A Web company's singular journey
Unlike others scooped up by big firms, TripAdvisor has thrived here at home
TripAdvisor employees - (from left) Eddie Taub, Aaron Kovalcsik, Claire Dienhart, and Hubert Hwang - play a video game during lunch at the Web company's new home office in Newton. (Josh Reynolds for The Boston Globe)NEWTON - When it was snapped up for $210 million in 2004, some feared out-of-state ownership would diminish TripAdvisor LLC, a Needham start-up that created a compelling travel website featuring user-generated reviews of hotels and tourist attractions.
Instead, TripAdvisor has become one of New England's largest Internet companies, buying nine other travel properties in niche markets such as cruises and airplane seating. It drew 25.5 million visitors to its network of a dozen websites in July, ranking TripAdvisor tops in online travel information, according to research firm comScore Media Metrix.
With its parent company, Expedia Inc., investing about $400 million over the past four years, TripAdvisor has boosted its payroll from fewer than 50 employees when it was acquired to 434, including more than 200 in the Boston area. The company recently moved its home office into a former Polaroid Corp. complex in Newton Highlands, rolled out applications for Facebook and other social networking sites, and is in the process of hiring another 50 engineers and sales people to expand the brand into Europe, India, and China.
"There's no limit to demand for information by people planning a trip," said Stephen Kaufer, TripAdvisor's co founder and chief executive, who estimated half the company's traffic now comes from abroad. "We expect to grow year by year in every dimension."
TripAdvisor's journey contrasts with the bumpier paths of other high-tech standouts in recent state history - from Polaroid to Digital Equipment Corp. to Lycos Inc. - that reduced workforces and lost their local identity after being gobbled up by outsiders. Among many Massachusetts business leaders, the loss of corporate headquarters has become a sensitive issue.
Where other buyers have snatched the brands and shifted management control out of state, starving the local office of resources, Expedia, based in Bellevue, Wash., has provided financial support but allowed TripAdvisor to operate autonomously from Massachusetts - a practice that TripAdvisor, in turn, has extended to its own acquisitions, such as VirtualTourist, Cruise Critic, SmarterTravel, and SeatGuru.
TripAdvisor makes the bulk of its money through advertising from travel destinations and booking sites such as Expedia, as well as its rivals Orbitz and Travelocity, to which visitors can link from TripAdvisor's site. The company posted profits of $129 million on $260 million in revenue for the 12 months ended June 30, parent Expedia reported.
"We're absolutely committed to growing TripAdvisor as fast as we can and, frankly, to throwing as much capital at TripAdvisor as we can," said Dara Khosrowshahi, chief executive of Expedia. "Very early on, when we invested in the company, they beat everything they told us they were going to do, in terms of finance and operating goals."
Through its acquisitions and organic growth, TripAdvisor has built a lead as a destination over its closest competitor, Yahoo Travel. That site attracted 20.3 million unique visitors in July, according to comScore Media Metrix. But by tapping into the resources of its parent company, and tightly integrating reviews and booking, Yahoo Travel is betting TripAdvisor's lead is not insurmountable.
"TripAdvisor doesn't have a very easy way for you to book a flight or a hotel," said Pablo O'Brien, director of product management for Yahoo Travel in Sunnyvale, Calif. "You have to go to another site."
In 2004, when TripAdvisor was purchased by Interactive Corp., the New York conglomerate run by media mogul Barry Diller, it was placed under the umbrella of Expedia, which Diller bought from Microsoft Corp. three years earlier. In 2005, Expedia was spun out as a stand-alone company with Khosrowshahi at the helm, a move that set the stage for TripAdvisor's expansion.
But the growth hasn't been without friction. In July, Deirdre Kiely, a former Web content editor for TripAdvisor, filed a complaint on behalf of herself and other content providers alleging the company violates Massachusetts law by classifying them as independent contractors rather than employees. The plaintiffs write articles and edit reviews of hotels and restaurants for the website, according to the complaint.
TripAdvisor executives declined to discuss the case, which is pending in US District Court in Boston. If it is certified as a class-action lawsuit, as the plaintiffs are seeking, it would be a setback not only for TripAdvisor but for other Internet companies that hire contractors to generate the editorial content displayed on their websites.
Regardless of the outcome, TripAdvisor's blueprint of giving travelers a way to share their experiences is continuing to gain traction as online spending on leisure travel increases. The market is projected to grow from $86 billion in 2007 to $98.1 billion this year and $110 billion in 2009, according to Forrester Research of Cambridge.
At the same time, TripAdvisor is building its brand and harvesting traveler reviews through software applications it has developed for social networking sites, like Facebook, that let members swap travel tips and stories, and map places they have visited.
"TripAdvisor is to travel reviews what Kleenex is to facial tissues," said Henry Harteveldt, a Forrester vice president and principal analyst. "They define the category. This is a company that was ahead of its time but now they're in the sweet spot. And as social computing becomes big, they're posed to capitalize on that."
But rivals, ranging from Yahoo Travel to IgoUgo in New York, are building up their own sites and see plenty of running room in the burgeoning market.
"There's definitely opportunity," said Robert Albert, vice president of media for Travelocity, whose IgoUgo site specializes in online trip planning tools. "TripAdvisor is big, for sure. But there are so many ideas in online travel, and so much hasn't been done yet. When you consider all the online organizing, sharing, and planning that needs to be done, TripAdvisor hasn't cornered the market."
Robert Weisman can be reached at weisman@globe.com.
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