NOTE 12: SEGMENT INFORMATION

Our reporting structure includes two reportable segments: Hotel and Non-Hotel.

Hotel

Our Hotel segment includes revenue generated from the following sources:

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TripAdvisor-branded Click-based and Transaction Revenue. Our largest source of Hotel segment revenue is generated from click-based advertising on TripAdvisor-branded websites, which is primarily comprised of contextually-relevant booking links to our partners’ sites. Our click-based advertising partners are predominantly online travel agencies, or OTAs, and direct suppliers in the hotel product category. Click-based advertising is generally priced on a cost-per-click, or “CPC”, basis, with payments from advertisers determined by the number of users who click on a link multiplied by the price that partner is willing to pay for that click, or hotel shopper lead. CPC rates are determined in a dynamic, competitive auction process that enables our partners to use our proprietary, automated bidding system to submit CPC bids to have their hotel rates and availability listed on our site. Transaction revenue is generated from our instant booking feature, which enables the merchant of record, generally an OTA or hotel partner, to pay a commission to TripAdvisor for a user that completes a hotel reservation on our website.

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TripAdvisor-branded Display-based Advertising and Subscription Revenue. Advertising partners can promote their brands in a contextually-relevant manner through a variety of display-based advertising placements on our websites. Our display-based advertising clients are predominately direct suppliers of hotels, airlines and cruises, as well as destination marketing organizations. We also accept display-based advertising from OTAs and attractions, as well as advertisers from non-travel categories. Display-based advertising is sold predominantly on a cost per thousand impressions, or CPM, basis. Subscription-based advertising is offered to hotels, B&Bs and other specialty lodging properties. This advertising product is sold for a flat fee and enables subscribers to list, for a contracted period of time, a website URL, email address and phone number on our TripAdvisor-branded websites, as well as to post special offers for travelers.

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Other Hotel Revenue. Our other hotel revenue primarily includes revenue from non-TripAdvisor branded websites, such as smartertravel.com, independenttraveler.com, and bookingbuddy.com, which includes click-based advertising revenue, display-based advertising revenue, hotel room reservations sold through these websites, and advertising revenue from making cruise reservations available for price comparison and booking.

Non-Hotel

Our Non-Hotel segment consists of the aggregation of three operating segments, our Attractions, Restaurants and Vacation Rentals businesses.

Attractions. We provide information and services for users to research and book activities and attractions in popular travel destinations through our dedicated Attractions business, Viator, as well as on our TripAdvisor website and applications. We generate revenue by charging the operators a commission for each transaction we facilitate through our online reservation systems. In addition to its consumer-direct business, Viator also powers activity and attractions booking capabilities to its affiliate partners, including some of the world’s top airlines, hotel chains and online and offline travel agencies. Viator’s bookable inventory is available on www.viator.com as well as TripAdvisor-branded websites and mobile applications.

Restaurants. We provide information and services for users to research and book restaurants in popular travel destinations through our dedicated restaurant reservations business, TheFork, as well as on our TripAdvisor website and applications. TheFork is an online restaurant booking platform operating on a number of sites (including www.lafourchette.com, www.eltenedor.com, www.iens.nl, www.besttables.com, www.dimmi.com.au, and www.en.couverts.nl), with a network of restaurant partners primarily across Europe and Australia. We generate revenue by charging our restaurant partners a fee for each restaurant guest, or seated diner, that we facilitate through our online reservation systems. TheFork also provides flexible online booking and a premium data and analytics tool, for which the restaurant owner pays a subscription fee. TheFork’s bookable inventory is also available on TripAdvisor-branded websites and mobile applications.

Vacation Rentals. We provide information and services for users to research and book vacation and short-term rental properties, including full home rentals, condominiums, villas, beach rentals, cabins and cottages. The Vacation Rentals business generates revenue by offering individual property owners and property managers, the ability to list their properties on our websites and mobile applications through a free-to-list, commission-based option, and to a lesser extent, an annual subscription-based fee structure. These properties are listed on a number of platforms, including www.flipkey.com, www.holidaylettings.co.uk, www.housetrip.com, www.niumba.com, and www.vacationhomerentals.com, as well as on our TripAdvisor-branded websites.

