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spk02: Good day and thank you for standing by. Welcome to the TripAdvisor fourth quarter 2023 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Angela White, VP of IR.
spk03: Thank you, Josh. Good morning, everyone, and welcome to TripAdvisor's fourth quarter and full year 2023 financial results call. Joining me today are Matt Goldberg, President and CEO, and Mike Noonan, CFO. Last night after market closed, we filed and made available our earnings release. In that release, you'll find reconciliations of non-GAAP financial measures to the most comparable GAAP measure discussed on this call. Before we begin, I'd like to remind you that this call may contain estimates and other forward-looking statements that represent management's views as of today, February 15, 2024. TripAdvisor disclaims any obligation to update these statements to reflect future events or circumstances. Please refer to our earnings release as well as our filings with the SEC for information concerning factors that could cause actual results to differ materially from these forward-looking statements. With that, I'll turn the call over to Matt.
spk10: Thanks, Angela, and good morning, everyone. Before I begin, I'd like to address the press release we filed on Monday. We announced that our board of directors has formed a special committee to evaluate any proposals resulting from Liberty Trip Advisor Holdings' stated intention to engage in discussions with respect to a potential transaction. We appreciate your understanding that we won't address any questions on this topic today or provide further updates unless we have something definitive to share. Now I'd like to address our performance. We were pleased to exit the year with results that exceeded our expectations. Q4 revenue was $390 million, reflecting year-over-year growth of 10%. Q4 adjusted EBITDA was $84 million, 22% of revenue, exceeding expectations due to revenue outperformance at Brand Trip Advisor and marketing efficiencies at both Brand Trip Advisor and Viator. For the full year, consolidated revenue grew by 20% to an all-time high of $1.8 billion, and adjusted EBITDA grew 13% to $334 million. Last year, we made meaningful progress executing against our strategic priorities. We reinforced our market leadership position at Viator while sharpening our focus on smart user acquisition. Viator also finished the year at break-even profitability, achieving the full-year milestone a year earlier than anticipated. At Brand Trip Advisor, we invested in our strategy and delivered promising early proof points while maintaining financial discipline. Finally, at the fork, we delivered revenue gains while significantly improving our profit margin through disciplined cost management and exited the year at break even for Q4. Our results also reflect how we're building a stronger, more diversified and defensible position in the large and growing global travel and experiences industry. We have a unique and leading position in the high growth experiences category, given the breadth of TripAdvisor and the depth of Viator. Within Brand TripAdvisor, experiences, along with other partner offerings beyond our legacy Hotel Meta offering, are now contributing almost half of the revenue versus less than one-third in 2015, reflecting our ability to diversify our monetization and reduce dependence on Hotel Meta revenue. And across the group portfolio, Viator and The Fork have grown to nearly 50% of our revenue in 2023 versus less than 10% in 2015, and they've each reached the scale to deliver increasing profitability. Let me highlight our accomplishments and look ahead to 2024 priorities for each segment. At Brand Trip Advisor, we kicked off 2023 by introducing a multi-year strategic vision that focuses on delivering world-class guidance products to deepen engagement with our audience and fuel diverse monetization paths. Over the course of the year, we delivered tangible progress through product innovation. We relaunched our TRIPS tool for creating itineraries and integrated generative AI deeply into the user experience. I previously cited a few proof points that demonstrate the impact, and we're pleased that each of these has continued to improve over time. First, the average revenue per TRIPS user shortly after launch was three times higher than the average member. That has now increased to closer to five times and our average member already monetizes at approximately 10 times the rate of the average non-member. Second, we saw 100% increase in the number of daily users who generated and saved an itinerary specifically with AI in the back half of the year with limited marketing efforts, and the majority are now engaging with this tool in our app. Finally, we continue to see growth in the return rates for Trip users, whose repeat rates are meaningfully higher than users who don't use the tool. During the year, we also introduced generative AI driven hotel review summaries, an important example of how we're uniquely positioned to use technology to draw differentiated insights from our proprietary database of quality content and behavioral data. Across the 30,000 plus hotels where this is currently available, we're seeing early but strong positive indicators. User satisfaction scores are nearly 75%, which is even higher than the strong initial scores for our trips feature at launch. We continue to bring more travelers to our experiences pages. In 2023, 180 million more travelers used TripAdvisor to shop for experiences than in 2022. As a result, we drove revenue growth rates higher than any other category in the segment at approximately 45%. Importantly, this strong demand reflects the opportunity we have to match additional supply adding relevant new inventory and partners across geographies and categories, representing meaningful upside for experiences on TripAdvisor. 2024 will be a year of acceleration for Brand TripAdvisor. Here are a few of our priorities. First, we'll deliver a differentiated experience in the mobile app. To put it simply, our existing app users are more engaged and more valuable than users on other services. They account for a relatively small percent of our total MAUs, but a disproportionate number of reviews and trips created at 30% and over 60% respectively. Our aim is to deliver an essential app for travelers that convinces more of our audience to download and use the app as the best end-to-end trip companion powered by AI. Second, we'll begin to shift our marketing in support of our engagement-led strategy. Historically, we've optimized everything from our paid search spend to CRM to drive immediate click and display revenue. With the progress we've made against our product, we now have the opportunity to target higher value audiences more directly and drive more users to sign up and sign in as members to download our app and to begin planning a trip because we know each of these behaviors is orders of magnitude more valuable to us than same session clicks. Finally, we'll leverage the investments we've made in data and AI to deliver a more