TripAdvisor CEO Says Wall Street Underestimates Its Value Now That It’s Flying Solo

Stephen Kaufer got the idea for TripAdvisor more than a decade ago, after planning a trip to Mexico and having a difficult time knowing which accommodations his family would enjoy most.

As the father of eight kids — now all between the ages of 12 and 21 — he knows a thing or two about the importance of finding the perfect place. (Note: Kaufer delicately calls family trips “adventures,” while getaways with his wife are “vacations.”)

Since then, TripAdvisor has become the online go-to destination for reviews of hotels from Barbados to bed-and-breakfasts in New York City.

In 2004, Kaufer sold the company to IAC for $210 million, setting off a somewhat complicated operating journey. A year later, TripAdvisor spun out of IAC as part of Expedia. It remained a division within the online travel agency until last month, when it broke off into an independent publicly held company.

Today, the Newton, Mass.-based company has 1,100 employees, attracts more than 50 million unique visitors and has published more than 60 million reviews. It trades on the Nasdaq under the ticker symbol “TRIP,” while Expedia continues to trade under the symbol “EXPE.”

Kaufer talked to AllThingsD about being an independently traded company, and about the media company’s prospects for growth:

AllThingsD: What is it like to be out from under Expedia’s wing?

Stephen Kaufer: There was a joke when we were spun out as part of Expedia from IAC. People asked me, “What’s your vision for TripAdvisor?” I would always say, “I want to be bigger than Expedia,” and people’s response always was, “That’s what the little brother might say.”

A year or two ago, we passed Expedia in comScore metrics, and are still experiencing growth. It’s a free service that’s valuable. It’s worldwide. TripAdvisor is in 21 languages, and three-fourths of the traffic comes from outside of the U.S.

Now that you are out from under Expedia, do you have more flexibility on where you send leads that are generated from people reading reviews on TripAdvisor?

Under Expedia, we had no obligation to send traffic to them … That never happened, and we were allowed to run independently. But at the end of the day, they [competitors] knew their marketing spend was going into Expedia’s pocket. That’s the most exciting thing. We are now completely independent. Expedia now owns no stock, so when I talk to Orbitz or Priceline, these folks can now partner with TripAdvisor without any hint of helping to fuel the competitors.

Why the spinoff now?

It was announced back in April, but basically there was a view that there was a class of investors that liked a pure Internet category leader and a fast-growing media company like TripAdvisor, and there’s another class that appreciates Expedia, which is in the dominant online travel agency position.

We were blurring the two when they were together. It gives Wall Street the opportunity to invest in either, and each company will find its own set of investors.

Do you think Wall Street is correctly valuing TripAdvisor? (The stock failed to come roaring out of the gate.)

No. But I’m not complaining. I think Wall Street, over the next couple of quarters, will appreciate how both companies perform as independent companies. The numbers have been a little hidden because they were jumbled together. … They’ve never seen TripAdvisor operate independently. They ask, “What will you do differently? How will things be the same?” Watch us, and I think you’ll like what you see.

Will you grow mostly organically, or through M&A?

We have a good track record on acquisition and product innovation.

The last few acquisitions, you saw a focus on our strategic priorities: A mobile company, a social company, two vacation rental companies and a company in China. Our four key investment areas that we called out are vacation rentals, mobile, social and geographic expansion.

In many ways, TripAdvisor was one of the original social networks, where users shared information on their vacations. Now you see Facebook getting into the space with Facebook Connect and other initiatives, too.

Everyone feels like being able to get travel recommendations from their friends is a natural evolution for getting a better recommendation, period.

There’s a couple of different angles. Some social travel companies are focused on making planning a group trip easier. No site out there has scale and does that well, and we don’t do that now. Facebook is a great platform to do it on, and it may be interesting to us in the future.

Our focus is leveraging the friend graph on Facebook and our rich content to give someone the experience of seeing recommendations or ratings from friends.

We love the concept, and we are furiously building up our own product offering to make it more valuable. If it’s not too early to call someone a leader, we are clearly it, because we have the content and the friend graph. We aren’t a site that’s based on Facebook, which is an advantage, because you can do anyting you want to do on the Web or the tablet or mobile.

What about Google moving into travel?

They have a couple of different approaches. They have Google Places, which reviews everything; and they have Google Hotels, which is a hotel finder; and then Google Flights, to help you find the best fare.

With Google Places, they still can’t seem to generate enough high-quality reviews to be useful. They compete with Yelp and us, and I’ve yet to be concerned. I was concerned about Google Flights — a lot — before they launched, but you cannot book through an online travel agent like Expedia — only directly through the airlines for now.

It’s an incomplete product, so I still use TripAdvisor flights, or go to Expedia or Orbitz. They get better results, and maybe aren’t as fast, but more information is still better.

They say they want to include online travel agents, but the airlines won’t let them. … Don’t mistake my tone for being sympathetic to Google on this one.

What about vacation rentals? HomeAway went public last year.

After HomeAway, there’s not that much.

We agree it’s a great market, and it deserves to be online. It helps consumers and there’s a need to bring a trust element into the equation. Folks who have tried it have liked (renting homes), and a whole lot of people haven’t tried it, because a hotel is all they’ve ever tried.

If they are reading hotel reviews, but I see that you are trying to stay seven nights in Orlando, I might say, “Did you know that you might be able to save money and get a private swimming pool?” They never would have thought of that as an opportunity, but there’s lots of great opportunities in Orlando and tons of other cities.

HomeAway dominates the category, but there’s plenty of room for a second, third and fourth.

I’m surprised that already three-fourths of your traffic comes from outside the U.S.

Yes, and that portion is growing. We have offices all over the globe, and our biggest investment opportunity is in China. We purchased a metasearch site for air, hotel and train in China. We view international growth as a tailwind to the business.

So what’s your price target for the stock? It’s currently trading around $25 a share.

I’m looking at how I can grow the business over the long term, and that’s why we are making some of these investments. I might be ahead of it, or other folks ahead of me, but I’m a nuts-and-bolts operator. I like to build stuff, and getting TripAdvisor to the next level of functionality and awareness is my priority — not the stock price.


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