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Anual Report
268
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2014 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 00135362 TRIPADVISOR, INC. (Exact name of registrant as specified in its charter) Delaware 800743202 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 141 Needham Street Newton, MA 02464 (Address of principal executive office) (Zip Code) Registrant’s telephone number, including area code: (617) 6706300 Securities registered pursuant to Section 12(b) of the Act: Title of each class: Name of each exchange on which registered: Common Stock, $0.001 par value The NASDAQ Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b2 of the Exchange Act. Large accelerated filer Accelerated filer Nonaccelerated filer (Do not check if a smaller reporting company) Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes No The aggregate market value of the common stock of the registrant held by nonaffiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter was $12,115,385,937 based on the closing price on The NASDAQ Global Select Market on such date. For the purpose of the foregoing calculation only, all directors and executive officers of the registrant are assumed to be affiliates of the registrant. Class Outstanding Shares at February 6, 2015 Common Stock, $0.001 par value per share 130,126,683 shares Class B Common Stock, $0.001 par value per share 12,799,999 shares Documents Incorporated by Reference The registrant intends to file a proxy statement pursuant to Regulation 14A not later than 120 days after the close of the fiscal year ended December 31, 2014. Portions of such proxy statement are incorporated by reference into Part III of this Annual Report on Form 10K.
Transcript

  • UNITEDSTATESSECURITIESANDEXCHANGECOMMISSION

    Washington,D.C. 20549

    Form10K

    ANNUALREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIESEXCHANGEACTOF1934ForthefiscalyearendedDecember31,2014

    OR TRANSITIONREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIESEXCHANGEACTOF1934

    ForthetransitionperiodfromtoCommissionfilenumber:00135362

    TRIPADVISOR,INC.(Exactnameofregistrantasspecifiedinitscharter)

    Delaware 800743202(Stateorotherjurisdictionofincorporationororganization)

    (I.R.S.EmployerIdentificationNo.)

    141NeedhamStreetNewton,MA02464

    (Addressofprincipalexecutiveoffice)(ZipCode)Registrantstelephonenumber,includingareacode:

    (617)6706300

    SecuritiesregisteredpursuanttoSection12(b)oftheAct:

    Titleofeachclass: Nameofeachexchangeonwhichregistered:CommonStock,$0.001parvalue TheNASDAQStockMarketLLC

    SecuritiesregisteredpursuanttoSection12(g)oftheAct:None

    Indicatebycheckmarkiftheregistrantisawellknownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.YesNoIndicatebycheckmarkiftheregistrantisnotrequiredtofilereportspursuanttoSection13orSection15(d)oftheAct.YesNoIndicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934

    duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days.YesNo

    IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyandpostedonitscorporateWebsite,ifany,everyInteractiveDataFilerequiredtobesubmittedandpostedpursuanttoRule405ofRegulationST(232.405ofthischapter)duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtosubmitandpostsuchfiles).YesNo

    IndicatebycheckmarkifdisclosureofdelinquentfilerspursuanttoItem405ofRegulationSKisnotcontainedherein,andwillnotbecontained,tothebestofregistrantsknowledge,indefinitiveproxyorinformationstatementsincorporatedbyreferenceinPartIIIofthisForm10KoranyamendmenttothisForm10K.

    Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,anonacceleratedfiler,orasmallerreportingcompany.Seethedefinitionsoflargeacceleratedfiler,acceleratedfilerandsmallerreportingcompanyinRule12b2oftheExchangeAct.

    Largeacceleratedfiler Acceleratedfiler Nonacceleratedfiler (Donotcheckifasmallerreportingcompany) Smallerreportingcompany

    Indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b2oftheExchangeAct).YesNoTheaggregatemarketvalueofthecommonstockoftheregistrantheldbynonaffiliatesoftheregistrantasofthelastbusinessdayoftheregistrantsmost

    recentlycompletedsecondfiscalquarterwas$12,115,385,937basedontheclosingpriceonTheNASDAQGlobalSelectMarketonsuchdate.Forthepurposeoftheforegoingcalculationonly,alldirectorsandexecutiveofficersoftheregistrantareassumedtobeaffiliatesoftheregistrant.

    Class OutstandingSharesatFebruary6,2015CommonStock,$0.001parvaluepershare 130,126,683shares

    ClassBCommonStock,$0.001parvaluepershare 12,799,999shares

    DocumentsIncorporatedbyReferenceTheregistrantintendstofileaproxystatementpursuanttoRegulation14Anotlaterthan120daysafterthecloseofthefiscalyearendedDecember31,

    2014.PortionsofsuchproxystatementareincorporatedbyreferenceintoPartIIIofthisAnnualReportonForm10K.

  • TableofContents PagePARTI 2

    Item1. Business 2

    Item1A. RiskFactors 11

    Item1B. UnresolvedStaffComments 25

    Item2. Properties 25

    Item3. LegalProceedings 25

    Item4. MineSafetyDisclosures 25

    PARTII 26

    Item5.MarketforRegistrantsCommonEquity,RelatedStockholderMattersandIssuerPurchasesofEquitySecurities 26

    Item6. SelectedFinancialData 28

    Item7. ManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperations 30

    Item7A. QuantitativeandQualitativeDisclosuresAboutMarketRisk 53

    Item8. FinancialStatementsandSupplementaryData 55

    Item9. ChangesinandDisagreementswithAccountantsonAccountingandFinancialDisclosure 97

    Item9A. ControlsandProcedures 97

    Item9B. OtherInformation 100

    PARTIII 100

    Item10. Directors,ExecutiveOfficersandCorporateGovernance 100

    Item11. ExecutiveCompensation 100

    Item12. SecurityOwnershipofCertainBeneficialOwnersandManagementandRelatedStockholderMatters 100

    Item13. CertainRelationshipsandRelatedTransactions,andDirectorIndependence 100

    Item14. PrincipalAccountingFeesandServices 100

    PARTIV 101

    Item15. ExhibitsFinancialStatementSchedules 101

    SIGNATURES 102

    i

  • WerefertoTripAdvisor,Inc.andourwhollyownedsubsidiariesasTripAdvisor,theCompany,us,weandourinthisAnnualReportonForm10K.

    CautionaryNoteRegardingForwardLookingStatements

    ThisAnnualReportonForm10Kcontainsforwardlookingstatementsthatinvolverisksanduncertainties,aswellasassumptionsthat,iftheynevermaterializeorproveincorrect,couldcauseourresultstodiffermateriallyfromthoseexpressedorimpliedbysuchforwardlookingstatements.ThestatementscontainedinthisAnnualReportthatarenotpurelyhistoricalareforwardlookingstatementswithinthemeaningofSection27AoftheSecuritiesActof1933,asamended,ortheSecuritiesAct,andSection21EoftheSecuritiesExchangeActof1934,asamended,ortheExchangeAct.Whenused,thewordsanticipate,believe,could,estimate,expect,intend,may,might,plan,project,resultshould,will,andsimilarexpressionswhichdonotrelatesolelytohistoricalmattersareintendedtoidentifyforwardlookingstatements.Wecautioninvestorsthatanyforwardlookingstatementsinthisreport,orwhichmanagementmaymakeorallyorinwritingfromtimetotime,arebasedonmanagementsbeliefsandonassumptionsmadeby,andinformationcurrentlyavailableto,management.Suchstatementsaresubjecttorisks,uncertaintiesandassumptionsandarenotguaranteesoffutureperformance,whichmaybeaffectedbyknownandunknownrisks,trends,uncertaintiesandfactorsthatarebeyondourcontrol.Someoftherisksanduncertaintiesthatmaycauseouractualresults,performanceorachievementstodiffermateriallyfromthoseexpressedorimpliedbyforwardlookingstatementsaremorefullydescribedinPartI,Item1A,"RiskFactors."Moreover,weoperateinaverycompetitiveandrapidlychangingenvironment.Newriskfactorsemergefromtimetotimeanditisnotpossibleformanagementtopredictallsuchriskfactors,norcanweassesstheimpactofallsuchriskfactorsonourbusinessortheextenttowhichanyfactor,orcombinationoffactors,maycauseactualresultstodiffermateriallyfromthosecontainedinanyforwardlookingstatements.Wecautionyouthat,whileforwardlookingstatementsreflectourgoodfaithbeliefswhenwemakethem,theyarenotguaranteesoffutureperformanceandareimpactedbyactualeventswhentheyoccurafterwemakesuchstatements.Weexpresslydisclaimanyresponsibilitytoupdateourforwardlookingstatements,whetherasaresultofnewinformation,futureeventsorotherwise.

    InvestorsshouldalsorefertoourquarterlyreportsonForm10QforfutureperiodsandcurrentreportsonForm8KaswefilethemwiththeU.S.SecuritiesandExchangeCommission,ortheSEC,andtoothermaterialswemayfurnishtothepublicfromtimetotimethroughCurrentReportsonForm8Korotherwise,foradiscussionofrisksanduncertaintiesthatmaycauseactualresults,performanceorachievementstodiffermateriallyfromthoseexpressedorimpliedbyforwardlookingstatements.

    1

  • PARTIItem1. Business

    Overview

    TripAdvisor,Inc.ownsandoperatesaportfolioofleadingonlinetravelbrands.TripAdvisor,ourflagshipbrand,istheworldslargesttravelsite,andourmissionistohelppeoplearoundtheworldplanandbooktheperfecttrip.Weaccomplishthisby,amongotherthings,aggregatingmillionsoftravelersreviewsandopinionsaboutaccommodations,destinations,activitiesandattractions,andrestaurants,throughouttheworldsothatourusershaveaccesstotrustedadvicewherevertheirtriptakesthem.Ourplatformnotonlyhelpsusersplantheirtripwithouruniqueusergeneratedcontent,butalsoenablesuserstocomparerealtimepricingandavailabilitysothattheycanbookhotels,vacationrentals,flights,activitiesandattractions,andrestaurants.

    TheinitiallaunchofourU.S.basedtripadvisor.comwebsitewasinNovember2000.OurTripAdvisorbrandedwebsitesnowincludelocalizedversionsoftheTripAdvisorwebsitein45countries,includingChinaunderthebrand,daodao.comandareofferedin28languages:English,SpanishChinese(TraditionalandSimplified),Russian,Arabic,Greek,Korean,Polish,Norwegian,Turkish,Danish,Swedish,Dutch,Bahasa,Thai,Portuguese,Japanese,Italian,French,Turkish,Vietnamese,Hebrew,Suomi,Hungarian,Czech,Slovak,Serbian,andGerman.TripAdvisorbrandedsitesmakeupthelargesttravelcommunityintheworld,reachingmorethan315millionuniquemonthlyvisitors,andmorethan200millionreviewsandopinionscoveringmorethan4.5millionplacestostay,placestoeatandthingstodo,duringtheyearendedDecember31,2014.

    InadditiontotheflagshipTripAdvisorbrand,wenowmanageandoperate24othertravelmediabrands,connectedbythecommongoalofprovidingusersthemostcomprehensiveplanningandbookingresourcesinthetravelindustry.Thesemediabrandsarelistedbelow:

    airfarewatchdog.com Providesuptodateairlinedealsthathavebeenresearchedandverifiedbyateam

    ofdedicatedairfareexperts.bookingbuddy.com Travelshoppingwebsitethatgivestravelerseasyaccesstoairfare,hotel,car

    rental,cruise,vacationrental,andvacationdeals,pluspricesfromselectedtravelsites.

    cruisecritic.com Acommunityofavidandfirsttimecruiserswhoenjoythefunofplanning,researchingandsharingtheirpassionforcruising.

    everytrail.com Mobileapplicationandwebsiteforcollectingandsharinggeotaggedusergeneratedtravelcontent,suchaswalkingtours,roadtrips,sightseeingtours.

    familyvacationcritic.com Reviewsoffamilyfriendlyhotels,resorts,destinationsandattractions,writtenbyexperiencedfamilytravelexperts.

    flipkey.com Avacationrentalsitefeaturingresidentialpropertiesfromaroundtheworld,withalargecollectionofguestreviews.

    gateguru.com Mobileresourceforuptodateflightandairportinformationaroundtheworld.holidaylettings.co.uk AleadingU.K.basedvacationrentalsite,featuringresidentialproperties

    globallylistedforrental,enablinguserstolivelikealocalwhileonholiday.holidaywatchdog.com AU.K.basedwebsitefortravelerreviewsonhotelsanddestinationsfocusingon

    theMediterranean.independenttraveler.com Atravelersexchangethatfeaturespracticaltravelresourcesforacommunityof

    internationaltravelerswhoenjoytheadventureofindependenttravel.jetsetter.com Membersonlyprivatesalesiteprovidinginsideraccess,expertknowledgeand

    exclusivedealsforvacationsaroundtheworld.thefork.com(includinglafourchette.com,eltenedor.comandiens.nl)

    AleadingonlineandmobilereservationplatformforrestaurantswithanextensivenetworkofrestaurantpartnersinEurope.

    kuxun.cn Travelmetasearchengine,muchlikeTripAdvisor,operatinginChina.niumba.com ASpanishbasedvacationrentalsite,featuringpropertieslistedgloballyandthe

    worldslargestcollectionofSpanishvacationrentals.onetime.com Comparisonshoppingtravelwebsitethatallowstravelshopperstoconduct

    itinerarybased,multisitesearchesforflights,hotels,cruises,vacations,andcarrentals.