personalized experience for our users, particularly our highly engaged members. This starts with recognizing them for their contributions to our community and extends to broader benefits and rewards we can offer through our free membership program. It also includes new ways to engage with our product, including on AI-driven conversational search experience and iterative trip planning capabilities, that better integrate commerce opportunities by helping travelers find the right hotel, experience, or restaurant to round out their itinerary. Next, at Viator, in 2023, we made significant progress to reinforce our leadership position in experiences by investing and improving our product for both travelers and operators, and continuing to drive our scale. This year was an impressive year of revenue growth at 49% bringing Viator revenue to 41% of total group revenue. GBV grew to over 40% to more than 3.7 billion, and we also reached break-even profitability for the full year earlier than anticipated. This milestone reflects the power of the model and the operating cost leverage our lean fixed cost structure affords. On the demand side, we optimized our brand campaign, growing our awareness and reinforcing our position as the most well-known experiences brand in the U.S. We made improvements across nearly every part of the shopping experience on every surface. We've enhanced our sort for better discoverability, matured the app and grew its share of bookings, and improved the post-booking experience across the board. These and other updates contributed to double-digit growth and conversion across the business. Our new rewards program, meanwhile, is driving value for customers. the early proof points drove mid-teens improvement in retention for travelers using the program. And our most loyal users are our fastest growing customer segment. They're more likely to come through unpaid and immediately profitable channels and spend more than first-time users, driving improvement in our unit economics. For operators, we launched our latest version of the marketing program, Accelerate. We consulted more than 5,000 operators in its creation, and this consideration shows in the results. Well over 50% of eligible products participate in the program, which continues to support our healthy take rate. With the largest product inventory and supply base available anywhere, the value we are driving for operators is clear. Churn rates are low, and supplier and product counts are steadily increasing. In Viator in 2024, we remain focused on growing our scale balancing growth, profitability, and market share as the global market leader in experiences. With an eye on profitable growth, we expect to drive improvements in unit economics through a combination of initiatives focused on lowering customer acquisition costs, increasing retention, and enhancing lifetime value. On the demand side, our focus is on an improved experience along the customer journey, from first-time interaction to long-standing returning customers. These are unique experiences for most travelers, so it's important that at first interaction we begin to build our relationship of trust and value so they return back to book their next memorable experience. We'll do this by leveraging our group customer data platform and delivering a more robust, personalized experience for travelers. We'll also continue to focus on enhancing our app value proposition. We know that app users convert to bookers at a rate higher than desktop or mobile web users, so we'll continue to emphasize app engagement opportunities. We'll also continue to optimize marketing spend and our overall channel strategy, focusing on acquiring the highest intent customers and continuing to drive awareness. We expect to see improvement in unit economics as our multi-channel marketing investments gain traction. On the operator side, we'll continue to drive value through programs aimed at helping operators increase their exposure through features such as incremental performance tracking and insights. The combination of work to enhance the experience for both sides of the marketplace should help operators continue to see value and remain loyal over time. Finally, at the fork in 2023, we began the transition to deliver profitable growth. leveraging past investments and improving our unit economics while maintaining our leadership position in dining in Europe. We grew revenue 19% in constant currency and also delivered significant margin improvement of 22 percentage points, a swing of 25 million in EBITDA as a result of disciplined cost management. During 2023, we continued to rationalize our footprint to focus on priority European markets, modernized our technology platform to drive speed of product innovation, and launched new products and services for both diners and restaurant partners. The team shipped more features in the last six months than they had in the previous six years, resulting in a stronger value proposition for both sides of the marketplace. For diners, we focused on improving the app user experience, resulting in higher conversion rates where 75% of our bookings are made. For restaurants, we stabilized churn and drove more than 20% growth in B2B revenue and new restaurant signatures by migrating our ERB to a single platform, introducing new features for payments and yield management, and improving our sales efficiency. At the fork in 2024, we'll continue to make steady transition to annual profitable growth by focusing on our largest opportunity markets, marketing efficiency, sales productivity, and product-led innovation. We'll evolve our marketing strategy to increase our efforts around repeat diners while taking a measured approach to brand investments in prioritized markets. For diners, we'll focus on driving app-based engagement and conversion through quality content, personalization, recommendations, and incentives to return. For restaurants, we'll focus on value-add ERB features, value-based pricing options, revenue management features, and the ability to market special offers to our growing base of high intent diners. We expect our combined initiatives to drive growth in our average revenue per restaurant and continue to improve our unit economics as we leverage the benefit of a streamlined cost base. To close, we're motivated by our progress in 2023, and we believe that our strategies are delivering results. In 2024, we'll continue to pursue a disciplined financial profile with investment for longer-term growth and transformation across the portfolio. We believe that travel has a sustainable long-term growth path ahead. In 2023, we saw healthy underlying demand despite the backdrop of macro uncertainty, which is testament to consumers prioritizing travel over other discretionary categories. Our traveler surveys reflect steady travel and spending intent in 2024 with a focus on experiences as a central component. We believe this puts TripAdvisor Group in an advantaged position as we build on our vision to be the world's most trusted source for travel and experiences. And now I'll turn the call over to Mike.
