TripAdvisor is the largest travel site in the world, with a mission to help people plan and book the perfect trip. TripAdvisor accomplishes its goal by offering users a platform that aggregates user-generated reviews and opinions about accommodations, destinations, activities and restaurants worldwide and connecting users with providers of travel accommodations and travel services to book each aspect their trip. At year end 2014, TripAdvisor was available in 28 languages across 45 localized sites, holding over 200 million reviews and opinions of 4.5 million places to stay, places to eat and things to do and attracting 315 million unique users a month.
TripAdvisor is a classic example of an indirect network effect business. There are 3 stakeholders in its network, the user, TripAdvisor – the platform/interface, and the advertiser (e.g. OTAs, hotels, and other service providers). As more users use TripAdvisor and add reviews online, more advertisers promote deals and convenient bookings on the site, which then attracts more users. Over the past 5 years this cycle has fueled market and financial growth for the firm, growing from 65 million unique monthly users in 2012 to 315 million unique monthly users in 2014 and from $637M annual revenue in 2011 to $1.2B annual revenue in 2014.
At 200 million reviews, TripAdvisor has successfully scaled up its business to exhibit indirect network effects. However, this did not happen overnight. Back in 2000, TripAdvisor founders realized a gap in the market for easily accessible un-biased travel information. Noticing this gap, they set out to create a platform that aggregated unbiased travel-related information from across the Internet. It first indexed blogs, combed guidebooks and newspaper articles to create a baseline of information, and also allowed users to enter their own reviews. Following, the company pursued a cost-per-click advertising model, allowing OTAs, hotels, and other service providers advertize relevant information on the site, which also allowed for convenient booking functionality. TripAdvisor derives a majority of its revenue from the sale of advertizing, primarily through click-based, and to a lesser extent display based. Other revenue sources include business subscriptions, transaction-based offerings and content licensing. The combination of user generated content and relevant advertizing proved to be great hit and ignited the ongoing network effect.
TripAdvisor is able to maintain its market leadership through its product-focused culture and once-a-week release cycle that continuously pushes out new high-value functionalities to its users. In 2014 it released Instant Booking and Just for You. The Instant Booking feature enables users to quickly and easily book a hotel on TripAdvisor through its hotel or online travel agent partners. Just for You makes the hotel research experience more personalized with hotel recommendations to TripAdvisor users based on their individual preferences and travel history on the site.
Overall, TripAdvisor displays a brilliant business model but it or plays in a very competitive travel marketplace, competing for content, users and advertisers. Major competitors include, Google, Bing Travel, Baidu, OTAs, Airbndn, Ctrip.com, Homeaway Inc. and Yelp. To maintain its market share the company plans to invest heavily in brand recognition and brand-direct efforts such as online search, TV and email.