TripAdvisor business model matches the demand for people looking for a travel experience with supply from travel partners around the world providing travel accommodations and experiences. When this match is created TripAdvisor collects commission from partners on a CPC and CPM basis. The non-hotel revenue comprises experiences, restaurants, and rentals.
Business Model Element
Analysis
Implications
Examples
Value Proposition
TripAdvisor’s value proposition centers around: – User-Generated Content: Provides a platform for travelers to share reviews and ratings. – Comprehensive Information: Offers a wide range of travel-related content. – Community and Social Features: Fosters a sense of community among travelers. – Booking Services: Allows users to book hotels, flights, and activities. – Price Comparison: Enables users to compare prices from different providers. TripAdvisor aims to empower travelers with user-generated content, comprehensive information, community, booking services, and price comparison to make informed travel decisions.
Provides travelers with trusted reviews and a wealth of travel-related information. Creates a sense of community among travelers worldwide. Offers booking services for convenience and a seamless travel experience. Facilitates price comparison for cost-conscious travelers. Attracts a global user base seeking reliable travel information and services.
– User-generated reviews and ratings. – Comprehensive travel-related content. – Community features for travelers. – Booking services for hotels, flights, and activities. – Price comparison for travel options. – Attracting a global user base of travelers.
Customer Segments
TripAdvisor serves various customer segments, including: 1. Travelers: Individuals seeking travel information and booking services. 2. Hotels and Accommodations: Businesses looking to promote their properties. 3. Restaurants: Eateries interested in showcasing their offerings. 4. Airlines and Transportation: Companies offering travel services. 5. Tour Operators: Organizations offering guided tours and activities. TripAdvisor caters to travelers, businesses in the travel industry, and service providers, connecting them through its platform.
Offers travelers a platform for travel information and booking services. Provides businesses with a platform to promote their offerings. Attracts service providers and travel-related businesses. Connects travelers with a wide range of travel service providers.
– Travelers seeking information and booking services. – Hotels and accommodations promoting their properties. – Restaurants showcasing their offerings. – Airlines and transportation companies offering services. – Tour operators providing guided tours and activities. – Connecting travelers with travel service providers.
Distribution Strategy
TripAdvisor’s distribution strategy includes: – Website and Mobile App: Provides an online platform for users to access travel content. – Partnerships: Collaborates with hotels, airlines, and other travel providers. – SEO and Online Advertising: Utilizes search engine optimization and digital advertising. – User Engagement: Encourages users to contribute reviews and engage with the community. TripAdvisor leverages its online platform, partnerships, digital marketing, and user engagement to reach and retain its audience.
Offers an easily accessible online platform for travelers. Collaborates with travel providers to expand offerings. Utilizes digital marketing to attract users. Fosters user engagement to enhance content and community.
– Operating a website and mobile app for travel content. – Partnering with hotels, airlines, and travel providers. – Utilizing SEO and online advertising for user acquisition. – Encouraging user contributions and engagement.
Revenue Streams
TripAdvisor generates revenue through various streams: 1. Click-Based Advertising: Earns fees when users click on ads displayed on its platform. 2. Subscription Services: Offers premium listings and services to businesses. 3. Booking Commissions: Charges commissions on bookings made through its platform. 4. Display Advertising: Sells ad space to businesses and brands. 5. Sponsored Content: Promotes sponsored content from travel providers. TripAdvisor diversifies its income sources through advertising, subscriptions, commissions, and sponsored content.
Earns revenue when users click on ads displayed on its platform. Offers premium services to businesses for additional income. Charges commissions on bookings made through its platform. Sells ad space and promotes sponsored content. Diversifies revenue streams for financial stability.
– Generating revenue from click-based advertising. – Offering premium listings and services to businesses. – Charging commissions on bookings made through the platform. – Selling ad space to businesses and brands. – Promoting sponsored content from travel providers. – Diversifying revenue streams for financial stability.