spk09: Thank you, Matt. And good morning, everyone. I'll start by reviewing our Q4 and full year 2023 performance And then I'll provide high-level thoughts on 2024. All growth rates for 2023 are relative to the comparable period in 2022, unless otherwise indicated. Q4 consolidated revenue was $390 million, reflecting growth of 10% or 8% on a constant currency basis. Adjusted EBITDA was $84 million or 22% of revenue and 10 percentage points higher than last year. Consolidated performance was higher than our expectation, primarily due to a more favorable traffic mix at Brand Trip Advisor and disciplined marketing spend at Viator. Turning to segment performance for the quarter, Brand Trip Advisor delivered revenue of $218 million, approximately flat year over year. Revenue in branded hotels was $135 million, a decline of 4%, driven by low single-digit decline in hotel meta and flat to slightly down performance in hotel B2B. Hotel Meta performance was driven by sustained pricing strength and growth in both free and paid channels, which was offset by lower click volumes, primarily in paid channels as we continue to manage these channels for profitability by maintaining consistent ROAS targets. From a revenue perspective, growth in Hotel Meta in the U.S. and rest of the world was flat to slightly up, while EMEA declined in line with prior quarters. Importantly, revenue from free channels remained stable, As a result, hotel meta contribution profit margin was slightly higher year over year. Media and advertising revenue grew 6% to $35 million. Growth in the quarter was more normalized, but a sequential step down that we expected primarily due to the recovery pattern in the broader media and advertising sector. Experiences in dining revenue grew 12% to $38 million. with experiences revenue growing approximately 20% in the midst of a challenging macro environment. Dining revenue slightly declined as we continued realigning our sales model in our B2B business as discussed on our last call. Other revenue was flat year over year at 10 million. Growth in cruise was 10% in the quarter, offset by sustained revenue pressure in our remaining category offerings due to our strategic de-emphasis. Adjusted EBITDA in the brand TripAdvisor segment was 69 million, or 32% of revenue. Adjusted EBITDA margin improved by approximately 325 bps year-over-year due to strong revenue performance in our free channels, as well as leverage in headcount and other fixed costs. Turning now to VITOR. Q4 revenue was 161 million, reflecting growth of 27% or 25% on a constant currency basis. Gross Booking Value, or GBV, grew 20% to approximately 720 million, driven primarily by volume growth. The GBV and booking growth performance in the quarter was impacted by the onset of the Middle East conflict and its ripple effects in other European destinations where travel advisory warnings were issued. We also drove some marketing deficiencies in the quarter that impacted GBV and booking growth. In Q4, GBV growth from repeat travelers substantially outpaced GBP growth from new travelers. Compared to our new travelers, our repeat travelers book more items per trip, they buy more expensive products, and they have higher propensity to repeat with us, all of which gives us growing confidence that our efforts in increasing scale and growing travel lifetime value are working. We will also continue to focus on acquiring large new traveler cohorts, given the attractive size of the market opportunity and our track record of converting new travelers to repeat travelers over time. We will do so with a disciplined approach, responding to the quality of traffic we observe, and remain flexible as we move through the year. Adjusted EBITDA advised towards 15 million, or 9% of revenue, a significant margin improvement year-over-year, largely due to the profitability flow-through from the aforementioned GBV mix in the quarter. As we have discussed on prior calls, Viator's profitability is impacted by the size and mix of new traveler acquisition. As future growth becomes increasingly driven by repeat bookers, we expect to see attractive and sustainable margin flow through driven by these large and growing repeat cohorts. At the fork, Q4 revenue was 39 million, reflecting growth of 18% and 10% on a constant currency basis. Revenue growth is driven by a balanced mix of both volume and pricing. Adjusted EBITDA was breakeven in the quarter, an improvement of $15 million year-over-year, which was driven by continued focus on improving unit economics on both the supply and demand side of the marketplace and prudent cost control. We are very pleased with the work the teams have done over the year to position this segment for profitable growth in 2024. Now turning to consolidated expenses for the quarter. Cost of revenue delevered modestly due to increased direct costs related to certain media campaigns and cloud migration related expenses at BrandtribAdvisor, as well as the increased mix of Viator-related costs as a percent of consolidated revenue. Sales and marketing costs as a percent of revenue were approximately 900 basis points lower, driven by more efficient marketing spend across each brand, most notably at BrandtribAdvisor and The Fork, as well as lower people costs across the brands. Technology and content costs as a percent of revenue were flat as investments in data and engineering resources in Branch TripAdvisor and Vientor remained in line with revenue growth. G&A expenses as a percent of revenue were approximately 400 basis points lower as a result of the cost savings actions we implemented at Branch TripAdvisor and The Fork, as well as the $8 million loss incurred in Q4 of 2024 related to a targeted payment fraud scheme which did not reoccur in 2023 and accounted for half of the year-over-year leverage. During the quarter, we also incurred approximately $4 million in restructuring expenses related to the previously announced actions we implemented at both Branch Reprovisor and The Fork. Now onto our cash and liquidity position. Operating cash flow was a deficit of $19 million, and free cash flow was a deficit of $35 million, driven by normal seasonal trends in deferred merchant payables at Viator. During the quarter, we repurchased approximately 1.3 million shares at an average cost of $18.85 per share, totaling approximately $25 million under our current share repurchase program. Turning now to our full year performance. Consolidated revenue grew 20% to $1.8 billion. As a reminder, year-over-year growth in the first quarter of the year benefited from an easier comparable. On a segment basis, brand TripAdvisor grew 7% to $1 billion, while Viator grew 49% to to $737 million, and the