achieve a higher share-of-mind for potential and repeat users. So a virtuous cycle was created, which catapulted the company to the top position in the industry.
Strong value proposition
Apart from providing reviews for about 5.3 million businesses and properties in 126,000+ destinations around the globe at one place, the company also provides a platform for travelers to interact and share experiences with each other, forming a community of like-minded people.
The company also added an Instant Booking platform last year, which now makes TripAdvisor a complete one-stop destination—from gathering information about travel destinations to travel plans and completing the final bookings.
TRIP makes up 1.8% of the NASDAQ-100 Ex-Technology Sector Index (QQXT).
Next, let’s look at how the company earns its revenues.