    2

  • oyster.com Hotelreviewwebsitefeaturingexpertreviewsandphotoscoveringcitiesaroundtheworld.

    seatguru.com Featuresaircraftseatmaps,seatreviews,andacolorcodedsystemtoidentifysuperiorandsubstandardairlineseats.

    smartertravel.com Oneofthelargestonlinetravelresourcesforindependentexpertadviceforthebudgetconscioustraveler,helpingthemfindthebestdealsandgetthemostvaluefromtheirtrips.

    tingo.com Thefirsthotelbookingsitethatautomaticallyrebookshotelroomsatalowerpriceiftheratedropsandrefundsthedifferencetothetravelerscreditcards.

    travelpod.com Pioneeringtravelblogwebsite.tripbod.com Atravelcommunitythathelpsconnecttravelerstolocalexpertsallowingthe

    travelertoobtainrelevantrecommendationsdirectfromalocalexpert.vacationhomerentals.com AU.S.basedvacationrentalwebsitefeaturingpropertiesaroundtheworld.viator.com Aleadingresourceforresearchingandbookingdestinationactivitiesaroundthe

    world.virtualtourist.com Travelorientedcommunitywebsitefeaturingusercontributedtravelguidesfor

    locationsworldwide.

    2014Highlights

    Followingaresomebusinesshighlightsforfiscal2014:

    Wereachedmorethan200millionreviewsandopinionsonmorethan4.5millionplacestostay,placestoeatandthingstodoincludingmorethan915,000hotelsandaccommodationsandapproximately650,000vacationrentals,2.4millionrestaurantsandmorethan500,000attractionsin147,000destinationsthroughouttheworld.

    Ourwebsitesgloballyreachedmorethan315millionmonthlyuniquevisitorsduringtheyearendedDecember31,2014,accordingtoGoogleAnalytics.

    Wereachednearly175millioncumulativemobileappdownloadsandapproximately50%ofTripAdvisortrafficvisitedwasviatabletsorsmartphonesin2014.Averagemonthlyuniquevisitorsviatabletsandsmartphonesgrewover60%yearoveryeartoapproximately140millionfortheyearendedDecember31,2014,accordingtocompanylogs.

    WelaunchedTripAdvisorpointsofsaleinNewZealand,Philippines,SouthAfrica,Vietnam,Austria,Israel,Finland,Hungary,CzechRepublic,Slovakia,andSerbia.

    Wenowmanageandoperate24travelmediabrandsinadditiontoourflagshipTripAdvisorbrand,allofwhichareconnectedbythecommongoalofprovidingcomprehensivetravelplanningresourcesacrossthetravelsector.

    WeintroducedInstantBooking,afeaturethatenablesuserstoquicklyandeasilybookahotelonTripAdvisorthroughourhoteloronlinetravelagentpartners.

    Welaunched,JustforYou,afeaturethatmakesthehotelresearchexperiencemorepersonalizedwithhotelrecommendationstoTripAdvisorusersbasedontheirindividualpreferencesandtravelhistoryonthesite.

    WebecameagloballeaderinattractionsbyacquiringViator,theleadingresourceforresearchingandbookingdestinationactivitiesaroundtheworld.ViatorenablesuserstobookonlineorindestinationactivitiesviatheViatorToursandActivitiesapp,featuringworldwidebookabletoursandattractions,includingmorethan600,000userreviews,photos,andvideos.

    WeestablishedaleadershippositioninonlinerestaurantreservationsinEuropebyacquiringLafourchette,Mytable.it,Restopolis,andIens.nl.Subsequently,weannouncedthelaunchofourInstantReservationfeatureforrestaurants,whichletsusersselectarestaurantandcompleteareservationonTripAdvisorandtheLafourchettenetworkofrestaurants.

    CorporateHistory,EquityOwnershipandVotingControl

    TripAdvisorwascofoundedinFebruary2000byStephenKaufer,ourcurrentPresidentandChiefExecutiveOfficer.TripAdvisorwasacquiredbyIAC/InterActiveCorp,orIAC,inApril2004.InAugust2005,IACspunoffitsportfoliooftravelbrands,includingTripAdvisor,intoaseparatenewlyformedDelawarecorporation,calledExpedia,Inc.,orExpedia.

    3

  • During2011,Expediaannounceditsplantoseparateintotwoindependentpubliccompaniesinordertobetterachievecertainstrategicobjectivesofitsvariousbusinesses.OnDecember20,2011ExpediacompletedthespinoffofTripAdvisorintoaseparatepubliclytradedDelawarecorporation.WerefertothistransactionastheSpinOff.TripAdvisorbegantradingonTheNASDAQGlobalSelectMarket,orNASDAQ,asanindependentpubliccompanyonDecember21,2011underthesymbolTRIP.

    OnDecember11,2012,LibertyInteractiveCorporation,orLiberty,purchasedanaggregateof4,799,848sharesofcommonstockofTripAdvisorfromBarryDiller,ourformerChairmanoftheBoardofDirectorsandSeniorExecutive,andcertainofhisaffiliates(theStockPurchase).Asaresult,Libertybeneficiallyowned18,159,752sharesofourcommonstockand12,799,999sharesofourClassBcommonstock.

    OnAugust27,2014,theentirebeneficialownershipofourcommonstockandClassBcommonstockheldbyLibertywasacquiredbyLibertyTripAdvisorHoldings,Inc.,orLTRIP.Simultaneously,Liberty,LTRIPsformerparentcompany,distributed,bymeansofadividend,totheholdersofitsLibertyVenturescommonstock,LibertysentireequityinterestinLTRIP.WerefertothistransactionastheLibertySpinOff.AsaresultoftheLibertySpinOff,effectiveAugust27,2014LTRIPbecameaseparate,publiclytradedcompanyand100%ofLibertysinterestinTripAdvisorwasheldbyLTRIP.

    Asaresultofthesetransactions,asofDecember31,2014,LTRIPbeneficiallyowned18,159,752sharesofourcommonstockand12,799,999sharesofourClassBcommonstock,whichsharesconstitute14.0%oftheoutstandingsharesofcommonstockand100%oftheoutstandingsharesofClassBcommonstock.AssumingtheconversionofallofLTRIPssharesofClassBcommonstockintocommonstock,LTRIPwouldbeneficiallyown21.7%oftheoutstandingcommonstock(calculatedinaccordancewithRule13d3).BecauseeachshareofClassBcommonstockisgenerallyentitledtotenvotespershareandeachshareofcommonstockisentitledtoonevotepershare,LTRIPmaybedeemedtobeneficiallyownequitysecuritiesrepresentingapproximately56.6%ofourvotingpower.

    OurBusinessModel

    Ourplatformsconnectuserswishingtoplanandbookthebesttravelexperienceswithprovidersoftravelaccommodationsandtravelservicesaroundtheworld.Wederivethemajorityofourrevenuefromthesaleofadvertising,primarilythroughclickbasedadvertisingand,toalesserextent,displaybasedadvertising.Theremainderofourrevenueisgeneratedthroughacombinationofsubscriptionandtransactionbasedofferingsandotherrevenueincludingcontentlicensing.

    ClickBasedAdvertisingRevenue.Ourlargestsourceofrevenueisclickbasedadvertising,whichincludeslinkstoourpartnersbookingsitesandcontextuallyrelevantbrandedandunbrandedtextlinks.Ourclickbasedadvertisingpartnersarepredominantlyonlinetravelagencies,orOTAs,anddirectsuppliersinthehotel,airlineandcruiseproductcategories.Clickbasedadvertisingisgenerallypricedonacostperclick,orCPC,basis,withpaymentsfromadvertisersbasedonthenumberofuserswhoclickoneachtypeoflink.CPCpricesaredeterminedinabiddingprocessthatallowsourpartnerstouseourproprietarysystemtosubmitCPCbidstohavetheirratesandavailabilitylistedonoursite.WhenapartnersubmitsaCPCbidtheyagreetopaytheamountofthatbideachtimeausersubsequentlyclicksontheURLlinktothepartnerswebsite.Bidsaresubmittedperiodicallysometimesasoftenasdailyorweeklyonapropertybypropertybasisandthesizeofthebidrelativetootherbidsreceiveddeterminesthepartnersplacementinallmetaplacementsonoursitewithoneormoreoffersshown,includinghotelcomparisonsearchresultsandthepropertydetailpage.Thesystemisautomatedandthesizeofthepartnersbidistheonlyfactorimpactingthepartnersplacementonthatpage,exceptthatindividualpartnersmaybesortedlowerintheeventthattheyhavenotprovidedpriceinformationoriftheyceasetohaveavailabilityfortheproperty.Whileweenterintomasteradvertisingcontractswithourpartners,thetermsoftheseagreementsgenerallyaddressmatterssuchasprivacyandcompliance,paymenttermsandconditions,terminationandindemnities.Mostofourclickbasedadvertisingcontractscanbeterminatedbyourpartnersatwilloronshortnotice. ClickbasedrevenuealsoincludesrevenuefromournewInstantBookingfeature,whichallowsapartnertopayacommissionrateforauserthatcompletesareservationonTripAdvisor.TripAdvisorisnotthemerchantofrecordonInstantBookingreservations.FortheyearsendedDecember31,2014,2013and2012,weearned$870million,or70%,$696million,or74%and$588million,or77%,respectively,ofrevenuefromclickbasedadvertising.

    DisplayBasedAdvertisingRevenue.Weearnrevenuefromavarietyofdisplaybasedadvertisingplacementsonourwebsitesthroughwhichouradvertisingpartnerscanpromotetheirbrandsinacontextuallyrelevantmanner.Whileourdisplaybasedadvertisingclientsarepredominatelydirectsuppliersinthehotel,airlineandcruisecategoriesaswellasOTAs,wealsoacceptdisplayadvertisingfromdestinationmarketingorganizations,casinos,resortsandattractions,aswellasadvertisersfromnontravelcategories.Wegenerallysellourdisplaybasedadvertisingonacostperthousandimpressions,orCPM,basis.Ourdisplaybasedadvertisingproductsalsoincludeanumberofcustombuiltfeatures.Forexample,DelayedAdCall,chargescustomersonlywhentheadunitisinausersview,aswellascertain

  • customizedcobrandedfeatures.FortheyearsendedDecember31,2014,2013and2012,weearned$140million,or11%,$119million,or13%,and$94million,or12%,respectively,inrevenuefromdisplaybasedadvertising.

    4

  • SubscriptionBased,TransactionandOtherRevenue.BusinessListings,isasubscriptionbasedadvertisingproductofferedtohotels,B&Bsandotherspecialtylodgingproperties.ManagedbyourTripAdvisorforBusinessteam,thisadvertisingproductissoldforaflatfeeandallowssubscriberstolist,foracontractedperiodoftime,awebsiteURL,emailaddressandphonenumberonourTripAdvisorbrandedwebsites,aswellastopostspecialoffersfortravelers.Inaddition,weearnrevenuefrommakinghotelroomnightsavailableforbookingonourtransactionbasedsites,includingJetsetterandTingoforwhichwearethemerchantofrecordmakingrentalsavailablethroughourvacationrentalsbusinesssellingdestinationactivitiesthroughViatorandprovidingonlinerestaurantreservationsthroughLafourchetteaswellasotherrevenueincludingcontentlicensingwiththirdpartysites.FortheyearsendedDecember31,2014,2013and2012weearned$236million,or19%,$130million,or14%,and$81million,or11%,respectively,inrevenuefromsubscriptionbased,transactionandotherrevenue.

    OurIndustry

    Weoperateintheglobaltravelindustry,focusingexclusivelyononlinetravelactivityandtheonlineadvertisingmarket.

    AccordingtothePhoCusWright,grossbookingsintheglobaltravelindustryareexpectedtobegreaterthan$1.3trillionin2015.Recenthistoricaltrendsshowthat,eachyear,anincreasingpercentageofglobaltravelspendinghasbeenconductedonlinethroughsupplierwebsitesandonlinetravelagencies.Webelievethatthistrendwillcontinueasonlinepenetrationcontinuestogrow,asmoreconsumersgainbroadbandaccesstotheInternet,assmartphone,tabletsandothermobilecomputingdevicescontinuetoproliferate,andastravelactivityincreasesalongwithanexpandingmiddleclassincertaindevelopingcountrieslikeChinaandIndia.

    AccordingtotheInternationalDataCorporation,orIDC,NewMediaMarketModel,only26%oftheapproximately$51billionthatisexpectedtobespentontraveladvertisingwillbespentonlinein2016.WebelievethattheInternetwillcontinuetobecomeevenmoreintegraltothetravelplanningprocessduetoincreasingworldwideonlinepenetration,particularlygiventhecapabilitiesthattheInternetprovidestravelers,includingtheabilitytorefinesearches,comparedestinations,viewrealtimepricing,completebookings,andaccessinformationwhileindestination.

