TripAdvisor (TRIP), the world's largest travel review company, saw its stock price almost double in 2013 from $44 at the beginning of the year to $83 at the end of it. There were several factors that led to this sharp up-move, including the company's growing user base and increasing revenues per page view. During the year, TripAdvisor entered new markets, completed the roll-out of its new meta-display platform and improved its mobile products. These initiatives allowed the company to better serve users and advertising partners.
We have a price estimate of $80 for TripAdvisor's stock, implying a premium of about 5% to its market price. In this article, we analyze the major developments in 2013 that fueled the rise in the stock price, and how these developments will drive future growth.
Traffic Maintained Its Strong Growth Momentum
TripAdvisor had 200 million monthly unique visitors in Q1 2013, which increased to 260 million in Q3 driven by the company's efforts to tap opportunities in mobile and international markets.  In March, TripAdvisor entered into a partnership with Samsung (OTC:SSNLF), making it the only travel application to come pre-installed onto the new Samsung Galaxy S4.  It also expanded in Latin America in the third quarter, adding new TripAdvisor domains in localized Spanish language in Venezuela, Peru, Chile and Colombia.  Its new meta-search platform that enhances overall user experience also helped bring more traffic to its websites. We will elaborate on the meta feature in the next section.
We believe that TripAdvisor's user base will continue to grow strongly with increasing investment into the mobile platform, expansion in international markets, and rapid adoption of the meta-search platform.
New Meta-Display Platform Received Good Response From Top Advertising Partners
Historically, users had to click on advertisers' links on TripAdvisor's website to check information on hotel pricing and availability. The company rolled out its new meta-display feature in Q2 that collates and displays hotel pricing and availability data from top advertisers on a single page. In other words, the new feature allows users to do comparison-based shopping on TripAdvisor's website itself. Although this has lowered the number of leads sent to advertisers, the leads are more qualified and have better conversion rates. That's because travelers are now more likely to visit advertisers' websites for booking rather than just seeking information.
TripAdvisor almost tripled its advertising rates for better leads and conversion rates. The company witnessed reduced bidding activity on the new platform in the second quarter as advertisers were wary of the high prices and the transition to meta. However, realizing that TripAdvisor is an important traffic generating channel for online travel agencies (OTAs), Expedia (EXPE), the biggest online travel agency in the U.S., ramped up bidding activity on the platform in Q3.  The move was followed by other advertisers. We believe that TripAdvisor will be able to further increase its advertising rates since users are likely to spend more time on its enhanced website.
TripConnect Was Launched In Order To Cater To A Larger Market
In October, TripAdvisor launched the TripConnect platform that allows small and independent hotels to participate in meta-display. The option to participate in meta was previously available only to large hotel chains, and online travel agencies such as Priceline (PCLN) and Expedia. We think that TripConnect is a win-win for all three - independent property owners, TripAdvisor and users. It offers property owners the chance to bypass OTAs and generate bookings through their own website, thereby saving time on marketing efforts, reducing commissions paid to OTAs, and helping them better understand guests' perception about their property through post-stay reviews. TripAdvisor benefits from fresher, verified reviews and higher advertising revenues, while its users have more booking options and review content to explore.
A total of 210 Internet booking engines covering 135,000 properties worldwide signed up for TripConnect ahead of its launch, better than the company's expectations. Close to 90% of these committed 210 Internet booking engines opted for the premium offering. We think that it may not be possible for many small and independent hotels to outbid big hotel chains and OTAs due to the large scale and access to resources of the latter. Nevertheless, TripAdvisor's vast reach is attractive to hoteliers, which should get more property owners to try out this new auction platform.
Direct Bookings Introduced On Smartphone Apps
Using TripAdvisor's app was cumbersome for users until October as they had to click on advertisers' links to see details and complete the booking process. In October, the company launched native apps for Android and iOS devices to reduce this friction. The re-launched apps allowed in-app navigation by keeping the booking experience restricted within TripAdvisor's app instead of launching new advertiser windows in a mobile browser. 
Although this has enhanced the interface, users continue to struggle when they want to move back and forth between advertisers' and TripAdvisor's content. The problem is more prominent in smartphones than other devices due to the smaller size of the screen. Therefore, during the Q3 earnings call the company announced that it would begin taking direct bookings on its smartphone apps from 2014.  This will further enhance usability by allowing users to complete the booking without leaving TripAdvisor. We think that these initiatives will help the company to improve smartphone monetization levels. Its smartphone monetization is presently less than 20% of that on desktops.
TripAdvisor is slated to release its earnings for fiscal 2013 on February 11, and we will be closely watching these developments.
Disclosure: No positions.