How does TripAdvisor make Money from TripAdvisor Business Model
Well, Today Unicornomy is 1-Year-old 😀 ! Enjoy the Valentine’s Day with this particular post.
TripAdvisor Inc. is a US based travel company providing user-generated reviews of travel-related content.
Yeah! This is what everyone knows about already!
What most of you might not know is that it is a part of Expedia Group (The Largest OTA in the world), it is a Reverse Listed Entity (Earlier a Part of Listed Expedia Group and then Spun off from the parent and then offered on the market).
One more thing you guys should know about, TripAdisor is owned by IAC (InterActiveCorp) – Which is one of the pioneers in Internet-based Businesses (Tinder) and a Behemoth in content backed companies.
TripAdvisor Market Capitalization: $4 Billion as of 2017 Feb
TripAdvisor Founder: Stephen Kaufer, Langley Steinert started TripAdvisor in 2000.
How does TripAdvisor make Money
How does TripAdvisor make money is what everyone wonders while reading their free reviews at the time of planning for that year end trip!
Business Model of TripAdvisor is pretty much like the other “Content Driven Web Properties” i.e. Advertising Revenue. Before understanding the Business Model of TripAdvisor in details let’s first have a look at How does TripAdvisor work.
How does TripAdvisor Work
How does TripAdvisor Work with reviews? Well, TripAdvisor never started out as a user-generated review aggregator. It was more of a curated network of thorough and expert knowledge of a particular destination which they eventually copied from Lonely Planet kind of guides. Later they introduced a button of “Write a Review” and boy that took off.
People poured their heart out while writing real and pathetic reviews. It is from there that they realized people are coming to their website more from the perspective of reading fellow traveler “genuine” reviews and not the expert knowledge.
They eventually added a lot of content concerning many other things related to travel like restaurant reviews, site seeing options, travel arrangements, etc. As of now, TripAdvisor is heavily dependent on Google for its incoming traffic (which took a fall btw in the latest algorithm update) thus a little line away from directly competing with Google because of Google spaces and Google flights. TripAdvisor also employs blackhat SEO techniques like cloaking and all to ensure industry baffling CTRs. Let’s look at the TripAdvisor Business Model to get into the specifics.
TripAdvisor Business Model
Lead gen and advertising primarily drive TripAdvisor Business Model. It is pretty complicated considering their large $1.5 Billion Revenues (2015) that comes from various sources listed below:
- CPC: Cost Per Click Advertising
- Google Adsense Traffic Monetization
- Affiliate Marketing (Sale driven Commissions)
- Display Advertising (Banners and Pop Ups)
- Subscription Packages (SaaS) for Property Owners
Let’s look at these in detail below. Please note that all these display units work seamlessly across all devices and operating systems.
TripAdvisor Business Model via Advertising
Advertising is of 3 types as mentioned above i.e. Display, CPC and Google Adsense.
TripAdvisor Business Model via Display Ads
Various sizes and dimensions of display ad options are available with TripAdvisor Business Owners. Ads can be customized basis being a Text Ad, Video Ad or Image based Ad.
Sponsored Hotel Listings can also be purchased for promoting the property at the top of search results.
Business Model of TripAdvisor via Google Adsense
Text Based Google Ads: Relevant Ads from Google Adwords Publishers like Booking.com etc.
SideScraper Based AdUnit: Image
TripAdvisor Business Model via Cost Per Click Advertising (CPC)
These CPC ads and other forms of ads are priced as per the TripAdvisor Team and keep on varying through the lifetime of the ad unit depending on the traffic it generated for that particular amount of time. The advertiser will know upfront that it is paying an X amount of money for Y number of visitors/viewers to that respective ad unit.
The small arrow near the names of Hotels.com and Booking.com etc. are CPC ads as well as some are Affiliate Ads (Can’t distinguish which is which though but major are CPC only).
How does TripAdvisor make Money
TripAdvisor makes money from the host of above-mentioned methods. But it is important to note that nearly 3/4th of the revenue comes from ADVERTISING only. Rest of the 25% is split between affiliate and Subscription packs.
Let’s look at the various affiliate placements of TripAdvisor Business Model.
In the below image you can look at the “Book on TripAdvisor” sign which is disabled because TA does not have any rooms left on those dates. If it had the entire booking requisition form would have opened up asking for your details. Since it does not have room nights on that particular date, it is redirecting the same to the affiliate network of Booking.com!
If the hotel has opted for Book via TripAdvisor option, there are two options with the property owner to choose from with respect to the amount of commission it is ok to dole out to TA on account of the successful booking.
Location and other tourist attractions can also be booked via “Viator.com” and TripAdvisor acts as an affiliate for that as well. Other OTAs can also be used to book tourist attractions.
An Important thing to note here is that TripAdvisor not only is an affiliate for these OTA (Online Travel Agents) but has an affiliate program of itself as well to drive much more traffic to its website. TA Affiliates direct the traffic to TripAdvisor which in turn redirects them to the other Revenue streams on its website.
How does TripAdvisor make Money via Subscriptions
Consumers never have to get a subscription to write, read or review. It is the business owner that has to take a Standard / Preferred access to get hold of the property and reply to reviews and do stuff with the listing.
The red block that you see on the number, email id, and website of the hotel is the part of the paid package that the business owner can avail to promote more inbound inquiries.
To Sum it up, TripAdvisor is a very healthy unit economics business, with a highly digital oriented business model and a enjoys an excellent brand recall in the consumer mindset. Like many other digital companies, it faces a threat from Google on account of places and flights, but I feel it can overcome that on account of being related to an equally competent OTA (Expedia).
Disclaimer: All Views about TripAdvisor Business Model and How does TripAdvisor Make Money are Personal. Images used have been taken from the website of TripAdvisor for illustration purpose only and all mention of the names and usage of the pictures and logo is part of the Expedia Group.