fork grew 22% to $154 million. Consolidated adjusted EBITDA for the full year was $334 million, or 19% of revenue, or 100 basis points lower than 22 adjusted EBITDA margin. Sales and marketing and G&A costs as a percent of revenue were flat, while cost of revenue and technology and content slightly increased as a percent of revenue. Turning to segment EBITDA for the year, Brand Trip Advisor delivered $348 million into adjusted EBITDA, or 34% of revenue. For the year, a combination of investment in data and engineering headcount, higher costs of revenue in media and advertising, and higher cloud migration costs as a percent of revenue drove the approximately 200-base point decline year-over-year. Viator adjusted EBITDA was break-even for the full year, which was a 200-base point improvement from last year, with increased leverage from people costs and direct marketing costs, which includes both traffic and brand. Finally, at the fork, we saw a significant EBITDA improvement in 2023, moving to a loss of $14 million versus a loss of $39 million in 2022. The largest driver of this improvement was in sales and marketing, with lower spend in performance and brand marketing, as well as increased leverage from sales headcount. This was especially impressive given the COVID subsidy benefit of $11 million received in 2022. Total operating cash flow for the year was $235 million, and free cash flow was $172 million. We repurchased a total of 6 million shares this year at an average price of $16.51, totaling $100 million. In light of the announcement earlier this week, for the time being, we've suspended our share purchase program. We ended the quarter and year with approximately $1.1 billion in cash and equivalents. As we discussed throughout the year, Fiscal 23 operating cash flow and free cash flow were impacted by a net cash outflow of 64 million related to our previously disclosed settlements with the IRS for income tax returns for the years 2009 through 2011. In 2024, we expect a net cash outflow of approximately 80 to 130 million related to the settlement for the years 2014 to 2016, resulting in an estimated increase in tax expense of approximately $30 million to $60 million, which we'll take in Q1. Now onto thoughts for 2024. In light of the formation of the Special Committee and evaluation of potential alternatives, we will not be providing a detailed outlook on this call. However, we will provide a framework as to how we are thinking about our priorities for the year. We will continue to invest and operate the brands in a way that strengthens and builds their long-term sustainable competitive advantage. We will do this against a backdrop of what we believe to be a healthy travel market, although we expect to see some normalization across travel this year versus last year. As such, we expect to see some tougher comparisons this year, particularly in Q1, where we expect to see the lowest growth quarter of the year across the segments. At Branch TripAdvisor, our priority is the long-term diversification of the portfolio. As we have said since launching our new strategy last year, we expect this to be a multi-year transformation supporting sustainable future revenue and profit growth. We are aiming for stable revenue dollars for the year while continuing to maintain flexibility for investment in our transformation. At Viator, our financial profile will reflect a balance between growth, profitability, and market share gains. Combined with some normalization of travel growth, we expect a step down in revenue growth for the year relative to where we exited 2023. We continue to expect Viator to be profitable for the full year. At the fork, we expect much of the groundwork we laid in 2023 will benefit us in 2024 as we continue to operate with more leverage and efficiency. Our balanced growth and profitability strategy is expected to result in a step down in growth from 2023 levels, but achieve full year profitability. With that, I'd like to turn the call back over to the operator and begin Q&A.
spk02: Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment for questions. Our first question comes from Ben Miller with Goldman Sachs. You may proceed.
spk04: Thanks so much for taking the question. We've talked a lot about the importance of mobile and app-based logged-in users. Anything you can share just on the top of funnel traffic and engagement you're seeing from that cohort and anything on conversion of non-apps, non-logged in members to members? Thanks.
spk10: So obviously each of our segments, Ben, thanks for the question, has a different combination. I mentioned that 75% at the fork are booking with us on the mobile app. Of course, you know, we put a real focus on the app at Viator and are seeing increasing size of those audiences and they're engaging further. We're putting this focus on TripAdvisor in a way that we really haven't in a while. I think I mentioned on one of our calls previously that we had refreshed the tech stack. It was modern and ready to go. And really, as we think about shifting to a mobile-first approach, You know, we want that app to be an indispensable experience for travelers. And the way that we're going to do this is we're going to make sure we give good incentives to sign in and log in, which is something that, you know, we've already done at scale. We have more than 130 million members. And then to convert them to download the app and engage there. And so what will wind up happening is, you know, they'll wind up spending time in the app. It'll feel like a closed experience where you can leverage AI to understand what your opportunities are as you're planning and what's around you when you're in destination. We think that'll drive meaningful engagement. And then, of course, we will focus on how that converts through the funnel. You know, those numbers, I don't think we put mobile app users out publicly in the past, so I don't intend to do that here. But we think that when you look at the overall percentage of our total audience, there is significant headroom to drive people into the app. And then we think that once they're in the app, we know that the value to us is many, many multiples of what they would be in a web-based experience. So I think, you know, without disclosing further detail that we haven't done in the past, I think you get a sense that our strategy across the board is to drive direct users into the app, engage them deeply, give them an experience that not only is trusted, high quality, but then when they go and have that experience in the real world, it's only natural to come back to the app and, of course, pay it forward to other travelers by sharing their experience. Thanks so much.