Our operating segments are determined based on how our chief operating decision maker manages our business, regularly assesses information and evaluates performance for operating decision-making purposes, including allocation of resources. The chief operating decision maker for the Company is our Chief Executive Officer. Our chief operating decision maker is also our Hotel segment manager. Each Non-Hotel operating segment has a segment manager who is directly accountable to and maintains regular contact with our chief operating decision maker to discuss operating activities, financial results, forecasts, and plans for the segment.

Adjusted EBITDA is our segment profit measure and a key measure used by our management and board of directors to understand and evaluate the operating performance of our business and on which internal budgets and forecasts are based and approved. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. We define Adjusted EBITDA as net income (loss) plus: (1) provision for income taxes; (2) other income (expense), net; (3) depreciation of property and equipment, including amortization of internal use software and website development; (4) amortization of intangible assets; (5) stock-based compensation and other stock-settled obligations; (6) goodwill, long-lived asset and intangible asset impairments; and (7) non-recurring expenses and income.

The following tables present our segment information for the three and six months ended June 30, 2017 and 2016, and include a reconciliation of Adjusted EBITDA to Net Income. We record depreciation of property and equipment, including amortization of internal-use software and website development, amortization of intangible assets, stock-based compensation and other stock-settled obligations, other income (expense), net, other non-recurring expenses and income, net, and income taxes, which are excluded from segment operating performance, in corporate and unallocated. In addition, we do not report our assets, capital expenditures and related depreciation expense by segment as our chief operating decision maker does not evaluate operating segments using this information. We also do not regularly provide such information by segment to our chief operating decision maker. Intersegment revenue is not material and, in addition, already eliminated in the information by segment provided to our chief operating decision maker. Our consolidated general and administrative expenses, excluding stock-based compensation costs, are shared by all operating segments. Each operating segment receives an allocated charge based on the segment’s percentage of the Company’s total personnel costs.

	Three months ended June 30, 2017
	Hotel		Non-Hotel		Corporate and Unallocated			Total
	(in millions)
Revenue	$	326	$	98	$	-		$	424
Adjusted EBITDA (1)	84			17		-			101
Depreciation						(19	)		(19	)
Amortization of intangible assets						(8	)		(8	)
Stock-based compensation						(28	)		(28	)
Operating income (loss)									46
Other expense, net									(2	)
Income before income taxes									44
Provision for income taxes									(17	)
Net income								$	27

	Three months ended June 30, 2016
	Hotel		Non-Hotel			Corporate and Unallocated			Total
	(in millions)
Revenue	$	316	$	75		$	-		$	391
Adjusted EBITDA (2)	105			(10	)		-			95
Depreciation							(17	)		(17	)
Amortization of intangible assets							(8	)		(8	)
Stock-based compensation							(23	)		(23	)
Operating income (loss)										47
Other expense, net										(3	)
Income before income taxes										44
Provision for income taxes										(10	)
Net income									$	34

	Six months ended June 30, 2017
	Hotel		Non-Hotel		Corporate and Unallocated			Total
	(in millions)
Revenue	$	640	$	156	$	-		$	796
Adjusted EBITDA (1)	172			2		-			174
Depreciation						(38	)		(38	)
Amortization of intangible assets						(16	)		(16	)
Stock-based compensation						(47	)		(47	)
Operating income (loss)									73
Other expense, net									(4	)
Income before income taxes									69
Provision for income taxes									(29	)
Net income								$	40

	Six months ended June 30, 2016
	Hotel		Non-Hotel			Corporate and Unallocated			Total
	(in millions)
Revenue	$	619	$	124		$	-		$	743
Adjusted EBITDA (2)	211			(31	)		-			180
Depreciation							(33	)		(33	)
Amortization of intangible assets							(15	)		(15	)
Stock-based compensation							(43	)		(43	)
Operating income (loss)										89
Other expense, net										(6	)
Income before income taxes										83
Provision for income taxes										(19	)
Net income									$	64




(1) (2)	Includes allocated general and administrative expenses in our Hotel segment of $20 million and $38 million; and in our Non-Hotel segment of $10 million and $19 million for the three and six months ended June 30, 2017, respectively. Includes allocated general and administrative expenses in our Hotel segment of $19 million and $41 million; and in our Non-Hotel segment of $9 million and $18 million for the three and six months ended June 30, 2016, respectively.