    AccordingtotheIDCNewMediaMarketModel,theglobalonlineadvertisingmarketisgrowingandisprojectedtoexceed$165billionby2016,asmoreandmoreadvertiserscontinuetoshifttheirspendingfromofflinetoonlinechannels,mirroringthetrendinconsumermediaconsumptiongenerally.Giventhesizeoftheonlineadvertisingmarket,webelievethattravelprovidersandtravelrelatedadvertisersare,andwillcontinuetobe,motivatedtodevotesignificantresourcestoadvertisetheirtravelproductsandservices.Inaddition,asmoreandmoretraveltransactionsareconductedonlinegenerally,webelievethatanincreasingamountoftraveladvertisingspendingwillmigratefromtraditionalofflineadvertisingchannelstoonlineadvertisingopportunities.

    OurKeyStrengths

    OurTripAdvisorbrandedsiteshelptravelersplanandbooktheperfecttrip.Tohelpourusersplantheirtrip,wehavemorethan200millionreviewsandopinions,approximately30millioncandidphotos,andhelpfulcontentrangingfromhotelroomtipstotravelguides.Wehavecreatedacomprehensiveonlineresourceforusergeneratedcontentondestinations,lodging,restaurantsandattractions.Weproviderealtimepricingandavailabilitysearchfunctionalitythatcompareshundredsofpartnerwebsitessothatouruserscanfindandbookthebestprices.Wealsoenableuserstobookactivitiesandattractionsandmakerestaurantreservationsthroughoursite.Thetoolsandinformationweprovideareavailablein28differentlanguagesonwebbasedandmobileapplicationsondesktopsandacrossallmobiledevices.

    Inordertoachieveourgoal,weleverageourkeyassetsarobusttravelcommunity,richusergeneratedcontent,continuoustechnologicalinnovationandglobalreachasfollows:

    RobustTravelCommunity.Webelievethatwehavethelargestbreadthofcontentinourmarkets,andthat,becauseofthisbreadth,travelersgravitatetoourwebsitestoresearchandplantheirtrips.Byprovidinganinteractiveforumtosharetheirexperiences,ourlargeandhighlyengagedcommunityoftravelersisavaluableresource.Tofacilitateplanning,weenableconsumerstoresearchpricingandavailabilityfromthirdpartytravelbookingsites.Toencouragebettertravelexperiencesforconsumersandtocreateafeedbackloopbetweenthehospitalityindustryandindividualtravelers,weallowhospitalitymanagementrepresentativestorespondtoreviewsoftheirpropertiesonourwebsite.Aftercompletingtheirtrip,consumerscanreturntoourwebsitestowritereviewstogivebacktothecommunitythathelpedthemplantheirtrip.Throughthiscycle,morecontentisgenerated,whichdrivescommunity,traffic,loyaltyandhighersearchenginerankings,allofwhichleadtofurthercontentcreation.Webelievethatthevolumeofreviewsgeneratedonourwebsitesandtherobustfeedbackloopcreatedonourwebsitesprovidesuswithasignificantadvantageoverourcompetitors.

  • RichUserGeneratedContent.Webelievethatthebesttravelcontentcomesfromthewisdomandinsightofarobustcommunityoftravelers.Weleverageusergeneratedcontenttopowertravelplanningbyallowingmemberstocreate

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  • reviewsandshareopinionsonhundredsofthousandsofaccommodations,destinations,attractionsandrestaurants.Asevidencedbythegrowthofourbusiness,thistypeoftravelplanninghasbeenembracedbytravelers.Topromoteanenthusiasticreviewercommunitythatcontinuestoprovidevaluablecontentandpromotesourbrand,wehavelaunchedseveralprogramstorecognizereviewercontributions,includingsitebadges,helpfulvoterecognition,andotherfeatures,allofwhichhighlightthecurrentandhelpfulreviewsandopinionsavailablethroughouttheTripAdvisorcommunity.

    TechnologyandInnovation.Productinnovationandspeedtomarketareourtwomostimportantprioritiesinordertocreateanincreasinglyrichuserexperience.Wehaveweeklyengineeringreleasesthatcontainnewproductsandfeaturesforourwebsitesandmobileapps.Somerecentexamplesofthisproductinnovationinclude:JustForYou,whichdeliversusersamorepersonalizedhotelshoppingexperienceInstantBooking,whichenablesuserstocompleteahotelreservationwhileremainingontheTripAdvisorwebsitehotelmetasearch,whichenablesuserstoseerealtimeavailabilityandcomparepricesfromhundredsofpartnerwebsites,withoutrequiringtheusertovisitanotherwebsiteandTripConnect,whichenablesindependenthotelierstocompeteforleadsonTripAdvisor.Ourongoingcommitmenttoinnovationalsoextendstocontentsyndicationandreviewcollectionpartnerships,asweleverageourtechnologyandcontentforthebenefitofotherwebsites.Inaddition,weutilizemanualandelectronicfrauddetectioninordertomaintainthequalityandauthenticityofuserreviews.

    GlobalReach.Weareaglobalcompany,boththroughthereachofourportfolioofbrandedwebsitesandthroughourinmarketstaffingin20countries.AsofDecember31,2014,wehadapproximately1,500employeesbasedoutsideoftheUnitedStates,representing54%ofouremployeepopulation.AsofDecember31,2014,wehadbrandedwebsitesin45countriesand28languages,includingalocallanguagewebsiteinChinaunderthebranddaodao.com.Wehaveover570millionreviewtranslations,andarecommittedtocontinuingtoimprovetheincountryuserexperienceandthelocalcontentcoverageforallofourpointsofsale.WebelievethattheuniversallyrelevantcontentandcommunityofourcoreTripAdvisorplatformandotherbrandsuniquelypositionustoappealtotravelersthroughouttheworld.

    OurStrategy

    Weleveragesignificantinvestmentsintechnology,operations,brandbuilding,andrelationshipswithadvertisersandotherpartnerstoexpandourbusinessandenhanceourglobalcompetitiveposition.Theseinvestmentshaveenabledusto,amongotherthings,aggregatealargebaseofconsumerreviews,inavarietyoflanguages,acrossourglobalplatformofourwebsites.Wecontinuetofocusonthefollowingareastogrowourbusiness:

    ContinuingTechnologyInnovation.Webelieveourabilitytoinnovateandtoprovideadditionalfunctionalitytoourwebsitesandappsacrossalldeviceswillenableustocontinuetodeliveranindustryleadinguserexperience.Ourinnovationculturesupportsbringingproductenhancementstomarketatspeed.Indoingso,webelievethatwecancontinueto,amongotherthings,growcontent,usage,loyaltyandengagement,aswellastoreinforceourcompetitivepositioning.

    ExpandingOurSocialandPersonalizationPlatform.Wegrowbrandawarenessandmemberacquisitiononsocialmediachannels,includingFacebook,Twitterandothersocialsharingplatforms.Weintendtocontinuetoexpandoursocialintegrationandpersonalizationeffortsaswebelievetheseinitiativeshelptodriveusage,engagement,andcontent.UserscansharetheirreviewsandratingswiththeirfriendsthroughFacebookConnectandalsocanpublishtheirTripAdvisorcontenttotheirFacebooktimeline.Additionally,ourJustForYoupersonalizationfeaturegivesuserspersonalizedrecommendationsbasedonfriendsreviewsandratingsaswellasinformationcollectedaboutuserpreferencesinselectinghotels.

    ImprovingtheExperience.Wecontinuetoinvestinuserexperienceenhancementsthatimprovetheresearching,comparingandbookingexperienceaswellashelpauserwhiletheyareonthetrip.Wehaveofferedaflightmetasearchproductthatdisplaysavailabilityandpricinginformationfrommultiplesourcessince2009,expandinginternationallyto38pointsofsaleasofDecember31,2014.In2012,weintroducedhotelmetasearchtoourglobalsmartphonetrafficandinJune2013,wecompletedtheprocessoffullyimplementinghotelmetasearchfunctionalityontoourdesktopandtabletplatforms.During2014weintroducedInstantBooking,toourmobileusers.Thisproductfeatureallowstravelerstocompleteahotelreservation,poweredbyourOTAandhotelierpartners,whileremainingontheTripAdvisormobileapp.Wecontinuetointegratethisfeatureontodesktopandtablets.InadditiontometasearchandInstantBooking,wecontinuetoofferandimprovefeaturessuchasuserreviews,photos,mapping,andfilteringtoassistusersinfindingtherighthotelfortheirtrip.

    InvestinginTrafficGrowth.Attractingmorevisitorstooursitesisatthecoreofourstrategicplanandwededicatesignificanttimeandfinancialresourcestowardsamplifyingourglobalbrand.Wedothisthroughonlineandofflinemarketingchannelstomaximizethenumberofuserswhonavigatetooursiteeitherdirectly,alsoknownasdomain

  • directtraffic,orfromthemarketingchanneldirectly.Offlineadvertisingchannelswehaveusedinthepasttoamplifyourbrandsinclude:permanentbrandingcampaignssuchasTripAdvisorbrandedtravelawards,certificates,stickersand

    6

  • badgesandtelevisionadvertising.Onlineadvertisingchannelswehaveusedinthepasttoamplifyourbrandinclude,butarenotlimitedto:customerrelationshipmanagementemailcampaigns,orCRMsocialnetworksorganicsearchthroughsearchengineoptimization,orSEOpaidsearchthroughsearchenginemarketing,orSEMandreferralsfrompartnerswhosesitescontainlinkstoTripAdvisorcontent,badgesorwidgets.Atapproximately11%ofglobalonlinetraveluniquevisitors,accordingtocomScoreMediaMetrix,webelievethatwehavealargeopportunitytocontinuegrowingvisitors.Inordertoachievethisobjective,weintendtoinvestintheaforementionedchannels,aswellasanynewchannelsthatwemayidentifyinthefuture.

    EnhancingInternationalOfferings.Wearefocusedonstrengtheningourbroadglobalfootprintaswebelievethatinternationalmarketsrepresentalongtermstrategicopportunityforus.WearecontinuingtoimprovelocalizationandgrowouruserbaseinEurope,AsiaandSouthAmerica,especiallyinemergingmarkets,suchasBrazil,RussiaandChina.Inaddition,wecurrentlyhavetwoleadproductofferingsintheChinesemarketDaoDaoandKuxunbothheadquarteredinBeijing.WecontinuetoinvestintheChinesemarket,despiteoperatingataloss,andwillcontinuetoincreaseourinternationalofferings.

    GrowingthroughStrategicAcquisitions.Wehaveahistoryofsuccessfullyacquiringandintegratingcompaniesthatexpandourfootprinteithergeographicallyorinmarketsectorsthatarecomplementarytoourflagshipproperties.Weintendtocontinuetogrowourbusinessandexpandourproductandserviceofferingsthroughacquisitionsthateithercomplementourexistingbusinessesorprovideadditionalresources,productsand/orservicesthatwillimprovetheuserexperience.AfewrecentexamplesincludeLafourchette,theleadingonlineandmobilereservationplatformforrestaurantsinFrance,SpainandSwitzerland,withanetworkofrestaurantpartnersinEuropeandViator,theleadingonlineresourceforresearchingandbookingdestinationactivitiesaroundtheworld.

    OurStrategicRelationships

    Wehaveanumberofrelationshipsthatarestrategicallyimportanttothesuccessofourbusiness.Theserelationshipsarememorializedinsomeformofagreement,althoughmanyoftheseagreementsareforalimitedtermorareterminableatwilloronshortnotice.Asaresult,weworkhardtoensurethemutualsuccessoftheserelationships.

    WehaveadvertisingrelationshipswiththevastmajorityoftheleadingOTAsaswellasavarietyofothertravelsupplierspursuanttowhichthesecompaniespurchasetravelerleadsfromus,generallyonaCPCbasis.FortheyearendedDecember31,2014,ourtwomostsignificantadvertisingpartners,ExpediaandPriceline(andtheirsubsidiaries),eachaccountedformorethan10%ofourtotalrevenueandcombinedaccountedfor46%ofourtotalrevenue.

    Wehaveacontentlicensingprogramutilizedbyover1,000partnersaroundtheworld,includinghotelchains,onlinetravelagents,touristboards,airlinesandmediasites.TripAdvisoralsodistributesitscontentthroughselfserviceHTMLwidgets,whichareusedonthewebsitesofhotels,restaurants,attractionsanddestinationmarketingorganizations.Theseproducts,whichareavailableatnocostintheTripAdvisorManagementCenter,allowbusinessesanddestinationstopromotethemselvesbydisplayingtheirTripAdvisorratings,reviewsandawards.TripAdvisorwidgetsarepresentlyfoundonmorethan150,000uniquedomainsaroundtheglobe,reachingover800millionpeoplepermonth.Partnersbenefitfromourusergeneratedcontent,suchasreviews,ratings,photosandtravelerforums.Inaddition,wepowerreviewcollectionforagrowingnumberofpartners,suchasAccorHotels,WyndhamHotelGroup,BestWesternandEasytobook.com,enablingthemtoproactivelycollectreviewsfromtheirowncustomerspoststayintheirownbrandedenvironment.Wehavealsodevelopedpartnershipswithmobilecarriersanddevicemanufacturers.