spk02: Thank you. One moment for questions. Our next question comes from the VEDCON with B. Riley Securities. You may proceed.
spk05: Yeah, thanks a lot. Maybe just a high-level question for you, Matt. How does the formation of a special committee by the board affect timing for a potential spinoff of Viator? And then, secondarily, maybe just on Viator margins for 2024, how should we think about the scope for improvement there? Should we look at Q4 as a proxy in terms of the year-on-year gain and how that might continue into 2024? Or just give us your high-level thoughts there. Thank you.
spk10: Yeah, thanks, Naved. Appreciate the question. I'll take the first, and I know Mike will take the second. You know, since I joined the company, of course, this notion of a spinoff of Viator has just not been something that we've spent a lot of time and energy on, given the markets that we've been in. We've been focused on the business, and I think You can see that our focus on the traveler, the experiences they have with us, and the way that our product delivers over and over for them again has really shown itself to prove out in the results that we've seen to date. And that remains true. We're totally focused on the business. The announcement this week doesn't change that. I'm focused on moving things forward and focused on our strategies, which I think are clear and really delivering. And I know that our teams are doing the same.
spk09: Mike? Yeah. Hey, Nived. On your second question, you know, again, avoiding kind of specific guidance as for my earlier commentary, you know, listen, I think we, and this is a statement we've made consistently in the past, you know, we are, I think, on a path to seeing Viator move in the direction of its long-term potential margins, right, which we've talked about. I'm not going to peg next year to, you know, what we're thinking and what happened in Q4, other than to say that's the broad trajectory we'd expect the business to pursue. Secondly, I would say, and this is reflected in some of my comments, you know, we're going to be thoughtful as we think about this. We're going to be prudent and disciplined as we think about our marketing investment. You know, that means we want to pursue high quality traffic. that means we're not going to pursue lower crowd traffic, right? So, you know, really have a disciplined approach and be nimble as we move through the year. So, again, I would just say we want this business to be on that trajectory, on that arc for what we believe, you know, achieving long-term margin potential over the near term.
spk05: Okay. Thank you, Matt. Thank you, Mike. Thanks, Tibet. Tibet.
spk02: Thank you. One moment for questions. Our next question comes from Richard Clark with Bernstein. You may proceed.
spk01: Good morning. Thanks for taking my questions. If I can maybe just ask that previous question in a slightly different way. If I look at Q4 at Viator, you made $34 million of additional revenue year on year. $18 million of additional EBITDA. So that's like a contribution margin of 53%. I mean, is that what's achievable on growth? Or is there anything else that's gone into that big improvement? Is that now the unit economics? And then maybe just secondly, I guess Expedia last week talking about leaning back in and maybe spending a bit more on marketing. Are you seeing any benefit of that? Is any of that flowing through to TripAdvisor?
spk09: Great. Thanks, Richard. I'll take those direct. I think I heard the last question is a little light, but we can come back to that in a sec. So just on Q4, let's be clear. Q4 was a tough quarter from a macro perspective. We have a lot of things kind of happening, as we said, with the Mideast conflict. Certainly brought some headwinds to the market. We also were very much disciplined in terms of thinking about how we want to acquire new users and getting back to the comment I just made, really targeting high-quality traffic and being maybe a bit more discerning. So both those impacts really affected new user growth. And so you saw really come through, I think, the power of the model, which is large repeat cohorts more prominently providing revenue there. So I think Q4 was a bit more of, and I'll also point to Richard, we had revenue of 27% growth, but GBV growth was 20, right? So there was a difference there and some timing, rev rec timing differences there that you should just maybe just read through that incremental margin. But it's really more of an impact of, you know, we saw the flow-through from, you know, lower new user acquisition due to some of the macro and marketing discipline we had in the quarter versus the flow-through of EBITDA from the repeat cohorts. And the second question... It was around Expedia, and maybe I'll lead off.
spk10: Look, we obviously don't comment on particular participants in the auction, but Clearly, the bidding dynamics are healthy. I've said in the past we take those relationships quite seriously, and so we spend a lot of time working with our partners to make sure that we are optimizing the way that we can deliver for their marketing objectives. And I think, you know, as Expedia makes an announcement like that and others respond, I think you can expect that that's something we will look to take advantage of. But the bidding dynamics are healthy.
spk01: Okay, very clear. Thank you.
spk02: Thank you. One moment for questions. Our next question comes from Doug Enmuth with J.P. Morgan. You may proceed.
spk11: Hey, this is Davey. Thanks for taking the questions. I have two. First one, I think Mike, you said you're expecting stable revenue dollars at brand trip. If that's true, could you talk about what's affecting that outlook? And then secondly, You guys saw very strong leverage out of sales and marketing in 4Q, and it sounds like you face greater emphasis on higher-value users. I'm wondering if there's anything else to call out on that marketing efficiency in 4Q? I'm looking ahead to 2024. Should we expect marketing to be a source of leverage?
