July 25, 2012 / 12:03 AM / 5 years ago

TripAdvisor profit down on higher costs, shares fall

(Reuters) - TripAdvisor posted a drop in second-quarter profit as the travel website spent more money to turn clicks into business for its clients, sending its shares down 15 percent in after-market trade.

The company, which was spun off from Expedia Inc in December, said it reduced its spend on search engine marketing but increased spending on other marketing channels during the quarter.

The company, which aggregates reviews and opinions about destinations and accommodations throughout the world, depends on advertising and subscription for business.

“Rather than reinvest these cost savings in search marketing we chose to reallocate some of it towards our traffic diversification efforts including our marketing campaigns on Facebook,” Chief Executive Steve Kaufer said on a conference call with analysts.

Total costs for the second quarter jumped 33 percent to $113.5 million. The change in strategy also resulted in lower hotel shopper growth, even though conversion rate increased.

The company said it expects click-based revenue growth in the mid-to high teens for the full year.

“On the click-based revenue line we are factoring in the Olympics and the continuation of our traffic quality improvement strategies as headwinds in the third quarter,” said CFO Julie Bradley.

Click-based advertising revenue for the second quarter grew 13 percent to $151.1 million.

Net income fell to $53 million, or 37 cents per share, for the second quarter from $54.1 million, or 41 cents per share, a year earlier.

Revenue rose 16 percent to $197.1 million.

Shares of the company closed at $43.47 on Tuesday on the Nasdaq.

Reporting by Megha Mandavia in Bangalore; Editing by Anil D'Silva

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