    Wealsosyndicateourclickbasedadvertisingtothirdpartywebsites.ThelargestsuchsyndicationrelationshipiswithYahoo!TravelGuides,pursuanttowhichweprovideshowpricesadvertisingontheYahoo!TravelGuideshotelpages.OthersyndicationpartnersincludeBingandAxelSpringer.

    MarketingandPromotions

    Wehaveestablishedwidelyusedandrecognizedbrandsthroughmarketingandpromotioncampaigns.Wecontinuetoaggressivelypromoteourbrands,particularlyourflagshipbrandTripAdvisor.Ourmarketingprogramsareintendedtobuildandmaintainthevalueofourbrands,promoteconsumerengagementandcontributions,drivequalifiedclickstoourpartnersandstrategicallypositionourbrandsinthemarket.Ourlongtermsuccessdependsonourcontinuedabilitytomaintainandincreasetheoverallnumberofconsumersflowingthroughourbrandinacosteffectivemanner,aswellasourabilitytoattractconsumerswhowillsharetheirowncontentfromtheirtrips.OurmarketingchannelsincludeSEMandSEO.Wealsoreachconsumersacrossthewebthroughouronlinemarketingprogram,andofflinethroughourofflinebrandcampaigns.WealsoutilizeCRMinwhichwesendrelevantandengagingtravelercommunicationstoourmembersviaemail.Wehavearobustglobalpublicrelationsprogram

  • thatyieldsplacementsonaconstantbasisinmajorprintandonlinepublications.Wecontinuetolookfornewwaystobuildbrandawarenessandexpandnewchannels,whichmayincludetraditionalmediaandsocialmediachannelsincludingFacebookandTwitter

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  • todeepencustomerengagement.WesyndicateourcontentsothatothersitescanfeatureTripAdvisorbrandingandcontent.Lastly,marketingandproductdevelopmentinitiativesarecloselytied.Weareconstantlycreatinghelpfulfeaturesandfunctionalitysothatourconsumerscandiscovermorerelevanttravelandreviewcontentthattheywanttotalkaboutandsharewiththeirfriends.

    OperationsandTechnology

    Wehaveassembledateamofhighlyskilledsoftwareengineers,computerscientists,datascientists,networkengineers,andsystemsengineerswhoseexpertisespansabroadrangeoftechnicalareas,includingawidevarietyofopensourceoperatingsystems,databases,languages,analytics,networking,scalablewebarchitecture,operations,andwarehousingtechnologies.Wemakesignificantinvestmentsinproductandfeaturedevelopment,datamanagement,personalizationtechnologies,scalableinfrastructures,networking,datawarehousing,andsearchenginetechnologies.TheTripAdvisorbrandedwebsitesarepoweredprimarilyusingJavaprogramminglanguage.

    Oursystemsinfrastructure,webanddatabaseserversforTripAdvisorbrandedwebsitesarehousedattwogeographicallyseparatefacilitiesandhavemultiplecommunicationlinksaswellascontinuousmonitoringandengineeringsupport.Eachfacilityisfullyselfsufficientandoperationalwithitsownhardware,networking,software,andcontent,andisstructuredinanactive/passive,fullyredundantconfiguration.Substantiallyallofoursoftwarecomponents,data,andcontentarereplicatedinmultipledatacentersanddevelopmentcenters,aswellasbeingbackedupatoffsitelocations.Oursystemsaremonitoredandprotectedthoughmultiplelayersofsecurity.Severalofourindividualsubsidiariesandbusinesses,includingoursubsidiariesinChina,havetheirowndatainfrastructureandtechnologyteams.

    WidespreadadoptionofmobiledevicessuchasiPhone,AndroidenabledsmartphonesandtabletssuchastheiPad,coupledwiththeimprovedwebbrowsingfunctionalityanddevelopmentofthousandsofusefulappsavailableonthesedevices,isdrivingsubstantialtrafficandcommerceactivitytomobileplatforms.Wehaveseentremendousgrowthintheadoptionofmobileplatforms,ashaveouradvertisingpartners.Advertisingopportunitiesmaybemorelimitedonmobiledevicesgiventheirsmallscreensizes.Further,giventhesizeandtechnicallimitationsoftabletsandsmartphones,mobileconsumersmaynotbewillingtodownloadmultipleappsfrommultipletravelserviceprovidersandinsteadprefertouseoneoralimitednumberofappsfortheirmobiletravelactivity.Asaresult,theconsumerexperiencewithmobileapps(aswellasbrandrecognitionandloyalty)isbecomingincreasinglyimportantandwemakesignificantinvestmentsinthisarea.

    Webelievethatmobilebookingsarenecessarytomaintainandgrowourbusinessasconsumersincreasinglyturntomobiledevicesandmobileapplications.Ifweareunabletocontinuetorapidlyinnovateandcreatenew,userfriendlyanddifferentiatedmobileofferingsandefficientlyandeffectivelyadvertiseanddistributeontheseplatforms,orifourmobileappsarenotdownloadedandusedbytravelconsumers,wecouldlosemarketsharetoexistingornewentrantsandourfuturegrowthandresultsofoperationscouldbeadverselyeffected.Asaresult,wehavemadesignificantprogresscreatingmobileofferingswhichhavereceivedstrongreviews,soliddownloadtrendsandaredrivingamaterialandincreasingshareofourbusiness.Oursmartphonemonetizationstrategiesarestilldeveloping,assmartphonemonetizationremainssignificantlylowerthandesktopmonetizationofhotelshoppersduringtheyearendedDecember31,2014,whiletabletsmonetizemorecloselytodesktops.

    Competition

    Wefacecompetitionforcontent,users,andadvertisers.Ourprimarycompetitorsincludelargeonlineportals,socialnetworkingsitesandsearchengines,suchasGoogle,MicrosoftsBing(includingBingTravel),Yahoo!(includingYahoo!Travel)andBaidu.WefacecompetitionfromOTAs(suchasExpediaandPricelineandtheirrespectivesubsidiaries),aswellaswholesalers,touroperatorsandtraditionalofflinetravelagencies.Wealsocompetewithawiderangeofothercompanies,includingAirbnb,Inc.,Ctrip.comInternational,Ltd.,HolidayCheckAG,HomeAway,Inc.,Yelp,Inc.andOpenTable,Inc.,asubsidiaryofPriceline.

    WebelievewearetheworldslargestglobalplatformfortravelrelatedreviewsandopinionsandwefacecompetitioninthetravelreviewspacefromOTAs,suchasExpediaandPricelineandtheirrespectivesubsidiaries,whichsolicitreviewsfromtravelerswhobooktravelontheirwebsites.Withrespecttoourrestaurantandattractionsbusiness,wefacecompetitionforreviewsfromOpenTable,asubsidiaryofPricelineandYelp,Inc.Moreover,networkswithsignificantinstalleduserbasessuchasGoogle(forexample,viaGoogle+LocalandGoogleHotelFinder)havebeguntocompetemoredirectlywithusbyattractingandaccumulatingusergeneratedreviewsandopinionsormaypursuetheacquisitionoftravelrelatedcontentdirectlyfromconsumers,andothernetworksandchannels,likeFacebook,couldchoosetodothesame.

    Inthecompetitiontoattractusers,werelyonourabilitytoacquiretrafficthroughofflinebrandrecognitionandbranddirecteffortssuchastelevision,emailandonlinesearch,whetherunpaidorpaid.UnpaidsearchissometimesreferredtoasSEO,which

  • isthepracticeofdevelopingwebsiteswithrelevantandcurrentcontentthatrankwellinorganic,orunpaid,searchengineresults.SEOcanbeaffectedbyanumberoffactorsincludingcompetitivesitecontent,changestoourwebsitearchitectureandpagedesigns,changestosearchenginerankingalgorithms,orchangestodisplayorderinginsearchengineresultssuchaspreferredplacementfor

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  • internalproductsofferedbysearchengines.SEMisaformofInternetmarketingthatinvolvesthepromotionofwebsitesbyincreasingtheirvisibilityinsearchengineresultspagesthroughtheuseofpaidplacement,contextualadvertising,andpaidinclusion.SEMisacompetitivemarketplacewithcompetitorscontinuallyupdatingtheirtrafficacquisitionstrategiesandeconomicmodelsacrossalargenumberofkeywordsandmarkets.

    CompetitionforAdvertisers

    Wecompetefortravelrelatedadvertisingbudgetswithlarge,establishedsearchengineswithsignificantlygreaterresourcesthanwehave,suchasGoogle,Bing,andYahoo!,aswellasonlinemediacompaniesandadnetworks,offlineadvertisingsources,suchastelevisionandprintmedia.Thesecompetitorshavelargeclientbasesandsignificantlygreaterresourcesthanwehaveandexpertiseindevelopingonlinecommerceandfacilitatinginternettrafficarecreatinginroadsintoonlinetravel.Competitionfromthesepartiescouldcauseustoloseadvertisingcustomersorsharesofadvertisingexpenditures.Forexample,GooglehaslaunchedHotelFinder,asearchtoolthatenablesuserstosearchandcomparehotelaccommodationsbasedonparameterssetbyusersandhas,attimes,placedtheGooglesupplierwebsitesoritsownsearchengineatornearthetopofhotelrelatedsearchresults.Inaddition,MicrosofthaslaunchedBingTravel,whichsearchesforhotelreservationsandairfaresonlineandpredictsthebesttimetopurchasethem.IfGoogle,Bingoranyotherleadingsearchenginesrefersignificanttraffictotheseorothertravelservicesthattheydevelopinthefuture,orotherwisefavorsupplierwebsitesorothertravelservicewebsitesoverotheronlinetravelsites,includingus,itwouldlikelybecomemoredifficultandexpensiveforustogeneratetraffictoourwebsitesandthereforemaintainorgrowourmarketshare.

    Certainofthecompanieswedobusinesswitharealsoourcompetitors.Theconsolidationofourcompetitorsandpartners,includingExpedia(throughitsinvestmentinTrivago)andPriceline(throughitsacquisitionofKayakandOpenTable),mayaffectourcompetitivenessandpartnerrelationships.Asthemarketevolvesforonlinetravelcontentandthetechnologysupportingit,includingnewplatformssuchassmartphoneandtabletcomputingdevices,weanticipatethattheexistingcompetitivelandscapewillchangeandnewcompetitorsmayemerge.

    IntellectualProperty

    Ourintellectualproperty,includingpatents,trademarks,copyrights,domainnames,tradedress,proprietarytechnologyandtradesecrets,isanimportantcomponentofourbusiness.Werelyonourintellectualpropertyrightsinourcontent,proprietarytechnology,softwarecode,ratingsindexes,databasesofreviewsandforumcontent,images,videos,graphicsandbrands.Wehaveacquiredsomeofourintellectualpropertyrightsthroughlicensesandcontentagreementswiththirdparties.Theselicensesandagreementsmayplacerestrictionsontheuseofourintellectualproperty.

    Weprotectourintellectualpropertybyrelyingonourtermsofuse,confidentialityproceduresandcontractualprovisions,aswellasoninternational,national,stateandcommonlawrights.Inaddition,weenterintoconfidentialityandinventionassignmentagreementswithemployeesandcontractors,andconfidentialityagreementswithotherthirdparties.Weprotectourbrandsbypursuingthetrademarkregistrationofourcorebrands,suchasTripAdvisorandtheOwlLogo,maintainingourtrademarkportfolio,securingcontractualtrademarkrightsprotectionwhenappropriate,andrelyingoncommonlawtrademarkrightswhenappropriate.Wealsoregistercopyrightsanddomainnamesasdeemedappropriate.Additionally,weprotectourtrademarks,domainnamesandcopyrightswiththeuseofintellectualpropertylicensesandanenforcementprogram.

    Wehaveconsidered,andwillcontinuetoconsider,theappropriatenessoffilingforpatentstoprotectfutureinventions,ascircumstancesmaywarrant.However,manypatentsprotectonlyspecificinventionsandtherecanbenoassurancethatothersmaynotcreatenewproductsormethodsthatachievesimilarresultswithoutinfringinguponpatentsownedbyus.

    GovernmentRegulation

    WearesubjecttoanumberofUnitedStatesfederalandstateandforeignlawsandregulationsthataffectcompaniesconductingbusinessontheInternet,manyofwhicharestillevolvingandbeingtestedincourts,andcouldbeinterpretedinwaysthatcouldharmourbusiness.Thesemayinvolveuserprivacy,libel,rightsofpublicity,dataprotection,content,intellectualproperty,distribution,electroniccontractsandothercommunications,competition,protectionofminors,consumerprotection,taxationandonlinepaymentservices.Inparticular,wearesubjecttoUnitedStatesfederalandstateandforeignlawsregardingprivacyandprotectionofuserdata.Foreigndataprotection,privacy,andotherlawsandregulationsareoftenmorerestrictivethanthoseintheUnitedStates.UnitedStatesfederalandstateandforeignlawsandregulationsareconstantlyevolvingandcanbesubjecttosignificantchange.Inaddition,theapplicationandinterpretationoftheselawsandregulationsisoftenuncertain,particularlyinthenewandrapidlyevolvingindustryinwhichweoperate.TherearealsoanumberoflegislativeproposalspendingbeforetheUnitedStatesCongress,variousstatelegislativebodies,andforeigngovernmentsconcerningdataprotectionwhich

  • couldaffectus.