spk09: Yeah, you broke up a little bit. Let me try to parse through it. I think your first question was around stable revenue at core. You know, again, I wasn't sure what your specific question was. I would just say that we want to stay away and are staying away from specific guidance, and we want to be, you know, give you some view of the shape of how we're thinking about the year, but did want to stay away from any specific guidance due to the recent announcements.
spk10: Secondly... The only color I would give on that to you, Doug, is that you can imagine we've talked from the beginning about a multi-year a strategy to transform a business. And when you do that, you're focusing on diversifying your revenues. And I think we are very pleased with how that diversification is going. I tried to reinforce that in my comments up front. You know, we see replacement dollars from categories that are growing very quickly. And of course, we're all familiar with, you know, the secular challenges in some of our revenue streams. So, you know, when you balance all that, that sort of comes together in that kind of a shape. It's what we expected. and we feel like we're making really good progress. And the second question was around marketing dollars and whether we'll see if I can you repeat that? Why don't you repeat the second question because I'm not sure we got that one.
spk11: Yeah, sorry. Second one was on marketing leverage that you saw in 4Q. It sounds like you guys place greater emphasis on higher value users, but wondering if there's anything else to call out on the efficiency you saw in 4Q and if we should expect marketing to be a source of leverage in 2024.
spk09: And again, are you referring to Viator in your comment? Or in total?
spk11: I mean, total sales and marketing, you guys saw very strong leverage, and it sounds like you guys saw that both across Brand Trip and Viator.
spk09: Yeah, got it.
spk11: Across both platforms.
spk09: Yeah, yeah. So just unpack on both platforms. I think the You know, the leverage is really across Brand TripAdvisor and Viator. I already talked about Viator on the last answer. You know, at Brand TripAdvisor, we just saw a very healthy free channel mix in the quarter. That very much impacts that leverage result. You know, just credit to the teams at Brand TripAdvisor who really work every day on optimizing all our channels, but particularly on the free channels, whether it's CRM, SEO, or other direct channels. We continue to see good results there. We saw a nice pricing versus our expectations and certainly good pricing on a year-over-year basis. That certainly was the driving factor at Brand TripAdvisor. All the teams are focused on how we continue to drive that forward. As you know, when you think about that, that was in both, just to clarify, that was in both hotel meta as well as our experiences business. These are things that the teams will continue to drive into next year. Very dynamic markets, both in the free and paid markets, particularly with how we advertise in the paid markets as well as in the free channels. But they will be working hard to, you know, continue to advance the ball next year.
spk10: And, Doug, I just want to say, you know, marketing is an area that we put a lot of focus and attention on in 2023. And I think it is becoming an increasing source of strength for us. You know, we are at each business thinking about how to leverage basically the full funnel of marketing approach. And so at TripAdvisor, we'll be able to adapt that to really back our engagement-led strategy. by being more up and down the funnel and being more targeted, leveraging data in our marketing like never before because of our data investments. Obviously, Viator had spent some time in 2022 really getting their cross-channel and fuller funnel approach going, and that is continuing to gain traction and will continue to be optimized and I think really serve that business as it continues to scale and drive leverage. And then at the fork, we are very focused on the marketing we want to do across all of our priority markets and thinking about how and when do we focus on new and really leaning into repeat this year and thinking more about being prudent about some of the awareness stuff that we used to do in the past everywhere and really focusing on priority markets. So I think what you're seeing is just a much sharper, more strategic, data-driven approach to the full funnel for each segment. And it's going to deliver.
spk11: Thank you.
spk02: Thank you. One moment for questions. Our next question comes from James Lee with Mizuho. You may proceed.
spk00: Great. Thanks for taking my questions. Two over here. First on media and advertising business. And you seem to have a pretty good position given the size of your audience here. Can you talk about the investment you're making in tech stack that will make your product even more engaging? And second, app user experience. I think historically, you guys were looking to reduce the number of steps to get to conversion. And can you talk about the progress on that, please? Thanks.
spk10: Okay, thank you, Ian. I'll take the first, and then I think Mike will take the second. So the media and advertising part of our business is one that, you know, we obviously have a fantastic high-intent audience. And it's highly qualified, and it's contextually relevant, and it's interested in travel. And that audience is interesting both for endemic and non-endemic advertisers. And I think over the years, it's really been a siloed business. It's existed on its own, and it's been in maybe competition with other areas of the product. Our opportunity, of course, is to integrate that opportunity more holistically into the overall experience and come up with solutions that are not only great for advertisers and partners, but can be part of the traveler experience that's valued. Now, the media and advertising business had a good year in 2023. I think overall 2012 or 13% growth, which I think was strong by category standards and even stronger when you consider that much of that growth is coming from formats where we have constraints. It's mostly display. We're not as deep as we can and will be in a few categories like video and mobile and social. But it's also an area that's going to benefit from our engagement-led approach and our investment in data. So, you know, over time, we have not prioritized big, meaningful, significant investments in media and advertising in 2023. And that's an area that we are focusing on as we think about what are the formats that we want to deliver for the future. How do we think about the way that we want to serve advertisers in new and unique ways? What's the difference between an enterprise client and a small, medium-sized client? And our goal is to get efficiency in our go-to-market, productivity in our sales organizations, and an integrated offering that I think will drive meaningful, bigger, longer deals that are really focused on the value of this audience. And we saw some good traction in 23, and I think we're going to continue to lean into that for 24.
