Have you ever wondered how TripAdvisor makes Money? In this post we will discuss the revenue model of TripAdvisor
TripAdvisor is one of the world’s most popular online travel platforms that enables users to research and plan their travel experiences. TripAdvisor aggregates millions of travelers’ reviews and opinions about destinations, accommodations, activities and attractions, and restaurants worldwide. The platform also enables users to compare real-time pricing and availability for Hotels & other experiences as well as to book hotels, flights, cruises, vacation rentals, tours, activities and attractions, and restaurants of their choice.
The Revenue Model of TripAdvisor
TripAdvisor makes money from the following sources:
- Referral Revenue from Hotel Segment
- Display Advertisement
- Commission Based Revenue Model
We will discuss each of these revenue sources of TripAdvisor in detail.
Referral Revenue from Hotel Segment
TripAdvisor has a global hotel search platform which enables users to search for and compare hotels on the basis of price and other relevant metrics. Its shows users the different prices offered for the same hotel by different websites allowing them to book hotels at the lowest price available online.
TripAdvisor generates a majority of its revenue from its hotel search feature.
A user searches for hotels on the TripAdvisor platform, clicks on one of the hotel offers/deals displayed in the search results and is referred to the advertiser website. Note that TripAdvisor merely refers the user to the partner/advertiser website from where he/she can complete the booking. The advertiser, which may either be an Online Travel Agency or a hotel, pays Trivago a certain sum of money for each such referral.
Each advertiser determines the amount that it wants to pay for each referral by bidding for advertisements on the marketplace. Tripadvisor operates a marketplace where advertisers can submit bids for each user click on an advertised rate for a hotel. By clicking on a given rate, that user is referred to that advertiser’s website where the user can complete the booking. In advertising terminology, this is known as the Cost-Per-Click or CPC revenue model.
Note that this is similar to the Revenue Model of Trivago.
Tripadvisor with its rich ‘bank’ of travelers’ reviews and opinions, is an extremely popular website with travel enthusiasts. It is because of this unique standing, that TripAdvisor is able to attract display advertisements from global brands looking to enhance exposure and improve sales.
Advertisers on the TripAdvisor platform primarily include Hotels, Airlines, Cruises and Online Travel Agencies.
Display-based advertising is sold predominantly on a cost per thousand impressions, or “CPM” basis wherein the advertisers pay TripAdvisor a fixed pre-determined sum of money for each thousand impressions (i.e views) of their advertisement. Under the CPM Model, revenue accrues to the publisher each time a user views the advertisement irrespective of whether he takes any action like clicking on the advertisement. Contrast this with the CPC Model where revenue will only accrue when the user clicks on the advertisement.
Commission Based Revenue Model
Apart from its hotel search feature, the TripAdvisor platform allows users to search for and book flights, cruises, vacation rentals, tours, activities and attractions, and restaurants at a destination of their choice.
In almost all of these cases, the user is redirected to a partner website where they can complete the booking. TripAdvisor earns a commission on each qualified booking facilitated by it at a partner website.
Hope you liked our presentation on the revenue model of TripAdvisor. You might also be interested in understanding the revenue model of BookMyShow.
Source: Form 10K