Marketing Strategy
TripAdvisor’s marketing strategy includes: – User-Generated Content: Encourages users to contribute reviews and ratings. – Social Proof: Highlights the credibility of user-generated content. – SEO: Optimizes content for search engines to attract organic traffic. – Email Marketing: Sends personalized recommendations and travel deals to users. – Partnerships: Collaborates with travel providers and influencers for promotion. TripAdvisor focuses on user engagement, credibility, organic reach, personalized recommendations, and partnerships in its marketing efforts.
Fosters user-generated content to enhance platform credibility. Utilizes social proof to showcase the value of user contributions. Optimizes content for search engines to attract organic traffic. Engages users with personalized email recommendations and deals. Collaborates with partners and influencers for wider reach.
– Encouraging users to contribute reviews and ratings. – Highlighting the credibility of user-generated content. – Optimizing content for search engines. – Sending personalized email recommendations. – Collaborating with travel providers and influencers.
Organization Structure
TripAdvisor’s organizational structure includes: – CEO and Leadership Team: Led by the CEO responsible for strategic direction. – Business Divisions: Organized into various divisions such as Hotels, Restaurants, and Experiences. – Global Workforce: Employs a global team to manage operations worldwide. – Board of Directors: Comprised of key individuals with expertise in various fields. TripAdvisor’s structure supports different business divisions, global operations, and strategic direction under the leadership of the CEO.
Led by a CEO who oversees strategic direction and decision-making. Organized into divisions for different aspects of the travel industry. Employs a global workforce to manage operations worldwide. Governed by a board of directors with expertise in various fields. Maintains a structure that supports diverse operations and global expansion.
– Led by a CEO responsible for strategic direction. – Organized into various business divisions, such as Hotels and Restaurants. – Employing a global workforce for worldwide operations. – Governed by a board of directors with expertise. – Supporting diverse operations and global expansion.
Competitive Advantage
TripAdvisor’s competitive advantage stems from: – User-Generated Content: A vast repository of traveler reviews and ratings. – Strong Brand: Recognized as a trusted source for travel information. – Partner Network: Collaborates with numerous hotels and travel providers. – Global Reach: A global user base and extensive travel content. – Revenue Diversification: Multiple income streams for financial stability. TripAdvisor’s user-generated content, brand trust, partner network, global reach, and revenue diversification solidify its position as a leading travel platform.
Benefits from a vast repository of traveler reviews and ratings. Recognized as a trusted source for travel information. Collaborates with numerous hotels and travel providers. Attracts a global user base with extensive travel content. Diversifies revenue streams for financial stability. Holds a strong competitive position in the travel information industry.
– Leveraging a vast repository of traveler reviews. – Building a strong brand as a trusted travel information source. – Collaborating with numerous hotels and travel providers. – Attracting a global user base with extensive content. – Diversifying revenue streams for financial stability. – Maintaining a strong competitive position in the travel industry.
Chris Dixon had what seemed to be a brilliant idea. He wanted to create a vertical search engine covering the travel industry.
That’s how TripAdvisor started and how it built its business plan.
It could be summarized as a vertical search engine for the travel industry, selling users to larger customers, like Expedia, Travelocity, AOL, and Yahoo.
So when Chris Dixon built the business plan, he got funding for that idea. A year and a half later, TripAdvisor had no revenues or clients.
The first site was gaining some traction through PR, but no revenuemodel existed.
Therefore, they started to monetize the site via banner ads, which seemed a smart idea – on paper – at the time, as the founding team figured if they were going to make a 3% click-through rate on those banners, the company would be highly profitable.
However, things didn’t look right when they started to roll this out in the real world.
As those banners had 0.1% clicks barely, which meant the company would be profitable only with billion of page views.
The traditional CPM (cost per mille) model and the banner ads didn’t make much sense.
Chris Dixon and the rest of the team stumbled upon a new monetization model called CPC (cost per click). In other words, the site had hotel pages; on those pages, a simple call to action that said “book this hotel” would be paid on a click-through basis.
While this model is given for granted now, it was the early 2000s when Google neither had figured that out.
Indeed, only one player – GoTo.com, later Overture – made money by syndicating its links.
Thus, when TripAdvisor figured out the CPC revenuemodel, it went from no revenue in November 2001 to breaking even in March 2002, with $70K per month in revenues. The company has become profitable ever since.
