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SEC Filings

TRIVAGO N.V. filed this Form 20-F on 03/06/2018
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The measures we are implementing that are designed to maximize the lifetime value of the user may not generate the long-term financial benefits that we anticipate.
We are implementing initiatives that are designed to focus less on revenue generated in each user session and more on the end-to-end booking value of our users. These initiatives are intended to help us increase booking conversion rates, revenue per qualified referral and, ultimately, we believe, our financial performance over the long term. However, these changes may have an adverse effect on revenue and/or profitability in the short or medium term. Some of these changes include:
Measures aimed at optimizing our platforms and product, with the intention of increasing user retention and booking conversion, while reducing the number of click-outs required to ultimately make a booking;
Our relevance assessment, which reflects our assessment of the quality of users' experience after clicking out to an advertiser from our website and functions as an adjustment to advertisers’ CPC bids in our marketplace auction process; and
Our attribution model, which is our model for allocating our performance marketing spend and which we continuously modify to reflect changes in how we determine whether revenue originated from a given marketing channel (or how revenue is “attributed” to that channel in our internal metrics) and that informs decisions we make about how much we spend on different performance marketing channels. The new attribution focuses on whether a user who comes to us from a performance marketing channel books a hotel. In the third quarter, we completed the roll-out of this new attribution model in our “Display, Email and Affiliate Advertising,” or “DEA,” channel. In the fourth quarter of 2017, we continued to implement this new attribution model in our "Search Engine Marketing," or "SEM," channel.
Although we aim for these measures to have a long-term positive effect on our profitability by focusing on traffic quality instead of volume, they may not produce the long-term financial benefits that we expect. We rely on assumptions, estimates and test data to determine whether these changes to our marketplace and advertising spend are effective, particularly in terms of booking conversion. In particular, we assume that our advertisers will ultimately be willing to pay more for referrals that are more likely, in our view, to lead to a completed booking. However, this assumes that our definition of value matches that of our advertisers, who may instead perceive value in referrals that do not result in an immediate hotel booking but have the potential to deliver repeat users of their websites in the future. If our advertisers do not perceive added value for them from enhancements we make, they may be unwilling to pay us more after we have introduced these enhancements, in which case our user growth, business and our results of operations could be negatively impacted.
In addition, while we expect these initiatives may lead to short-to medium-term reductions in our revenue growth and profitability, the extent of these effects is difficult to predict, and the initiatives could cause revenues to grow more slowly than we anticipate or lead to revenue declines, and could lead to losses. They may also lead to increased volatility in our results. As an example, our revenue levels may be negatively impacted or may become more volatile as our advertisers take measures to respond to the automated version of the relevance assessment that we introduced in the fourth quarter of 2017. In addition, we expect higher volatility in our results and potentially a slowdown in qualified referral growth in the near term as a result of the roll-out of the attribution model to areas other than DEA.
We rely on assumptions, estimates and data to make decisions about our business, and any inaccuracies in, or misinterpretation of, such information could negatively impact our business.
We take a data-driven, testing-based approach to managing our business, where we use our proprietary tools and processes to measure and optimize end-to-end performance of our platform. Our ability to analyze and rapidly respond to the internal data we track enables us to improve our platform and ultimately convert any improvements into increased revenue. While the internal data we use to judge the effectiveness of changes to our platform is based on what we believe to be reasonable assumptions and estimates, our internal tools are not independently verified by a third party and have a number of limitations. We only have access to limited information about user behavior compared to many of our competitors that in many cases can record detailed information about users who log onto their websites or who complete a booking or other