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  • Inaddition,weprovideadvertisingdataandinformationandconductmarketingactivitiesthataresubjecttoUnitedStatesfederalandstateconsumerprotectionlawsthatregulateunfairanddeceptivepractices,domesticallyandinternationally.TheUnitedStatesandEuropeanUnionhavebeguntoadoptlegislationthatregulatescertainaspectsoftheInternet,includingonlineeditorialandusergeneratedcontent,userprivacy,behavioraltargetingandonlineadvertising,taxation,andliabilityforthirdpartyactivities.

    UnitedStatesfederal,stateandforeigngovernmentsarealsoconsideringalternativelegislativeandregulatoryproposalsthatwouldincreaseregulationonInternetadvertising.Itisimpossibletoaccuratelypredictwhethernewtaxesorregulationswillbeimposedonourservices,andwhetherorhowwemightbeaffected.IncreasedregulationoftheInternetcouldincreasethecostofdoingbusinessorotherwisemateriallyadverselyaffectourbusiness,financialconditionoroperationalresults.

    OurReportableSegments

    Duringthefourthquarterof2014,managementchangedTripAdvisorsreportablesegmentstoreflectchangesinthemanagementreportingstructureoftheorganization,primarilyduetorecentbusinessacquisitions,andthemannerinwhichthechiefoperatingdecisionmaker,orCODM,regularlyassessesinformationandevaluatesperformanceforoperatingdecisionmakingpurposes,includingallocationofresources.WebelievethisnewsegmentstructurebetterprovidestheCODMwithinformationtoassessperformanceandtomakeresourceallocationdecisions.TheCODMforthecompanyisourChiefExecutiveOfficer.

    Therevisedreportingstructureincludestworeportablesegments:HotelandOther.OurOthersegmentconsistsoftheaggregationofthreeoperatingsegments,whichincludeourAttractions,RestaurantsandVacationRentalsbusinesses.

    HotelSegment

    OurHotelsegmentaccountedfor91%ofourCompanysconsolidatedrevenuein2014.

    OurHotelsegmentincludesrevenuegeneratedfromservicesrelatedtohotels,includingclickbasedanddisplaybasedadvertisingrevenuefrommakinghotelroomnights,airlinereservations,andcruisereservationsavailableforpricecomparisonandbooking,aswellassubscriptionbasedproductssuchasBusinessListings,transactionbasedproductssuchasJetsetterandTingo,andotherrevenuerelatedtohotels.

    TheHotelsegmentsfinancialperformanceisprincipallydependentonourabilitytogrowclickbasedadvertisingrevenue.Thisrevenuestreamishighlydependentupongrowthinourhotelshoppers,howeffectivelyweconverthotelshoppersintorevenue,andthepricewegetpaidperhotelshopper,allofwhichequatestorevenueperhotelshopper.ThetermhotelshoppersreferstouserswhoviewservletsonourwebsitesthatcontainalistingofhotelsinacityorvisitorstoaspecifichotelpageonTripAdvisor.

    MorethanhalfofTripAdvisorusersvisitpagesthatarenothotelrelated.RevenuegeneratedfromtheseusersisreflectedinourOthersegmentbelow.

    OtherSegment

    OurOthersegmentaccountedfor9%ofourconsolidatedrevenuein2014andconsistsofthefollowingbusinessesbelow:

    Attractions.Weprovide,throughViator,informationandservicesforresearchingandbookingdestinationactivitiesaroundtheworld.Viatorworkswithlocaloperatorstoprovidetravelerswithaccesstotoursandactivitiesinpopulardestinationsworldwide,earningacommissionforsuchservice.Inadditiontoitsconsumerdirectbusiness,Viatoralsoprovideslocalexperiencestoaffiliatepartners,includingsomeoftheworldstopairlines,hotelsandtravelagencies.

    Restaurants.Wehaveseveralwebsitesthatprovideonlineandmobilereservationservicesthatconnectrestaurantswithdiners.ThesewebsitesarecurrentlyfocusedontheEuropeanmarket,primarilythroughLafourchette.LafourchetteisanonlinerestaurantbookingplatformwithanetworkofrestaurantpartnersacrossEurope.Lafourchettealsooffersmanagementsoftwaresolutionshelpingrestaurantstomaximizebusinessbyprovidingaflexibleonlinebooking,discountanddatatool.Wegeneraterevenueprimarilybychargingafeeforeachrestaurantguestseatedthroughtheonlinereservationsystems.

    VacationRentals.Weofferindividualpropertyownersandpropertymanagerstheabilitytolisttheirproperties

  • availableforrentalandconnectwithtravelersusingasubscriptionbasedfeestructureorafreetolist,commissionperbookingbasedoption.Ourvacationrentalinventorycurrentlyincludesfullhomerentals,condos,villas,beachrentals,cabins,cottages,andmanyotheraccommodationtypes.Thesepropertiesarelistedacrossanumberofplatforms,includingTripAdvisorVacationRentals,U.S.basedFlipKey(whichincludestheVacationHomeRentalssitethatwasacquiredduring2014),andourEuropeanbasedHolidayLettingsandNiumbabusinesses.

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  • SubstantiallyallofourrevenuefromourOthersegmentisincludedinsubscriptionbased,transactionandotherrevenue.

    FinancialInformationaboutReportableSegmentsandGeographicInformation

    FortheyearsendedDecember31,2014,2013and2012ourtwomostsignificantadvertisingpartners,ExpediaandPriceline,eachaccountedformorethan10%ofourconsolidatedrevenueandcombinedaccountedfor46%,47%and48%ofourconsolidatedrevenue,respectively.ThisconcentrationofrevenueisrecordedinourHotelsegmentforthesereportingperiods.AsofDecember31,2014and2013,Expediaaccountedfor15%and14%,respectively,ofourtotalaccountsreceivable.

    FinancialinformationrelatedtoourtworeportablesegmentsandgeographicinformationrequiredhereiniscontainedinNote16SegmentandGeographicInformation,inthenotestoourconsolidatedfinancialstatements.

    Employees

    AsofDecember31,2014,wehadapproximately2,793employees.Oftheseemployees,approximately1,292werebasedintheUnitedStates.Webelievethatwehavegoodrelationshipswithouremployees,includingrelationshipswithemployeesrepresentedbyinternationalworkscouncilsorothersimilarorganizations.

    Seasonality

    Expendituresbytraveladvertiserstendtobeseasonal.Historically,ourstrongestquarterhasbeenthethirdquarter,whichisakeytravelresearchperiod,withtheweakestquarterbeingthefourthquarter.However,adverseeconomicconditionsorcontinuedgrowthofourinternationaloperationswithdifferingholidaypeaksmayinfluencethetypicaltrendofourseasonalityinthefuture.

    AdditionalInformation

    CompanyWebsiteandPublicFilings

    Wemaintainacorporatewebsiteatwww.tripadvisor.com.Exceptasexplicitlynoted,theinformationonourwebsite,aswellasthewebsitesofourvariousbrandsandbusinesses,isnotincorporatedbyreferenceinthisAnnualReportonForm10K,orinanyotherfilingswith,orinanyinformationfurnishedorsubmittedto,theSEC.

    Wemakeavailable,freeofchargethroughtheInvestorRelationssectionofourwebsite,ourAnnualReportsonForm10K,QuarterlyReportsonForm10QandCurrentReportsonForm8K,andamendmentstothosereports,filedorfurnishedpursuanttoSections13(a)orSection15(d)oftheExchangeActassoonasreasonablypracticableaftertheyhavebeenelectronicallyfiledwith,orfurnishedto,theSEC.

    CodeofEthics

    Wepostourcodeofbusinessconductandethics,whichappliestoallemployees,includingallexecutiveofficers,seniorfinancialofficersanddirectors,onourcorporatewebsiteatwww.tripadvisor.com.OurcodeofbusinessconductandethicscomplieswithItem406ofSECRegulationSKandtherulesofNASDAQ.WeintendtodiscloseanychangestothecodethataffecttheprovisionsrequiredbyItem406ofRegulationSK,andanywaiversofthecodeofethicsforourexecutiveofficers,seniorfinancialofficersordirectors,onourcorporatewebsite.Item1A. RiskFactors

    YoushouldconsidercarefullytherisksdescribedbelowtogetherwithalloftheotherinformationincludedinthisAnnualReportastheymayimpactourbusiness,resultsofoperationsand/orfinancialcondition.Therisksanduncertaintiesdescribedbelowarenottheonlyonesweface.Additionalrisksanduncertaintiesnotpresentlyknowntousorthatwecurrentlybelieveareimmaterialmayalsoimpairourbusiness,resultsofoperationsorfinancialcondition.Ifanyofthefollowingrisksoccur,ourbusiness,financialcondition,operatingresultsandcashflowscouldbemateriallyadverselyaffected.

    Ifweareunabletocontinuetoincreasevisitorstoourwebsitesandtocosteffectivelyconvertthesevisitorsintorepeatusersorcontributors,ouradvertisingrevenuecoulddecline.

    Theprimaryassetthatweusetoattractvisitorstraffictoourwebsitesandconvertthesevisitorsintorepeatusersisourcontinuedabilitytocollect,create,organizeanddistributehighquality,commerciallyvaluablecontentthatmeetsusersspecific

  • interestsandenablesthemtoshareandinteractwiththecontentandsupportingcommunities.Therecanbenoassurancesthatwewill

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  • continuetoobtaincontentinacosteffectivemannerorinamannerthatmeetsrapidlychangingconsumerdemand.Anyfailuretoobtainsuchcontentororganizeanddistributesuchcontentinamannerthatwillengageusers,orafailuretoprovideproductsthatareperceivedasuseful,reliableandtrustworthy,couldadverselyaffectuserexperiencesandreducetrafficdriventoourwebsites,whichwouldmakeourwebsiteslessattractivetoadvertisers.Anychangeinthecoststructurepursuanttowhichweobtainourcontent,orintravelersrelativeappreciationofuserbasedversusexpertcontentorouruserbasedcontentversusothersitesuserbasedcontent,couldalsoreducetrafficdriventoourwebsiteswhichwouldnegativelyimpactourbusinessandfinancialperformance.

    Wederivesubstantiallyallofourrevenuefromadvertisingandanysignificantreductioninspendingbyadvertiserscouldharmourbusiness.

    Wederivesubstantiallyallofourrevenuefromthesaleofadvertising,primarilythroughclickbasedadvertisingand,toalesserextent,displaybasedadvertising.Whileweenterintomasteradvertisingcontractswithourpartners,theseagreementsgenerallyaddressmatterssuchasprivacyandcompliance,paymenttermsandconditions,terminationandindemnities.Mostofourclickbasedadvertisingcontractscanbeterminatedbyourpartnersatwilloronshortnotice.Ourabilitytogrowadvertisingrevenuewithourexistingornewadvertisingpartnersisdependentinlargepartonourabilitytogeneraterevenueforthem.Advertiserswillnotcontinuetodobusinesswithusiftheirinvestmentinsuchadvertisingdoesnotgeneratesalesleads,customers,bookings,orrevenueandprofitonacosteffectivebasis,orifwedonotdeliveradvertisementsinaneffectivemanner.Ifweareunabletoprovidevaluetoouradvertisers,theywilllikelystopplacingadsonourwebsites,whichwouldharmourrevenuesandbusiness.Wecannotguaranteethatourcurrentadvertiserswillfulfilltheirobligationsunderexistingcontracts,continuetoadvertisebeyondthetermsofexistingcontractsorenterintoanyadditionalcontractswithus.

    Clickbasedadvertisingaccountsforthemajorityofouradvertisingrevenue.Anychangeswemaketoourbusinessmodelmayimpactouradvertisingrevenueinwaysthatwedonotexpect.Ifourpartnersdonotreceivethebenefitstheyexpectfromtheiradvertisingspendwithus,theymayreducetheirspending.Inaddition,ifnew,moreeffectiveadvertisingmodelsweretoemerge,therecanbenoassurancethatwewillhavetheabilitytoofferthesemodels,oroffertheminaneffectivemanner.

    Furthermore,ourCPCpricingforclickbasedadvertisingdepends,inpart,oncompetitionbetweenadvertisers.Ifourlargeadvertisersbecomelesscompetitivewitheachother,mergewitheachotherorwithourcompetitors,focusmoreonperclickprofitthanontrafficvolume,orareabletoreduceCPCs,thiscouldhaveanadverseimpactonourclickbasedadvertisingrevenuewhichwould,inturn,haveanadverseeffectonourbusiness,financialconditionandresultsofoperations.

