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SEC Filings

TRIVAGO N.V. filed this Form 20-F on 03/06/2018
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regularly compete with our advertisers on these marketing channels and adjust our spending on those channels based on trends we see in our results. If changes in large advertisers’ strategies on our marketplace cause us to spend significantly less on these marketing channels, and we generate fewer qualified referrals as a result, our revenue and results of operations could be adversely affected. In addition, such advertisers could also experience improvements in their competitiveness on such channels, providing them with additional financial benefits from pursuing such a strategy.
If we are unable to increase the diversity of our advertiser base, we will continue to be subject to the risks that advertiser concentration can lead to the adverse effects described above. The manifestation of any of these risks is likely to have a material adverse effect on our business, financial position and results of operations.
We are subject to a number of factors that contribute to significant quarter-to-quarter volatility in our financial condition and results of operations. These factors have impacted and may continue to negatively impact our ability to meet the financial guidance that we communicate to the market.
Our financial condition and results of operations have varied and may continue to vary considerably from quarter to quarter. This was reflected in the rapid slowdown in revenue growth that we experienced in the second half of 2017. The magnitude of the fluctuations in our financial results can be influenced, as mentioned above, by the fact that a large portion of our revenue is concentrated in referral revenue generated from brands affiliated with Expedia and Booking Holdings. This concentration means that changes in these advertisers' strategies on our marketplace can have material impacts on our referral revenue in a given financial period. Changes in referral revenue resulting from dynamics on our marketplace, whether or not relating to our largest advertisers, can occur with little or no notice to us, and can result in our not having enough time to pull back our advertising spend, particularly on television, quickly enough to respond to the speed of the change in revenue levels. As we spend the great majority of our revenues on advertising, such a failure to pull back advertising spend quickly enough can have a rapid adverse effect on our results of operations.
The difficulty of predicting advertiser behavior and outcomes on our marketplace make it challenging for us to forecast advertiser demand, especially since our advertisers can and often do change their CPC bid levels with little or no notice to us. In addition, nearly all of our agreements with OTAs, hotel chains and independent hotels may be terminated at will or upon three to seven days’ prior notice by either party. As a result, the financial guidance that we provide is subject to significant uncertainty, especially when the factors above are considered together with other trends, such as changing foreign exchange rates, user demand for travel services, regional and global economic conditions and other external factors that may impact our users’ discretionary spending. These fluctuations and any resulting inability to meet financial guidance may have a material adverse effect on our business, results of operations, financial condition and prospects.
As our business matures, we may not be able to grow our revenue in future periods at rates comparable to those in the past.
Our revenue in 2017 grew by 37% compared to 2016, which represented a significant slowdown compared to revenue growth of 53% in 2016 versus 2015. Although we have communicated that we expect to return to a positive trajectory in terms of our rate of revenue growth in the second half of 2018, we may not be able to increase our revenue in future periods at rates comparable to those in the past, or our revenue may decline. This may occur for any number of reasons, particularly as our business matures, and may reflect:
the possibility that our advertisers prioritize profitability over traffic growth;
declines in the emphasis that our advertisers wish to place on hotel metasearch as an advertising channel, particularly as we increasingly compete with them for traffic on other advertising channels, including on television and in auctions for search engine keywords (including bidding for trivago-related keywords);
possible reductions in the marginal returns from our advertising spend reflecting changes in the effectiveness of our advertising over time, and our brand awareness in light of the strategies of our competitors as they may choose to increase their advertising spend;