4 Reasons To Sell TripAdvisor (TRIP).

There is a bearish case to be made for TripAdvisor, Inc. (NASDAQ: TRIP). It rests on increased competition, a business model reliant on advertising, faltering results and a high valuation for its stock

What Is TripAdvisor?

TripAdvisor is an online travel company that aggregates reviews about destinations, accommodations, activities, attractions and restaurants throughout the world. This allows the site's users to access advice, and compare real-time pricing and availability.

Its main brand is TripAdvisor, although there are 23 other websites under the company's umbrella. The business is organized into two segments: hotel and other. Despite efforts to diversify into other areas, the hotel segment still generated about 85% of the first nine months of 2015's revenue and virtually all of the operating income.

Competition Abounds

There are not significant barriers to entry to the industry. The company works to attract users through efforts that include TV advertising, email and online search. However, none of these are unique to TripAdvisor.

Competition is intensifying, by management's own admission. A number of companies aggregate travel information, including well-established and well-financed companies such as Alphabet, Baidu.com, Bing Travel and Yahoo. There are also large online travel agencies such as Expedia and Priceline that host reviews from users who book travel on their websites.

Advertising Model

The majority of TripAdvisor's revenue is derived from advertising; specifically, click-based advertising. The company receives money from clients, primarily online travel agencies, when site users click on the ads. It is structured on a per-click basis. This accounted for 66% of TripAdvisor's revenue in the first nine months of 2015. Other sources of revenue are display-based advertising, subscription advertising and transaction-based revenue.