    Expendituresbyadvertisersalsotendtobecyclical,subjecttovariationbasedonbudgetaryconstraints,projectcancellationordelay,andtoreflectoveralleconomicconditionsandbuyingpatterns.Ifweareunabletogenerateadvertisingrevenueduetofactorsoutsideofourcontrol,ourbusinessandfinancialperformancewouldbeadverselyaffected.

    Ourbusinessescouldbenegativelyaffectedbychangesinsearchenginealgorithmsanddynamics,orsearchenginedisintermediation.

    WerelyheavilyonInternetsearchenginessuchasGoogle,bothfororganictrafficandthroughthepurchaseoftravelrelatedkeywords,togeneratetraffictoourwebsites.Weobtainasignificantamountoftrafficviasearchenginesand,therefore,utilizetechniquessuchasSEOandSEMtoimproveourplacementinrelevantsearchqueries.Searchengines,includingGoogle,frequentlyupdateandchangethelogicthatdeterminestheplacementanddisplayofresultsofauserssearch,suchthatthepurchasedoralgorithmicplacementoflinkstoourwebsitescanbenegativelyaffected.Moreover,asearchenginecould,forcompetitiveorotherpurposes,alteritssearchalgorithmsorresultscausingourwebsitestoplacelowerinsearchqueryresults.Ifamajorsearchenginechangesitsalgorithmsinamannerthatnegativelyaffectsourpaidorunpaidsearchranking,orifcompetitivedynamicsimpacttheeffectivenessofSEOorSEMinanegativemanner,ourbusinessandfinancialperformancewouldbeadverselyaffected,potentiallytoamaterialextent.Furthermore,ourfailuretosuccessfullymanageourSEOandSEMstrategiescouldresultinasubstantialdecreaseintraffictoourwebsites,aswellasincreasedcostsifweweretoreplacefreetrafficwithpaidtraffic.

    Inaddition,totheextentthatGoogle(includingGoogle+LocalandGoogleHotelFinder)andBing(includingBingTravel),orotherleadingsearchormetasearchenginesthathaveasignificantpresenceinourkeymarkets,disintermediateOTAsortravelcontentprovidersbyofferingcomprehensivetravelplanningorshoppingcapabilities,orreferthoseleadstosuppliersdirectly,ortootherfavoredpartners,therecouldbeamaterialadverseimpactonourbusinessandfinancialperformance.Forexample,during2012,GooglecompleteditsacquisitionofflightsearchtechnologycompanyITASoftwareandseparatelymadechangestoitshotelsearchresults,includingbothexpandingandpromotingtheuseofGoogle+Local.Totheextenttheseactionshaveanegativeeffectonoursearchtraffic,whetherondesktop,tabletormobiledevices,ourbusinessandfinancialperformancecouldbe

  • adverselyaffected.

    12

  • Werelyonarelativelysmallnumberofsignificantadvertisersandanyreductioninspendingbyorlossofthoseadvertiserscouldseriouslyharmourbusiness.

    Wederiveasubstantialportionofourrevenuefromarelativelysmallnumberofsignificantadvertisers.Forexample,fortheyearendedDecember31,2014,ourtwomostsignificantadvertisingpartners,ExpediaandPriceline(andtheirsubsidiaries),accountedforacombined46%oftotalrevenue.Ifanyofoursignificantadvertisersweretoceaseorsignificantlycurtailadvertisingonourwebsites,wecouldexperiencearapiddeclineinourrevenueoverarelativelyshortperiodoftime.

    Oursuccessdependsupontheacceptance,andsuccessfulmeasurement,ofonlineadvertisingasanalternativetoofflineadvertising.

    Thelongtermgrowthofourbusinesswilldependheavilyonthecontinuedacceptanceofonlineadvertisingasanalternativeorsupplementtoofflineadvertisingandtheincreaseinthepercentageoftheadvertisingmarketallocatedtoonlineadvertising,whichmaynothappeninamannerortotheextentthatwecurrentlyexpect.Wecompetewithtraditionalmediaforadvertisingdollars,inadditiontowebsiteswithhigherlevelsoftraffic.Ifonlineadvertisingceasestobeanacceptablealternativeorsupplementtoofflineadvertisingthenourbusiness,financialconditionandresultsofoperationswillbenegativelyimpacted.

    Theadoptionofonlineadvertising,particularlybythoseentitiesthathavehistoricallyreliedupontraditionalmediaforadvertising,requirestheacceptanceofanewwayofconductingbusiness,exchanginginformationandevaluatingnewadvertisingandmarketingtechnologiesandservices.Becausetheonlinemarketingindustryisrelativelynewandrapidlyevolving,itusesdifferentmethodsthantraditionalmediatogaugeitseffectiveness.SomeofourpotentialcustomershavelittleornoexperienceusingtheInternetforadvertisingandmarketingpurposesandhaveallocatedonlylimitedportionsoftheiradvertisingandmarketingbudgetstotheInternet.Asaresult,wearecontinuallyevaluatingchangestoaspectsofourbusinessmodeltokeeppacewiththeexpectationsofusersandadvertisers,andthesechangesmaynotyieldthebenefitsweexpect.Inparticular,wearedependentonourclientsadoptionofnewmetricstomeasurethesuccessofonlinemarketingcampaigns.

    Inaddition,ifadvertisersmateriallychangetheirtransactionattributionmodelsortheirreturnoninvestmentcalculationsand/orincreasetheirreturnoninvestmenttargetswithrespecttoonlineadvertisingingeneral,orTripAdvisortrafficinparticular,theymightreducethepricestheyarewillingtopayforouradvertisingproducts,whichwouldhaveanadverseeffectonourbusiness,financialconditionandresultsofoperations.

    Growthintheuseofdevicesotherthandesktopcomputersmaynegativelyaffectourrevenueandfinancialresults.

    OurcontentwasoriginallydesignedforusersaccessingtheInternetonadesktopcomputer.ThenumberofpeoplewhoaccesstheInternetthroughdevicesotherthandesktopscomputers,includingmobilephones,smartphones,handheldcomputerssuchasnotebooksandtablets,videogameconsolesandtelevisionsettopdevices,hasincreasedsubstantiallyinthelastfewyears.Weanticipatethattherateofuseofthesecomputingdeviceswillcontinuetogrow.Thelowerresolution,functionalityandmemoryassociatedwithsomeofthesealternativedevicesmaketheuseofourproductsandservicesthroughsuchdevicesmoredifficultandversionsofourproductsandservicesdevelopedforthesedevicesmaynotbecompellingtousers.Wehavedevelopedservicesandapplicationstoaddresslimitationsofthesedevicesandouradvertisingrevenuescontinuetogrow,however,wemonetizeusersofthesedevicesatalowerratecomparedtouserswhoaccessourwebsitesthroughdesktopcomputers.

    Declinesordisruptionsintheeconomyingeneralandtravelindustryinparticularcouldadverselyaffectourbusinessesandfinancialperformance.

    Ourbusinessesandfinancialperformanceareaffectedbythehealthoftheglobaleconomygenerallyaswellasthetravelindustryinparticular.Theglobaleconomymaybeadverselyimpactedbyanumberofnegativeeconomicdevelopmentsincludingdefaultsongovernmentdebt,significantincreasesinfuelandenergycosts,taxincreasesandothermattersthatcouldreducediscretionaryspending,continuedtighteningofcreditmarkets,furtherdeclinesinconsumerconfidence,andpolicymissteps.Theseconditionscouldhaveamaterialadverseimpactonourbusinessandfinancialperformance.

    Travelexpendituresaresensitivetopersonalandbusinessdiscretionaryspendinglevelsandtendtodeclineorgrowmoreslowlyduringeconomicdownturns.Decreasedtravelexpenditurescouldreducethedemandforourservices,therebycausingareductioninrevenue.

    13

  • Werelyonthevalueofourbrandandconsumertrustinourbrand.Ifwearenotabletomaintainandenhanceourbrand,orifeventsoccurthatdamageourreputationandbrand,ourbusinessmaybeharmed.

    WebelievethattheTripAdvisorbrandhascontributedsignificantlytooursuccessandthatmaintainingandenhancingourbrandiscriticaltoexpandingourbaseofusers,creatingcontentandattractingadvertisers.Asaresult,weinvestsignificantlyinbrandmarketingincludingtelevision.Weexpecttheseinvestmentstocontinue,orevenincrease,asaresultofavarietyoffactors,includingincreasedspendingfromcompetitors,theincreasingcostsofsupportingmultiplebrands,expansionintogeographiesandproductswhereourbrandsarelesswellknown,inflationinmediapricing,andthecontinuedemergenceandrelativetrafficsharegrowthofsearchenginesasdestinationsitesfortravelers.Sucheffortsmaynotmaintainorenhanceconsumerawarenessofourbrandsand,evenifwearesuccessfulinourbrandingefforts,sucheffortsmaynotbecosteffectiveorasefficientastheyhavebeenhistorically.Ifweareunabletomaintainorenhanceconsumerawarenessofourbrandsortogeneratedemandinacosteffectivemanner,itwouldhaveamaterialadverseeffectonourbusinessandfinancialperformance.

    Wereceivesignificantmediacoverageinourvariousgeographicmarkets.Unfavorablepublicityregarding,forexample,ourprivacypractices,productchanges,theaccuracyofusergeneratedcontent,productquality,litigationorregulatoryactivitycouldadverselyaffectourreputationwithourusersandouradvertisers.Suchnegativepublicityalsocouldhaveanadverseeffectonthesize,engagement,andloyaltyofouruserbaseandresultindecreasedrevenue,whichcouldadverselyaffectourbusinessandfinancialresults.

    Intensecompetitioncouldreduceourmarketshareandharmourfinancialperformance.

    Themarketfortheservicesweofferisintenselycompetitive.Wefacecompetitionfromanumberofdifferentsourcesandmanyofourcompetitorshavesignificantlygreaterandmorediversifiedresourcesthanwedoandmaybeabletoleverageotheraspectsoftheirbusinesstoenablethemtocompetemoreeffectivelyagainstus.Morespecifically:

    Wefacecompetitionfromtravelserviceproviderssuchasmajorhotelcompanies,airlinesandrentalcarcompanies,manyofwhichhavetheirownwebsitestowhichtheydrivebusiness.Forexample,severalmajorhotelcompanieslaunchedanonlinehotelreservationservicewithastatedgoalofdrivingconsumersdirectlytotheirbrandwebsitestherebyreducingthesharereceivebyonlinetravelagents.Theymayalsoattempttoimprovetheircompetitivepositionbyofferinglowerroomrates,betterroomavailabilityoradditionalfeaturesoramenitiesthroughthisreservationservicethanareavailablethroughserviceslikeours.

    Wefacecompetitionfromonlinetravelagents,suchasExpediaandPriceline(andtheirsubsidiaries),andthiscompetitionmayincreasetotheextentthattheseonlinetravelagentsaccumulateanddevelopacomprehensiveofferingoftravelrelatedreviewsandresources.Thebarrierstoentryforthesecompaniesmaybelimitedgiventheiraccesstotravelrelatedinformationandrelationshipswithconsumers.

    Wefaceincreasedcompetitionfromthelargesearchenginesandsocialnetworkingsites,companies,suchasGoogleandFacebook,orothercompanies,whichcompetitionwillonlyincreaseshouldtheychosetocompetemoredirectlywithusinthetravelreviewspace,andcreatecommerciallyvaluableonlinecontentatsignificantscale.Forexample,Google+Local,withitsaggregatedreviewsandlocalrecommendations,competeswithusandGooglesaccesstomorecomprehensivedataregardingusersearchqueriesthroughitssearchalgorithmsgivesitasignificantcompetitiveadvantageoverothercompaniesintheindustry,includingus.Inaddition,ifsignificantnumbersofusersadoptFacebooksnewlyreleasedGraphSearchtogettravelrecommendations,itcouldhavetheeffectofreducingtrafficanduserengagementonTripAdvisor.

    Wealsofacecompetitionfromtravelagencies,wholesalersandtraveloperatorsaswellasoperatorsoftravelindustryreservationdatabasessuchasGalileo,Travelport,AmadeusandSabre.

    Inaddition,wecompetewithnewspapers,magazinesandothertraditionalmediacompaniesthatprovideofflineandonlineadvertisingopportunities.

    Forourvacationrentalbusiness,wealsofacecompetitionfromseveralcompanies,includingHomeAwayandAirbnb,someofwhomhavealargerinventoryofroomsavailablethanwedo.

    Forourrestaurantreservationandattractionsbusiness,thecompetitionisnotasconsolidatedasitisforotherareasofourbusinesshowever,wefacecompetitionfromcertaincompanieslikeOpenTableintheUnitedStates.

    Manyofourcompetitorshavesignificantlygreaterfinancial,technical,marketingandotherresourcescomparedtousandhaveexpertiseindevelopingonlinecommerceandfacilitatingInternettrafficaswellaslargeclientbases.Weexpecttofaceadditionalcompetitionasotherestablishedandemergingcompaniesenterthetraveladvertisingmarket.

