Expedia’s Stock Value Threatened by New Social Network for Travelers

Expedia (NASDAQ:EXPE) could be facing a very serious threat to its business, although not from the usual suspects like Priceline (NASDAQ:PCLN) or Kayak. This time, it comes in the form of a new social network for travelers, Gogobot. ^[1]. Still in the Beta phase, Gogobot combines social networking and online travel research and bookings into one seamless platform. Backed by $4 million in funding from Battery Ventures, ^[2] Gogobot is poised to elbow its way into the online travel space.

Expedia, the world leading online travel portal does not just make money from travel bookings but also through advertising on its websites. Expedia’s Tripadvisor is the #1 online travel community operating in North America, Europe and Asia-Pacific. The site aggregates opinions and offers rich user-generated travel-related content including millions of reviews on destinations, hotels, restaurants. The sheer number of reviews adds to its credibility and draws traffic to tripadvisor.com, which Expedia then monetizes in the form of revenue from advertising placements on the website.

Our price estimate for Expedia stock stands at $29.12, roughly 30% ahead of market price.

How does Gogobot threaten Expedia?

1) Absence of Social Networking at Tripadvisor

Tripadvisor lacks real social networking functionality. Gogobot offers to fill this gap by providing users with travel advice from their personal social network connections on Facebook and Twitter. The reasoning for this is obvious – people care much more about their friends’ opinions than those of the endless stream of anonymous reviewers. We’re much more likely to act on a tip from a friend than a stranger.

2) Gogobot to Offer Bookings on its Own Website

Gogobot announced partnerships with established online travel agencies like Priceline, Orbitz, Kayak and even Expedia to allow users to book flights and hotels from these sites without actually being directed to the sites. Expedia doesn’t really have a choice here. The company has to partner with Gogobot or risk losing booking volumes to other agencies that do. This, unfortunately, reduces the number of visitors that would otherwise find their way onto Expedia’s site. Reduced traffic will likely put a dent in advertising revenues for Expedia as well as other online travel agencies.

3) A More User-Friendly and Interactive Interface at Gogobot

Gogobot was awarded the 2010 Techcrunch Crunchie award for best design. The site comes with integrated maps and a Yahoo Answers-style question-and-advice feature. The user-friendly interface at Gogobot could help attract and retain more traffic to its website. This could be a serious blow to Expedia’s advertising revenues from its Tripadvisor network.

What is the Potential Impact on Expedia?

Gogobot poses a real threat to Tripadvisor’s visitation, and could cause the sites revenue from advertising to slip. Although Gogobot is nowhere near the millions of reviews for hotels and destinations that Tripadvisor currently boasts, the social networking element could spur a rapid surge in Gogobot’s content. Facebook’s over half a billion users could quickly turn the tide in Gogobot’s favor.

So how important is Tripadvisor to Expedia? We estimate that this site’s operations represent 23% of the company’s stock value, which we peg at $29.12. This is a good chunk of Expedia’s value, so don’t expect the company to give up it’s position atop the online travel community hill without a fight.

See our complete analysis of Expedia’s stock here

1. Gogobot Travel Social Network Partners With Expedia, Orbitz, PC Mag, March 24′ 2011 [↩]
2. Tech Crunch, June 14′ 2010 [↩]