spk09: Yeah, and then your question on kind of user experience and conversion, you know, it's a broad question, and it cuts across a lot of our brands, primarily at Brand Trip Advisor and Viator. You know, Brand Trip Advisor, we're really excited about some of the strategy work we've been working on this year, particularly as it relates to data, personalization. I know you've heard us talk about this for some time, but really the ability, I think, to impact both our hotel meta and our experiences business at Brand Trip Advisor. Making sure that we are targeting the right people with the right ad or supply for hotel meta. That has very definitive conversion impacts. We're excited about what we've seen there. And we've done so much funnel work on the experiences product at Branch Trip Advisor, right? And as you know, we continue to experiment with how to optimize that user experience in that funnel. And there's a lot of shared learnings between the Viator teams and the Branch Trip Advisor teams. And at Viator, you know, funnel optimization is core what they do. We had You know, very solid conversion gains this year. Very proud of the teams and the work they put in there. That goes to everything from getting the right supply, and we do have the largest supply base in the experiences market. You know, using data to get the right supply to offer when the person comes and visits us. So making sure we were presenting the right type of supply and supply diversity. at the right price and making it seamless really to get to book. And that's really what the teams were all about. And we're excited about other things we're working on this year. Matt mentioned loyalty program at Viator. These are all things we think that are really going to enhance those conversion benefits. So a lot of progress has been made across the teams. We think there's more progress to be had and are excited about it. Thank you.
spk02: Thank you. One moment for questions. Our next question comes from Jed Kelly with Oppenheimer. You may proceed.
spk06: Hey, great. Thanks for taking my questions. Can you just talk about the competition you're seeing in performance marketing channels with some of your competitors, both with Viator and with Core Trip Advisor? Seems like some of your competitors recently have indicated they're still going to spend a lot going into 24. Thank you. Yep.
spk09: Yeah, Jed. So I'd say, as you know, these markets are extremely competitive, different competitors in different areas. Viator, the experience of space is a competitive one. You do have a broad competitive dynamics in the paid channels. Obviously, there's a few operators that are larger and more at scale that tend to show up in those pay channels more regularly. But you still have a pretty broad kind of long tail of others that are bidding in that market. Fewer so that are in the brand campaigns. Again, those are more of the scaled operators and experiences that are actually marketing and branding very specific to the experiences. We would assume that would continue. And that's where we, again, getting back to being disciplined about our acquisition, you know, make sure we're using our dollars wisely to, you know, users that we think will convert. But not just convert, we'll come back. And that's the key, as you know, we've said for some time to how we think about the economic model. At Brandtrip Advisor, you know, when you think about primarily hotel meta, you know, that is, you know, very competitive. marketplace. And you think about where we are competing against in the pay channels are, you know, all the players you would imagine in the hotel ecosystem. And, you know, that's why, again, we have to be very disciplined in our approach. We've been very disciplined by, as we've said many times, maintaining our marketing ROASs. We are excited about the investments that Matt really alluded to in his prepared remarks around thinking about using data and personalization around, again, acquiring the right type of user that we believe can really convert not just convert, but actually have a sustainability and an LTB to it, right, that we believe can, you know, get to the app, we believe can get to some of the goodness that Matt talked about that we see in our app ecosystem and are starting to really think about how we use our data to acquire those right users that have those attributes and promote that behavior. So we're excited about where that can lead us this year. And, again, we'll continue to be nimble as we move through the year on both areas. Thank you.
spk07: thank you one moment for questions our next question comes from brian fitzgerald with wells fargo you may proceed thanks guys uh a quick follow-up on viator a nice quarter fx neutral growth 25 um can you talk a little bit about you talked about the competition in and it being a competitive space is is that sequential decel there is it a factor of um that consumer demand, or is it this competition you talked to, or is it really, it sounded like from the main call, it's just a normalization of pent-up demand in prior periods. So if you could kind of parse out, hey, it's consumer demand on macro, hey, it's competition, hey, it's normalization, hey, it's one-third of each of those. And then experiences in dining revenue on brand trip, was up 12% year-over-year, so we're seeing nice growth there. How much runway is there, and how would you assess your ability to cross-sell inventory across the travel and dining and experiences? Is there more runway to drive experiences and dining out of Brandtrip? Thanks.
spk09: Yep, great. I'll take the first one. Matt, take second. Yeah, so when you think about, and I think the question is really around Q4 decel, I think it's really two big areas, right? One, it's really, as we said, a slowdown in new bookings. And that is really driven by two things. One, macro. There was a lot of volatility in the quarter, and it just, you know, there was a dampening of demand as we came out of some of that volatility. You know, two, you know, we are going to be, and have said, be thoughtful, very thoughtful about acquiring the right type of, right type of user, and we're very careful about our marketing spend in the quarter. And then secondly, I would say, you know, we are lapping, when you think about the funnel, we're lapping some, you know, prices and margin impacts that have helped revenue, right, through the year in 2023. And these are things that, as we look forward, you wouldn't expect would be as a bigger contributor to revenue. So when you think about that, you know, if we had a kind of a new user demand was a little bit lower because of some of the macro and the things we said, you know, yes, I think that you would have a knock-on effect as you move into the new year. But, you know, we feel pretty good about where we are in the position that we have you know, kind of where we're starting the year. But, yeah, that would be a factual statement. So, second question.