  • 14

  • Certainofthecompanieswedobusinesswith,includingsomeofourclickbasedadvertisingpartners,arealsoourcompetitors.Theconsolidationofourcompetitorsandpartners,includingExpedia(throughitsinvestmentinTrivago)andPriceline(throughitsacquisitionofKayakandOpenTable),mayaffectourrelativecompetitivenessandourpartnerrelationships.Competitionandconsolidationcouldresultinhighertrafficacquisitioncosts,reducedmarginsonouradvertisingservices,lossofmarketshare,reducedcustomertraffictoourwebsitesandreducedadvertisingbytravelcompaniesonourwebsites.Forexample,Google(throughitslaunchofGoogleHotelFinder,evolutionandexpansionofGoogle+LocalandpreferredtopplacementofPlacesresultsinGoogleorganictravelsearchresults)andMicrosoftsBing(throughitslaunchofBingTravel),haveeachtakenstepstoappealmoredirectlytotravelcustomers,whichcouldleadtodiversionofcustomertraffictotheirownwebsitesorthoseofafavoredpartner,orundermineourabilitytoobtainprominentplacementinpaidorunpaidsearchresultsatareasonablecost,oratall.Competitioninourindustrymayresultinpricingpressure,lossofmarketshareordecreasedmemberengagement,anyofwhichcouldadverselyaffectourbusinessandfinancialperformance.

    Weareregularlysubjecttoclaims,suits,governmentinvestigations,andotherproceedingsthatmayresultinadverseoutcomes.

    Weareregularlysubjecttoclaims,suits,andgovernmentinvestigationsinvolvingcompetition,intellectualproperty,privacy,consumerprotection,tax,laborandemployment,commercialdisputes,contentgeneratedbyourusers,goodsandservicesofferedbyadvertisersorpublishersusingourplatforms,andothermatters.Thesaleofhardwareproductsalsoexposesustotheriskofproductliabilityandotherlitigationinvolvingassertionsaboutproductdefects,aswellashealthandsafety,hazardousmaterialsusage,andotherenvironmentalconcerns.Inaddition,ourbusinessesfaceintellectualpropertylitigation,asfurtherdiscussedlater,thatexposesustotheriskofexclusionandceaseanddesistorders,whichcouldlimitourabilitytosellproductsandservices.

    Suchclaims,suits,andgovernmentinvestigationsareinherentlyuncertainandtheirresultscannotbepredictedwithcertainty.Regardlessoftheoutcome,anyofthesetypesoflegalproceedingscanhaveanadverseimpactonusbecauseoflegalcosts,diversionofmanagementresources,andotherfactors.Determiningreservesforourpendinglitigationisacomplex,factintensiveprocessthatrequiressignificantjudgment.Itispossiblethataresolutionofoneormoresuchproceedingscouldresultinsubstantialfinesandpenaltiesthatcouldadverselyaffectourbusiness,consolidatedfinancialposition,resultsofoperations,orcashflowsinaparticularperiod.Theseproceedingscouldalsoresultinreputationalharm,criminalsanctions,consentdecrees,ororderspreventingusfromofferingcertainfeatures,functionalities,products,orservices,requiringachangeinourbusinesspracticesorproductrecallsorotherfieldaction,orrequiringdevelopmentofnoninfringingorotherwisealteredproductsortechnologies.Anyoftheseconsequencescouldadverselyaffectourbusinessandresultsofoperations.

    Wearedependentuponthequalityoftrafficinournetworktoprovidevaluetoonlineadvertisers,andanyfailureinourqualitycontrolcouldhaveamaterialadverseeffectonthevalueofourwebsitestoouradvertisersandadverselyaffectourrevenue.

    Weusetechnologyandprocessestomonitorthequalityofandtoidentifyanyanomalousmetricsassociatedwith,theInternettrafficthatwedelivertoonlineadvertisers.Thesemetricsmaybeindicativeoflowqualityclickssuchasnonhumanprocesses,includingrobots,spidersorothersoftwarethemechanicalautomationofclickingandothertypesofinvalidclicksorclickfraud.Evenwithsuchmonitoringinplace,thereisariskthatacertainamountoflowqualitytraffic,ortrafficthatonlineadvertisersdeemtobeinvalid,willbedeliveredtosuchonlineadvertisers.Asaresult,wemayberequiredtocreditamountsowedtousbyouradvertisers.Furthermore,lowqualityorinvalidtrafficmaybedetrimentaltoourrelationshipswithadvertisers,andcouldadverselyaffectouradvertisingpricingandrevenue.

    Werelyonassumptionsandestimatesanddatafromthirdpartiestocalculatecertainofourkeymetrics,andrealorperceivedinaccuraciesinsuchmetricsmayharmourreputationandnegativelyaffectourbusiness.

    Certainkeymetrics,suchasthenumberofouractiveusers,uniquevisitors,totaltrafficandnumberofreviewsandopinions,arecalculated,insomecases,usinginternalcompanydataand,inothercases,relyingondatafromthirdparties.Whilethesenumbersarebasedonwhatwebelievetobereasonablecalculationsfortheapplicableperiodsofmeasurement,thereareinherentchallengesinmeasuringusageanduserengagementacrossourlargeuserbasearoundtheworld.Forexample,asinglepersonorusermayhavemultipleaccountsorbrowsetheinternetonmultiplebrowsers,somemobileapplicationsautomaticallycontactourserversforregularupdateswithnouseractionandwearenotabletocaptureuserinformationonallofourplatforms.Assuch,thecalculationsofouractiveusersanduniquevisitorsmaynotaccuratelyreflectthenumberofpeopleactuallyusingourplatforms.Inaddition,ourmeasuresofusergrowthanduserengagementmaydifferfromestimatespublishedbythirdpartiesorfromsimilarmetricsofourcompetitorsduetodifferencesinmethodologiesutilizedbyusandthethirdpartiesforwhichwerelyonthisdata.

    Wearecontinuallyseekingtoimproveourabilitytoestimatethesekeymetrics.Weregularlyreviewandadjustourprocessesforcalculatingourinternalmetricstoimprovetheiraccuracy.Ifourusers,advertisers,partnersandshareholdersdonotperceiveourmetricstobeaccuraterepresentationsorifwediscovermaterialinaccuraciesinourusermetrics,ourreputationmay

  • beharmed.Inwhichcase,usersmaynotuseourproductsandservicesandadvertisersandpartnersmaybelesswillingtoallocatetheirbudgetstoourproductsandserviceswhichcouldnegativelyaffectourbusinessandoperatingresults.

    15

  • Werelyoninformationtechnologytooperateourbusinessandmaintaincompetitiveness,andanyfailuretoadapttotechnologicaldevelopmentsorindustrytrendscouldharmourbusinesses.

    Wedependontheuseofsophisticatedinformationtechnologiesandsystems.Asouroperationsgrowinsizeandscope,wemustcontinuouslyimproveandupgradeoursystemsandinfrastructurewhilemaintainingorimprovingthereliabilityandintegrityofoursystemsandinfrastructure.Ourfuturesuccessalsodependsonourabilitytoadaptourservicesandinfrastructuretomeetrapidlyevolvingconsumertrendsanddemandswhilecontinuingtoimprovetheperformance,featuresandreliabilityofourservicesinresponsetocompetitiveserviceandproductofferings.Theemergenceofalternativeplatformssuchassmartphoneandtabletcomputingdevicesandtheemergenceofnichecompetitorswhomaybeabletooptimizeproducts,servicesorstrategiesforsuchplatformswillrequirenewinvestmentintechnology.Newdevelopmentsinotherareas,suchascloudcomputing,couldalsomakeiteasierforcompetitiontoenterourmarketsduetolowerupfronttechnologycosts.Inaddition,wemaynotbeabletomaintainourexistingsystemsorreplaceorintroducenewtechnologiesandsystemsasquicklyaswewouldlikeorinacosteffectivemanner.

    Ifwedonotcontinuetoinnovateandprovidetoolsandservicesthatareusefultotravelers,wemaynotremaincompetitive,andourbusinessandfinancialperformancecouldsuffer.

    Oursuccessdependsinpartoncontinuedinnovationtoprovidefeaturesandservicesthatmakeourwebsitesandsmartphoneandtabletcomputingapplicationsusefulfortravelers.Ourcompetitorsarecontinuallydevelopinginnovationsinonlinetravelrelatedservicesandfeatures.Asaresult,wearecontinuallyworkingtoimproveourbusinessmodelanduserexperienceinordertodriveusertrafficandconversiondates.Wecangivenoassurancesthatthechangeswemakewillyieldthebenefitsweexpectandwillnothaveadverseimpactsthatwedidnotanticipate.Ifweareunabletocontinueofferinginnovativeproductsandservicesandqualityfeaturesthattravelerswanttouse,existingusersmaybecomedissatisfiedandusecompetitorsofferingsandwemaybeunabletoattractadditionalusers,whichcouldadverselyaffectourbusinessandfinancialperformance.

    Newtechnologiescouldblockourads,whichwouldharmourbusiness.

    Wederivemostofourrevenuesfromfeespaidtousbyadvertisersinconnectionwiththedisplayofadsonwebpagesforourusers.Technologieshavebeendevelopedthatcanblockthedisplayofonlineadsandthatprovidetoolstouserstooptoutofsomewebbasedadvertisingproducts.Asaresult,thesetechnologiesandtoolscouldadverselyaffectourbusinessandfinancialperformance.

    Ourcultureemphasizesrapidinnovationandprioritizesuserengagementovershorttermfinancialresults.

    Weoperateinaculturethatencouragesrapiddevelopmentandreleaseofnewandimprovedproducts,whichmayattimesresultinunintendedconsequencesordecisionsthatarepoorlyreceivedbyusersoradvertisers.Ourculturealsoprioritizesuserengagement,orwebsitestickiness,overshorttermfinancialresults.Wehavetakenactionsinthepastandmaycontinuetomakeproductdecisionsgoingforwardthathavetheeffectofreducingourshorttermrevenueorprofitabilityifwebelievethatthedecisionsbenefittheaggregateuserexperience,conversionratesand/orCPCpricing,therebyultimatelyimprovingourfinancialperformanceoverthelongterm.Theshorttermreductionsinrevenueorprofitabilitycouldbemoreseverethanweanticipateorthesedecisionsmaynotproducethelongtermbenefitsthatweexpect,inwhichcaseourusergrowthandengagement,ourrelationshipswithusersandadvertisers,andourbusinessandresultsofoperationscouldbeharmed.

    Theonlinevacationrentalmarketisrapidlyevolvingandifwefailtopredictthemannerinwhichthemarketdevelops,ourbusinessandprospectsmaysuffer.

    WeoffervacationrentalservicesthroughourU.S.basedFlipKeyandVacationHomeRentalsandEuropeanbasedHolidayLettingsandNiumba.Theonlinevacationrentalmarketisrelativelynewandrapidlyevolvinginmanyrespects,includingacceptanceofthebusinessmodelbytravelers,propertyownersandpropertymanagersfromabusinessandmarketingperspectiveaswellastheregulatoryenvironment.Weoperateinvariousdisparatejurisdictionsandmarketsandhavelimitedinsightintotrendsthatmaydevelopinthosemarketsandmayaffectourbusiness.Sincewebeganofferingsuchservices,therehavebeenandcontinuetobesignificantbusiness,marketingandregulatorydevelopments.Operatinginnewanduntestedjurisdictionsrequiressignificantmanagementattentionandfinancialresources.Wecannotassurethatourexpansioneffortswillbesuccessful,andtheinvestmentandadditionalresourcesrequiredtoestablishoperationsandmanagegrowthmaynotproducethedesiredlevelsofrevenueorprofitability.

    Ifwefailtoattractandmaintainacriticalmassofvacationrentallistingsandtravelers,ourvacationrentalmarketplaceswill

  • becomelessvaluableandthismayhaveanegativeimpactonourbusiness.

    Inourvacationrentalbusiness,revenueisgeneratedwhenownersormanagersofvacationrentalpropertiespayusfeestolistandmarketvacationrentalpropertiestouserswhovisitthewebsitescomprisingourmarketplace,ownersand/ortravelerspayusfeesuponbookingatransactionandpropertymanagerspayusfeesforemailandtelephoneleadsfrompotentialtravelers.Asaresult,our

    16

  • successinthisareaprimarilydependsonourabilitytoattractowners,managers,travelersandadvertiserstoourmarketplace.Ifpropertyownersandmanagersdonotperceivethebenefitsofmarketingtheirpropertiesthroughourwebsites,orelecttolistthemwithacompetitorinsteadoflistingwithus,ourvolumeofnewlistingsandlistingrenewalsmaysuffer.Asaresult,wemaybeunabletoofferasufficientsupplyandvarietyofvacationpropertiestoattracttravelerstoourwebsites.Largercompetitoralreadyexistsinthevacationrentalspace,withsignificantlymoreusersandlistedproperties,andnewcompetitorswithsignificantfinancialresourcesarecontinuallyemerging.

    Wemaybesubjecttoclaimsthatweviolatedintellectualpropertyrightsofothersandtheseclaimscanbeextremelycostlytodefendandcouldrequireustopaysignificantdamagesandlimitourabilitytooperate.