One other key element of TripAdvisor’s initial traction and success was the user-generated content.
The site allowed users to write reviews – at the time something completely new, as most people relied on experts’ reviews – and to sell the leads generated by the site to travel agencies.
The turning point happened when TripAdvisor figured out that people were skipping experts’ reviews and going straight to the users’ reviews.
Today this seems trivial and a proven concept, but it was neither granted nor supposed to work at the time.
But when TripAdvisor understood that the user-generated content was so effective and the CPC revenuemodel worked so well, they pushed on the gas pedal to gain even more traction.
Fast forward to 2019, TripAdvisor gained over six billion dollars in market cap!
TripAdvisor’s mission statement analyzed
our mission is to help people around the world to plan, book and experience the perfect trip.
TripAdvisor achieves its mission by providing consumers and travel partners with several pieces to “experience the perfect trip:”
A global platform.
The rich consumer-generated content.
A set of price comparison tools.
Online reservation.
Related services for destinations, accommodations, travel activities.
Experiences.
And restaurants.
Breaking down TripAdvisor Two-Sided Business model
TripAdvisor business model matches the demand for people looking for a travel experience with supply from travel partners around the world providing travel accommodations and experiences.
Therefore the company has two key partners:
Consumers looking for the perfect travel experience
Travel partners willing to pay TripAdvisor to be discovered by their potential customers. Those travel partners include hotel chains, independent hoteliers, online travel agencies, or OTAs and more
TripAdvisor enables media advertising opportunities, and it facilitates transactions between consumers and travel partners by:
Sending referrals to travel partners’ websites,
Facilitating bookings on behalf of travel partners,
Serving as the merchant of record (in particular for Experiences and Rentals offerings)
And with advertising placements on its websites and mobile apps.
How does TripAdvisor make money?
TripAdvisor makes money with two segments:
Hotel revenues
And non-Hotel revenues (Experiences, Restaurants, and Rentals)
The Hotel segment explained
The Hotel segment accounted for 72%, 77%, and 80%, of TripAdvisor revenue in 2018, 2017 and 2016, coming from the following sources:
TripAdvisor-branded Click-based and Transaction Revenue. Click-based advertising comprises of contextually-relevant links to travel partners’ sites. Click-based travel partners are primary OTAs and direct suppliers in the hotel category. The revenuemodel is on a cost-per-click, or “CPC” basis, with payments determined by the number of travelers who click on a link multiplied by the CPC rate for each specific click.
TripAdvisor-branded Display-based Advertising and Subscription Revenue. Comprising display-based advertising placements on TripAdvisor websites. The display-based advertising clients are predominantly direct suppliers of hotels, air travel, and cruises, as well as destination marketing organizations. Display-based advertising is sold primarily on a cost per thousand impressions, or CPM, basis. TripAdvisor also offers subscription-based advertising to hoteliers, owners of B&Bs and other lodging properties. Subscription advertising services are predominantly sold for a flat fee for a contracted period of time of one year or less.
Within the Hotel Segment in 2018, 2017 and 2016 TripAdvisor two most significant travel partners were Expedia (and its subsidiaries) and Booking (and its subsidiaries) which combined accounted for approximately 37%, 43% and 46% of its revenues.
Non-Hotel offerings (Experiences, Restaurants, and Rentals)
Experiences, Restaurants, and Rentals accounted for 28%, 23%, and 20% of TripAdvisor revenue in 2018, 2017 and 2016, respectively. That revenue comes from:
Experiences: in popular travel destinations both through Viator, a dedicated Experiences offering, and on TripAdvisor website and app. TripAdvisor connects with local tour or travel activities/experiences operators (on the supplying side) to provide consumers with access to tours, activities, and experiences by generating commissions for each booking transaction.
Restaurants: Through the dedicated restaurant reservations offering, TheFork, an on TripAdvisor websites and mobile apps the company primarily generates transaction fees (or per seated diner fees) paid by restaurants for diners seated primarily from bookings through TheFork’s online reservation system.