spk10: Yeah, thanks. I love the question about the experiences opportunity. And, you know, you talk about experiences in dining. Really, experience is proving out what we've talked about as being able to diversify TripAdvisor and take advantage of marketplace economics, and really think about how to match supply and demand. And so the 180 million incremental experienced shoppers that I mentioned is an example of that. Really understanding why our audience comes to our site, and when we have that kind of scale, being thoughtful about how we leverage data, understanding identity, and really leading them on the path that they are there to transact on or search for that next opportunity. And so, you know, that's going to drive, I think, meaningful upside. Now, today, we've proven it out largely through the relationship with Viator. And we're really excited because TripAdvisor offers this really broad guidance platform. And of course, Viator offers this, you know, deep well of opportunities, you know, deeper than anywhere else you can find. And being able to bring those two together has driven tremendous growth. And we are finding new and different ways for those two businesses to work together to really drive that growth. But at TripAdvisor, there is an opportunity to bring in more inventory, to think about matching by geography, by category, and maybe even categories that Viator doesn't represent today that we can find elsewhere is something we can do. And that will drive significant upside for a long time to come. I also think you're right. As we think about engaging our highest value audience as members and increasingly on our mobile app, the cross-sell of wanting to do a full itinerary, starting with generative AI and identifying that thing that is most relevant and being able to make it happen right there in the app gives us tremendous cross-sell opportunities and the opportunity to create tremendous value through that relationship. As I said, I think over the last year, we've articulated this from the start. Quarter by quarter, we've said what we've done in product, the proof points, the indicators that that engagement can happen. And I think you are seeing the emerging view of what this strategy can do to drive the diversification of TripAdvisor. So thanks for the question. We're real excited about it.
spk07: And if I could real quickly as a follow-up, because you both mentioned, hey, we're using data and AI to pursue high-quality versus low-quality traffic. And so we're informing ourselves in that regard. And And then, Matt, you just mentioned, hey, we're using data to better match and to cross-sell. Could you really quickly assess your current strength or how much runway we have in terms of, hey, we're in early days of taking data and applying it to both optimize our CAC or optimize our matching? Where are we on the spectrum of, hey, we've still got a lot of data that we're not bringing to bear yet?
spk10: Yeah, I mean, it's early days. Remember, when I first arrived, it was when we articulated the vision that we could do more with data. We proceeded to put a unified group data platform in place. We flowed all of our data into that. It now has over 3 billion profiles. And then we created the opportunity and the tools for all of the segments to leverage that data with the appropriate governance and privacy. to begin to target. So it's very early innings there. And we are using that same data asset and all, you know, it's not only identity, it's behavioral data, it's clickstream data, it's the booking data where we have it. We have the ability to bring on second-party data now that we didn't have before and, of course, append third-party data. So we are beginning to get a data stack with the appropriate marketing tech tools to begin to target and to begin to use that in all areas of our product development and really That's what allowed us to move quickly on putting AI at the center of it. Because if you have a brand of our size and you have a set of content data and first-party behavioral data with your audience, you can create more relevance, more personalization. But it is early. These are not things that you do immediately overnight. These are things that stack quarter by quarter, and we're in that process of stacking. So I think you'll see us continue to progress that over time.
spk02: Awesome. Appreciate it. Thank you. One moment for questions. Our next question comes from Trevor Young with Barclays. You may proceed.
spk08: Great. Thanks. Just on Viator, what are the two or three hurdles that keep new customers from coming back? And what steps are you doing to kind of retain those customers and get them to start behaving more like those repeat customers with more items per trip and higher price per item? Is it those efforts to just try to distill down to those higher quality customers day one? Is it going to be the loyalty program? Is it expanding the supply and better surfacing the right supply like you mentioned a couple minutes ago?
spk10: Yeah, look, thanks for the question. I think Viator was on to this very early. The single biggest hurdle is that most of this transacting still happens offline. And so there's an awareness that the category exists. When we talk to travelers, You know, almost all of them would love to book a great, relevant experience easily online. And then like three quarters of those don't even realize that the category exists. So, you know, we're excited about the awareness that is rising for the category in general. And, you know, I think, you know, we're excited that Viator is getting attached to it as we've really leaned into that. You know, the second thing is probably just giving them a really easy, smooth experience that works. And the Viator team has been on top of this. They've been focused on scaling their customer base, making the very first end-to-end booking a trusted, valuable experience with a reason to return, creating the kinds of tools and relevance that make it a habit to come back to Viator, and then, of course, on the other side, making sure that they create real value for operators through strategic programs. We get excited when our operator counts are the largest in the industry and, you know, we have multiples more product represented on our category. Because if we can figure out the sort and have the right data to match to somebody's interest, that just means we're going to do a better job and ultimately be the default choice not only for our partners but also for consumers.
spk08: That's helpful. Thank you.
spk02: Thank you. I would now like to turn the call back over to Matt Goldberg for any closing remarks.
spk10: Thank you, and thanks again to everyone for joining us today. We made great progress in 2023. Our talented teams are focused on executing on clear strategies for 2024, and we look forward to the next update. Thank you.
spk02: Thank you for your participation.
spk10: You may now disconnect.
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