    CompaniesintheInternetandtechnologyindustries,andotherpatentandtrademarkholdersseekingtoprofitfromroyaltiesinconnectionwithgrantsoflicenses,ownlargenumbersofpatents,copyrights,trademarksandtradesecretsandfrequentlyenterintolitigationbasedonallegationsofinfringementorotherviolationsofintellectualpropertyrights.Wehavereceivedinthepast,andmayinthefuturereceive,noticesthatclaimwehavemisappropriatedormisusedotherpartiesintellectualpropertyrights.Anyintellectualpropertyclaimagainstus,regardlessofmerit,couldbetimeconsumingandexpensivetosettleorlitigateandcoulddivertmanagementsattentionandotherresources.Theseclaimsalsocouldsubjectustosignificantliabilityfordamagesandcouldresultinourhavingtostopusingtechnologyorcontentfoundtobeinviolationofanotherpartysrights.Wemightberequiredormayopttoseekalicenseforrightstointellectualpropertyheldbyothers,whichmaynotbeavailableoncommerciallyreasonableterms,oratall.Evenifalicenseisavailable,wecouldberequiredtopaysignificantroyalties,whichwouldincreaseouroperatingexpenses.Wemayalsoberequiredtodevelopalternativenoninfringingtechnology,orcontent,whichcouldrequiresignificanteffortandexpenseandmakeuslesscompetitiveintherelevantmarket.Anyoftheseresultscouldharmourbusinessandfinancialperformance.

    Investment in new business strategies and acquisitions could disrupt our ongoing business and present risks not originallycontemplated.

    Wehaveinvested,andinthefuturemayinvest,innewbusinessstrategiesoracquisitions.Suchendeavorsmayinvolvesignificantrisksanduncertainties,includingdistractionofmanagementfromcurrentoperations,greaterthanexpectedliabilitiesandexpenses,inadequatereturnofcapital,andunidentifiedissuesnotdiscoveredinourinvestigationsandevaluationsofthosestrategiesandacquisitions.Wemaydecidetomakeminorityinvestments,includingthroughjointventures,inwhichwehavelimitedornomanagementoroperationalcontrol.Thecontrollingpersoninsuchacasemayhavebusinessinterests,strategiesorgoalsthatareinconsistentwithours,anddecisionsofthecompanyorventureinwhichweinvestedmayresultinharmtoourreputationoradverselyaffectthevalueofourinvestment.Further,wemayissuesharesofourcommonstockinthesetransactions,whichcouldresultindilutiontoourstockholders.

    Ifthebusinesseswehaveacquiredorinvestedindonotperformasexpectedorweareunabletoeffectivelyintegrateacquiredbusinesses,ouroperatingresultsandprospectscouldbeharmed.

    Wehaveacquiredanumberofbusinessesinthepastandourfuturegrowthmaydepend,inpart,onfutureacquisitions,anyofwhichcouldbematerialtoourfinancialconditionandresultsofoperations.Certainfinancialandoperationalrisksrelatedtoacquisitionsthatmayhaveamaterialimpactonourbusinessare:

    Useofcashresourcesandincurrenceofdebtandcontingentliabilitiesinfundingacquisitionsmaylimitotherpotentialusesofourcash,includingstockrepurchases,dividendpaymentsandretirementofoutstandingindebtedness

    Amortizationexpensesrelatedtoacquiredintangibleassetsandotheradverseaccountingconsequences

    Expectedandunexpectedcostsincurredinidentifyingandpursuingacquisitions,andperformingduediligenceonpotentialacquisitiontargetsthatmayormaynotbesuccessful

    Diversionofmanagementsattentionorotherresourcesfromourexistingbusiness

    Difficultiesandexpensesinintegratingtheoperations,products,technology,privacyprotectionsystems,informationsystemsorpersonneloftheacquiredcompany

    Costsassociatedwithlitigationorotherclaimsrelatingtotheacquiredcompany

    Impairmentofrelationshipswithemployees,suppliersandaffiliatesofourbusinessandtheacquiredbusiness

    Theassumptionofknownandunknowndebtandliabilitiesoftheacquiredcompany

    Failureoftheacquiredcompanytoachieveanticipatedtraffic,revenues,earningsorcashflowsortoretainkey

  • managementoremployees

    Failuretogenerateadequatereturnsonacquisitionsandinvestments

    17

  • Entranceintomarketsinwhichwehavenodirectpriorexperienceandincreasedcomplexityinourbusiness

    Impairmentofgoodwillorotherintangibleassetssuchastrademarksorotherintellectualpropertyarisingfromacquisitionsand

    Adversemarketreactiontoacquisitions.

    Moreover,werelyheavilyontherepresentationsandwarrantiesprovidedtousbythesellersofacquiredcompanies,includingastheyrelatetocreation,ownershipandrightsinintellectualpropertyandcompliancewithlawsandcontractualrequirements.Ourfailuretoaddresstheserisksorotherproblemsencounteredinconnectionwithpastorfutureacquisitionsandinvestmentscouldcauseustofailtorealizetheanticipatedbenefitsofsuchacquisitionsorinvestments,incurunanticipatedliabilitiesandharmourbusinessgenerally.

    Ifwefailtomanageourgrowtheffectively,ourbrand,resultsofoperationsandbusinesscouldbeharmed.

    Wehaveexperiencedrapidgrowthinourheadcountandoperations,whichplacessubstantialdemandsonmanagementandouroperationalinfrastructure.Wecontinuetomakesubstantialinvestmentsinourtechnology,salesandmarketingandcommunitymanagementorganizations.Aswecontinuetogrow,wemusteffectivelyintegrate,developandmotivatealargenumberofnewemployees,includingemployeesininternationalmarkets,whilemaintainingthebeneficialaspectsofourcompanyculture.Ifwedonotmanagethegrowthofourbusinessandoperationseffectively,thequalityofourplatformandefficiencyofouroperationscouldsuffer,whichcouldharmourbrand,resultsofoperationsandbusiness.

    Wemayhavefuturecapitalneedsandmaynotbeabletoobtainadditionalfinancingonacceptableterms.

    Wearepartytoatermloanwitharemainingprincipalof$300million,aswellasarevolvingcreditfacilityof$200millionatDecember31,2014.Thesearrangementsmaylimitourabilitytosecuresignificantadditionalfinancinginthefutureonfavorabletermsorouroperatingcashflowmaybeinsufficienttosatisfyourfinancialobligationsunderindebtednessoutstandingfromtimetotime.Ourabilitytosecureadditionalfinancingandsatisfyourfinancialobligationsunderindebtednessoutstandingfromtimetotimewilldependuponourfutureoperatingperformance,whichissubjecttothenprevailinggeneraleconomicandcreditmarketconditions,includinginterestratelevelsandtheavailabilityofcreditgenerally,andfinancial,businessandotherfactors,manyofwhicharebeyondourcontrol.Inlightofperiodicuncertaintyinthecapitalandcreditmarkets,therecanbenoassurancethatsufficientfinancingwillbeavailableondesirableorevenanytermstofundinvestments,acquisitions,stockrepurchases,dividends,debtrefinancingorextraordinaryactionsorthatcounterpartiesinanysuchfinancingswouldhonortheircontractualcommitments.Iffinancingisnotavailablewhenneededorisnotavailableonfavorableterms,wemaybeunabletoissueordevelopneworenhancedexistingservices,completeacquisitions,repurchaseequityorotherwisetakeadvantageofbusinessopportunities,anyofwhichcouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsofoperations.Ifweraiseadditionalfundsthroughtheissuanceofequitysecurities,ourstockholdersmayexperiencesignificantdilution.

    Furthermore,wearealsoaccumulatingagreaterportionofourcashflowsinforeignjurisdictionsthanpreviously,whichweconsiderindefinitelyreinvested.TherepatriationofsuchfundsforuseintheUnitedStates,includingforcorporatepurposessuchasacquisitions,stockrepurchases,dividendsordebtrefinancings,mayresultinadditionalU.S.incometaxexpenseandhighercostforsuchcapital.

    Wehavesignificantindebtedness,whichcouldadverselyaffectourbusinessandfinancialcondition.

    Theremainingprincipalonourtermloan$300millionatDecember31,2014.Risksrelatingtoourindebtednessinclude:

    Increasingourvulnerabilitytogeneraladverseeconomicandindustryconditions

    Requiringustodedicateaportionofourcashflowfromoperationstoprincipalandinterestpaymentsonourindebtedness,therebyreducingtheavailabilityofcashflowtofundworkingcapital,capitalexpenditures,acquisitionsandinvestmentsandothergeneralcorporatepurposes

    Makingitmoredifficultforustooptimallycapitalizeandmanagethecashflowforourbusinesses

    Limitingourflexibilityinplanningfor,orreactingto,changesinourbusinessesandthemarketsinwhichweoperate

    Possiblyplacingusatacompetitivedisadvantagecomparedtoourcompetitorsthathavelessdebt

    Limitingourabilitytoborrowadditionalfundsortoborrowfundsatratesoronothertermsthatwefindsacceptableand

  • Exposingustotheriskofincreasedinterestratesbecauseouroutstandingdebtisexpectedtobesubjecttovariableratesofinterest.

    18

  • Inaddition,itispossiblethatwemayneedtoincuradditionalindebtednessinthefutureintheordinarycourseofbusiness.Thetermsofourtermloanandrevolvingcreditfacilitywillallowustoincuradditionaldebtsubjecttocertainlimitations.Ifnewdebtisaddedtocurrentdebtlevels,therisksdescribedabovecouldintensify.

    Theagreementsthatgovernourcreditfacilitycontainvariouscovenantsthatlimitourdiscretionintheoperationofourbusinessandalsorequireustomeetfinancialmaintenancetestsandothercovenants.Thefailuretocomplywithsuchtestsandcovenantscouldhaveamaterialadverseeffectonus.

    Wearepartytoacreditagreementprovidingforarevolvingcreditfacilitywithaborrowingcapacityof$200millionandatermoffiveyears,aswellasafiveyear,termloanwithanoriginalprincipalof$400milliontoourwhollyownedsubsidiary,TripAdvisorHoldings,LLC.Theagreementsthatgovernthetermloanandrevolvingcreditfacilitycontainvariouscovenants,includingthosethatlimitourabilityto,amongotherthings:

    Incurindebtedness

    Paydividendson,redeemorrepurchaseourcapitalstock

    Enterintocertainassetsaletransactions,includingpartialorfullspinofftransactions

    Enterintosecuredfinancingarrangements

    Enterintosaleandleasebacktransactionsand

    Enterintounrelatedbusinesses.

    Thesecovenantsmaylimitourabilitytooptimallyoperateourbusiness.Inaddition,ourtermloanandrevolvingcreditfacilityrequirethatwemeetcertainfinancialtests,includinganinterestcoveragetestandaleverageratiotest.Anyfailuretocomplywiththerestrictionsofourtermloancreditfacilitymayresultinaneventofdefaultundertheagreementsgoverningsuchfacilities.Suchdefaultmayallowthecreditorstoacceleratethedebtincurredunderthereunder.Inaddition,lendersmaybeabletoterminateanycommitmentstheyhadmadetosupplyuswithfurtherfunds(includingperiodicrolloversofexistingborrowings).

    IftheSpinOff,togetherwithcertainrelatedtransactions,weretofailtoqualifyasatransactionthatisgenerallytaxfreeforU.S.federalincometaxpurposes,wecouldbesubjecttosignificanttaxliabilities.

    AsaconditiontothecompletionoftheSpinOff,ExpediaobtainedaprivateletterrulingfromtheInternalRevenueService,orIRS,alongwithanopinionofcounsel,regardingthequalificationoftheSpinOffandcertainrelatedtransactions,astransactionsthataregenerallytaxfreeforU.S.federalincometaxpurposes.TheIRSprivateletterrulingandtheopinionofcounselwerebasedon,amongotherthings,certainfactsandassumptionsaswellastheaccuracyofcertainrepresentations,statementsandundertakingsthatExpediaandwemadetotheIRSandtocounsel.Ifanyoftheserepresentations,statementsorundertakingsare,orbecome,inaccurateorincomplete,orifweorExpediabreachanyofthecovenants,theIRSprivateletterrulingandtheopinionofcounselmaybeinvalid.

    Moreover,theIRSprivateletterrulingdoesnotaddressalltheissuesthatarerelevanttodeterminingwhethertheSpinOffqualifiesasatransactionthatisgenerallytaxfreeforU.S.federalincometaxpurposes.NotwithstandingtheIRSprivateletterrulingand/ortheopinionofcounsel,theIRScoulddeterminethattheSpinOffshouldbetreatedasataxabletransactionifitdeterminesthatanyoftherepresentations,assumptionsorundertakingsthatwereincludedintherequestfortheIRSprivateletterrulingoronwhichtheopinionofcounselwasbasedisfalseorhasbeenviolatedorifitdisagreeswiththeconclusionsintheopinionofcounselthatarenotcoveredbyanyIRSruling.

    UndertheTaxSharingAgreementbetweenusandExpedia,wearegenerallyrequiredtoindemnifyExpediaforanytaxesresultingfromtheSpinOff(andanyrelatedinterest,penalties,le


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