Finding deals online is how modern consumers make their decisions. This is true for the travel industry as well. Various deal and booking sites fight for the growing number of customers. Travelzoo Inc. (NASDAQ:TZOO) is one of them. The stock has had a good year, up 53%. However, the recent earnings report was taken coldly despite the fact that the company had beaten estimates on both revenue and earnings. Investors wanted more. Would this end the uptrend that persisted throughout this year?
The revenue grew 4.8% in comparison with the second quarter of last year. The number of site subscribers advanced 4%. At the same time, earnings were down 25%. Investment expenses were the reason for that. The continuing shift to mobile has made the company work in the app field.
The company states that 40% of its traffic comes from mobile devices, and there were usability issues on these devices. In addition to that, the company is working to enable booking from the site itself. Travelzoo Inc. (NASDAQ:TZOO) has increased its headcount by 18.7% from a year ago, and continues to see the declining trend in the average annualized revenue per employee.
The company states that the quantity of the site’s subscribers directly influences revenue. Currently, it has 23 million subscribers. The company expects to get $167 million in revenue – or $7.44 in revenue per subscriber. Travelzoo Inc. (NASDAQ:TZOO) states that at 30 million subscribers it would get $210 million in revenue, with $7 revenue per subscriber. It would take the company three years to get there at current rates of subscription base growth. Three years to grow 26% is not what you expect from a growth stock. That’s why investors are disappointed.
The competition in the field is tense with the likes of Expedia Inc (NASDAQ:EXPE) and Tripadvisor Inc (NASDAQ:TRIP) each wanting its piece of the travel pie. Expedia Inc (NASDAQ:EXPE) has been under pressure since its first-quarter report, when the company issued soft guidance. The stock is still underperforming, up 4% this year. On the other side, Tripadvisor Inc (NASDAQ:TRIP) is having a good year, up 75%. The company exceeded second-quarter earnings estimates. Average unique monthly visitors grew 57%. Mobile users continued to flow in. Visits via a tablet or a smartphone were up 216% year over year. Tripadvisor Inc (NASDAQ:TRIP) was fast to bet on mobile, and now it enjoys the results of that bet.
However, monetization still lags. Smartphone monetization remains at less than 20% of desktop. Over time, this would probably improve as customers get accustomed to making purchases via their smartphones. Mobile is the trend that is here to stay, there is no doubt about that. Both Expedia Inc (NASDAQ:EXPE) and Travelzoo Inc. (NASDAQ:TZOO) are behind on this front, and this helps Tripadvisor Inc (NASDAQ:TRIP) trade at a significant premium to its peers.