Rentals: It provides information and services for consumers to research and to book a vacation and short-term rental properties, including full home rentals, condominiums, villas, beach rentals, cabins, and cottages. And it generates revenue primarily by offering individual property owners and managers the ability to list their properties on TripAdvisor websites and mobile apps thereby connecting homeowners with travelers through a free-to-list, commission-based option.
Breaking down marketing and distribution channels
TripAdvisor generates demand by tapping mainly into three principal distribution channels:
Indeed, if we look at the primary channels of the acquisition on TripAdvisor websites, search engines, paid advertising, and social media marketing represent the majority of its traffic:
Traffic from search engines, in particular (SEO) represents the majority of traffic for TripAdvisor.com.
We can also see the importance of both SEO and SEM on TripAdvisor top organic keywords and paid keywords:
And another good chunk of traffic and distribution happens via TripAdvisor’s mobile apps:
During 2018, TripAdvisor total advertising expense was approximately $544 million, primarily driven by online search engines, and to a lesser extent, investments in offline marketing channels (primarily television advertising).
Key Highlights
Value Proposition:
TripAdvisor offers a comprehensive platform for travelers to access user-generated content, community features, booking services, and price comparison tools.
Its value proposition revolves around empowering travelers with trusted reviews, comprehensive information, and convenient booking options.
Customer Segments:
Serves various customer segments including travelers seeking information and booking services, hotels and accommodations, restaurants, airlines, transportation companies, and tour operators.
Connects travelers with a wide range of travel service providers, attracting a global user base.
Distribution Strategy:
Utilizes its website, mobile app, partnerships, SEO, online advertising, and user engagement to reach and retain its audience.
Offers an easily accessible platform for travelers and collaborates with travel providers to expand offerings.
Revenue Streams:
Generates revenue through click-based advertising, subscription services, booking commissions, display advertising, and sponsored content.
Diversifies income sources through various revenue streams for financial stability.
Marketing Strategy:
Focuses on user-generated content, social proof, SEO, email marketing, and partnerships to enhance user engagement and reach.
Leverages user contributions and collaborations for wider promotion and credibility.
Organization Structure:
Led by a CEO overseeing strategic direction, organized into divisions for different aspects of the travel industry, and supported by a global workforce and board of directors.
Maintains a structure that supports diverse operations and global expansion.
Competitive Advantage:
Derives competitive advantage from user-generated content, strong brand trust, partner network, global reach, and revenue diversification.
Benefits from a vast repository of traveler reviews, collaborations with travel providers, and a solid position in the travel information industry.
Pivoting and Initial Traction:
Initially struggled to monetize the platform with banner ads but pivoted to a CPC revenue model, leading to profitability.
Identified the effectiveness of user-generated content and leveraged it to gain traction and success.
Mission Statement:
TripAdvisor’s mission is to help people plan, book, and experience the perfect trip, achieved through its global platform, user-generated content, price comparison tools, and related services.
Two-Sided Business Model:
Matches demand from travelers with supply from travel partners, facilitating transactions and advertising opportunities between them.
Generates revenue through hotel offerings and non-hotel offerings such as experiences, restaurants, and rentals.
Marketing and Distribution Channels:
Taps into distribution channels, including SEO, SEM, retargeting, television, and brand advertising to generate demand and traffic.
Invests in online search engines and offline marketing channels for user acquisition and brand promotion.
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TripAdvisor’s business model matches the demand for people looking for a travel experience with supply from travel partners around the world providing travel accommodations and experiences. When this match is created TripAdvisor collects commission from partners on a CPC and CPM basis. The non-hotel revenue comprises experiences, restaurants, and rentals.
Trivago is a search and discovery travel platform part of Expedia Group. Trivago is widely known as a trusted hotel comparison service. Trivago doesn’t charge based on bookings but rather through a cost-per-click (CPC) model, monetized when a hotel searcher clicks one of its advertiser listings. This referral revenue comprises most of Trivago’s income. Trivago also has another minor revenue stream via subscriptions to its Business Studio, a tool that helps hoteliers track impression and click data associated with their properties.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
