NEWTON, Mass. (AP) -- Shares of travel website operators took a hit on Wednesday, as investors reacted to a report by TripAdvisor Inc.
TripAdvisor shares led the decline, at one time losing nearly 20 percent. The company, which was spun off from Expedia Inc. in December, blamed the revenue shortfall on a change in the way it measures advertisement traffic. Essentially, it started measuring how many people clicked on its site's advertisements and went through to book travel on other online travel websites, rather than just measuring how well visitors responded to the ads on its own site. TripAdvisor offers reviews and flight searches, but redirects visitors to other sites for final booking.
The adjustment, which started in April, hurt its revenue by about $5 to $10 million. Total second-quarter revenue rose 7 percent to $141.4 million, with gains in its advertising and subscription revenue, but that was far below analysts' expectations of $203 million. TripAdvisor's move lowered sales and marketing costs and helped hold up its net income. The company's earnings per share results matched analysts' forecast.
Despite the change, the company held onto its revenue growth expectations for the year. Still, the move spooked investors across the sector.
Shares of TripAdvisor's former parent Expedia lost about 4.5 percent in late trading, to $44.26. Orbitz Worldwide Inc. gave up 7.8 percent to $3.90. And newly public Kayak Software Corp. lost 1.5 percent to $32.16..
In a note to clients, Citi analyst Mark Mahaney said that while he believes TripAdvisor is a good long-term investment, he thinks that margins will be squeezed in the near future due to various investments and fierce competition from Google and others. The second-quarter results also don't bode well for its peers, he noted. Expedia reports earnings on Thursday and Priceline and Orbitz report in August.
