TripAdvisor Launches Direct Booking Tool For U.S. Traffic To Boost Smartphone Monetization
TripAdvisor (NASDAQ:TRIP), the world’s largest travel review website by visitors, rolled out its Instant Booking feature across the U.S. this week. The launch of the feature is backed by the company’s motivation to reduce hand-off issues that smartphone users faced while navigating back and forth between TripAdvisor and an advertiser’s content. Instant Booking allows smartphone users to book hotels directly via TripAdvisor’s mobile app and mobile website, thus keeping the booking experience within the TripAdvisor environment and eliminating the need to navigate to an advertiser’s website to make bookings. [1]
Earlier in this quarter, Instant Booking was tested on about 10% of the U.S. traffic. We are encouraged by the broader rollout of the tool in the country as we believe that the feature will help TripAdvisor to earn more revenue from smartphones by converting lookers into bookers. Low monetization on smartphones is a concern that has been looming over TripAdvisor for several quarters.
We have a $89 price estimate for TripAdvisor, which marks our valuation at a discount of about 10% to the stock’s market price.
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Here’s Why Instant Booking Was Launched
Using TripAdvisor’s app was cumbersome for users, as they had to click on advertisers’ links to see details and complete the booking process. The company launched native apps for Android and iOS devices in October last year to reduce this friction. The re-launched apps allowed in-app navigation by keeping the booking experience restricted within TripAdvisor’s app instead of launching new advertiser windows in a mobile browser.
Although this enhanced the interface, users continued to struggle when they wanted to move back and forth between advertisers’ and TripAdvisor’s content. The problem was more prominent in smartphones than other devices due to the smaller size of the screen. That’s where the idea of having a direct booking tool like Instant Booking for smartphones emerged from. Instant Booking allows users to complete a booking with TripAdvisor itself while also providing the option to book with other advertisers.
Direct Bookings Is A Good Way To Enhance Mobile Monetization
Averaging 110 million monthly unique visitors via smartphones and tablets, equivalent to over 40% of total company traffic, mobile devices are an important source of traffic for TripAdvisor. [2] However, the company has struggled to monetize this traffic due to low spending by advertisers on mobile. Its smartphone monetization last year was less than 20% of that on desktops as it recently began displaying graphic advertising on smartphones and lacked any further smartphone monetization strategies.
Instant Booking enhances the user experience by allowing users to complete booking without leaving TripAdvisor, thereby also taking them further down the booking funnel. We think that this will help the company to improve conversion rates (from hotel seekers to hotel bookers), and as a result, lift smartphone monetization levels.
Seeking Partners Will Be A Difficult Task
Instant Booking handles major aspects of the booking process from selecting a room to inputting the personal and credit details, thus offering a frictionless booking experience. The fulfillment of the service is, however, carried out by an online travel agency (OTA) or a hotel partner. Therefore, it is important to build more partnerships in order to increase inventory and boost direct bookings via smartphones.
Only three sites—Choice Hotels, Getaroom.com, and TripAdvisor-owned Tingo—have signed up as partners with TripAdvisor so far. [1] Although TripAdvisor is a good source of traffic for OTA giants such as Priceline (NASDAQ:PCLN) and Expedia (NASDAQ:EXPE), we believe that these OTAs are apprehensive about partnering with the company as it could negatively weigh on booking volumes through their own mobile apps and websites. If TripAdvisor is able to bring these OTAs on board, it will witness a significant uplift in mobile bookings.
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Notes:- TripAdvisor Booking Launches on Mobile But Partners Remain Elusive, Skift, June 11, 2014 [↩] [↩]
- TripAdvisor Reports First Quarter2014 Financial Results, TripAdvisor Investor Relations, May 06, 2014 [↩]