Could Data Theft Hurt TripAdvisor's Instant Bookings Ambitions?

  • TripAdvisor owned Viator’s security systems were compromised earlier this month.
  • There have been reports of unauthorized charges to users’ credit cards.
  • The development could hamper user adoption of TripAdvisor’s ‘Instant Bookings’ feature.
  • TripAdvisor valuations are expensive in spite of the 7.5% correction this week.

Could Data Theft Hurt TripAdvisor's Instant Bookings Amibitions

Not long after eBay (NASDAQ:EBAY) reported a cyber-attack and stolen user data, TripAdvisor (NASDAQ:TRIP) has come into the limelight for a similar development. On 22 Sep 2014, TripAdvisor’s stock tumbled by over 4% as worried investors reacted to the news of a data theft from Viator, a company TripAdvisor recently acquired. Data thefts have become more common with several companies reporting such incidents. The news for TripAdvisor however, comes at a particularly bad time, as it is scheduled to roll-out its instant bookings feature across devices and geographies.

Viator Data Theft

Viator, the local tours and activities listing site which TripAdvisor acquired for about $200 million is one of the company’s biggest acquisitions this year. As per a press release on Viator’s site, the company was to notify approximately 1.4 million of its customers who could be affected by the data compromise.

Potentially about 880,000 of Viator’s customers had their payment card information (encrypted card number, expiration date, billing address, name and e-mail address) and Viator account information compromised, while 560,000 customers’ Viator account information might be at risk.

According to the release dated 19 Sep 2014, Viator had been notified by its payment card service provider on 2 Sep about the unauthorized charges that had occurred on several of its customer’s credit cards.

How Does The Data Theft Impact TripAdvisor?

The good part for TripAdvisor is that Viator functions separately and has its own e-commerce infrastructure. It’s not part of TripAdvisor’s site or app currently. So, it’s not really TripAdvisor’s security systems which have been breached. That could be one of the reasons why the company’s stock rebounded by close to 1.5% after tumbling by about 5.5% over two days.

Had TripAdvisor’s databases been compromised, the concerns would have been far greater.

TripAdvisor is currently in the middle of its ‘Instant Bookings’ feature roll-out. Earlier, the site would display collated availability and booking related data, and would divert users to advertisers’ sites to complete the bookings. To improve conversion rates, the company launched its instant booking feature which allows users to complete the payment and booking process within the TripAdvisor mobile app.

The feature is currently available to 100% of US mobile traffic and was scheduled to be made available on desktops and tablets over the ongoing quarter (Q3). The feature is also expected to be made available to users in other geographies in a phased manner. As per the company, the feature has been driving more conversions than the meta-search feature, which was TripAdvisor’s previous big ticket development. Note: Meta-search is the feature which collates availability and bookings related data from advertisers to provide users with all relevant information in one place.

So, instant bookings is of great importance to TripAdvisor, and a threat to user data would have raised concerns over the future of the functionality even before its complete roll-out.

Conclusion

As discussed, it’s not actually TripAdvisor’s security system which has been breached on this occasion. However, the site has been a victim of a similar attack in the past, back in 2011. Back then, TripAdvisor only collected e-mail addresses of users, restricting the scale of potential damage to spam e-mails. This incident, as evident could have far worse consequences. For those who recall the TripAdvisor data breach in 2011, the recent incident could threaten users’ confidence in the security systems in place.

TripAdvisor’s stock price fell by a further 3.33% on 25 Sep 2014, and is now down by about 7.3% since the time the data theft surfaced. However, these corrections in stock price don’t translate to an attractive investment opportunity. As we had discussed in our recent TripAdvisor valuation, TripAdvisor’s PE ratio of 63.5 and Price to Sales ratio of 12.6 make it a risky bet given the declining profit margins. Our TripAdvisor stock analysis highlights more key fundamentals pertaining to the company.

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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