Google s Summer Online Travel Plans:

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1 United States Equity Research Technology Internet Ken Sena Andrew McNellis Conor McDade Company Rating Current Target Previous Target Google (GOOG) OW $1,450 $1,400 Priceline (PCLN) OW $1,450 $1,480 TripAdvisor (TRIP) UW $85 $74 Change March 24, 2014 Google s Summer Online Travel Plans: Circumventing OTA Rate-Parity via Hotel Finder This report explores the importance of OTA rate parity contractual provisions for the online travel industry and explains how deeper bookings integration with hoteliers through Google and newer sources of personally identifiable information thanks to Search, Mobile and Social, is enabling Google s Hotel Finder to challenge the longstanding OTA pricing agreements that underpin the online travel industry s competitive landscape. 1-to-1 nature of marketing today will fuel opaque pricing. While Google s Hotel Finder is a more recent example of the challenge to the rate parity status quo (which we provide example of), it underscores a potentially more important industry trend in travel, namely that Search, Mobile and Social, thanks to the user s unique identifier, is allowing for hoteliers to use opaque pricing more freely as way of competing with the OTAs greater marketing efficiency. In addition, these unique identifiers are allowing hoteliers to integrate their first-party CRM data through booking engine interconnection as a means to drive higher marketing efficiency for hoteliers (essentially, customizable audiences ). Customizable Audiences for Travel. Integration of first-party data through deeper IBE integration is allowing hoteliers to introduce lists of their most valued customers to Search and Meta that is synced with other personally identifiable information (PII) on travelers to drive higher marketing performance across device in addition to enabling more examples of opaque pricing (which, again, challenge the longstanding notion of OTA rate parity with their partners). As support, we are hearing from CRM-focused ad agencies and booking engines that Google s new RLSAs (Remarketing Lists for Search Ads) are having such an effect. Positive Read-Through for TRIP. It is worth acknowledging that the first-party data consolidation trend that IBE integration and PII allows stands to benefit other Meta players of scale as well, such as TripAdvisor through its assisted bookings path efforts on mobile and deeper IBE marketing integration through TripConnect. As such, in addition to increasing our GOOG target from $1,400 to $1,450, we are increasing our TRIP target from $74 to $85. OTA Implications. What keeps us from calling for an even greater impact from the opaque pricing and data consolidation trends we highlight in this report is our healthy respect for the marketing efficiencies of the OTAs, particularly Priceline. Moreover, given the highly fragmented nature of the hotel industry, the OTAs may have plenty of time to integrate their own version of these newer supplier tools. Nevertheless, on modestly lower N/T ests which are now inline with Street, our PCLN target moves to $1,450 from $1,480. Google s Retail Efforts Are Analogous. Finally, while we can appreciate the feedback that Google s travel efforts have been relatively inconsequential to date, the same could have been said about Google s retail efforts before it introduced Product Listing Ads (PLAs) which provided Google with the merchant inventory data it needed to create a better shopping experience. We see the same potential here for its Hotel Price Ads (HPAs) through the booking engine integration it requires. Please see the analyst certification and important disclosures at the end of this report. Evercore Group L.L.C. and affiliates do and seek to do business with companies covered in its research reports. Investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

2 Role of Rate Parity in the Online Travel Industry To start, we provide a brief background on the role of rate parity in the travel industry and why this notion is so important. To understand this, one just needs to think about what the OTA does for the hotelier, which is to market the hotelier s room for a percentage of the daily rate. In return, the OTA requires that the hotelier not publish a rate beneath the daily rate at which the OTA is paying Google and other publishers to have marketed. Therefore, in exchange for providing hoteliers with a substantial amount of occupancy as result of its greater scale and marketing efficiency, the OTAs enforce rate parity contract provisions with the hotelier. Below we provide a summary of the rate parity contract provisions and exceptions. Figure 1: Rate Parity Agreement Overview Rate Parity Agreement Overview 1. Hotelier Direct Sites may not undercut prices they publish to OTAs 2. Rate Parity Agreements only apply to public rates 3. Rate Parity Agreements give OTAs and hoteliers an equal opportunity to obtain a booking Ways Around Rate Parity for Hoteliers Offer opaque rates through their own customer/crm lists Provide similar rates along with inclusive value-added services such as free meals Booking Becomes Function of Marketing Efficiency (as opposed to Yield Curve) Despite OTA and Meta claims that they offer the lowest rates or best value for many of their properties, lower rates do still exist so long as the hotelier is offering the rate in compliance with the exceptions provided under the rate parity contractual provisions. Namely the exceptions require that the hotelier already have an existing relationship with the traveler or provide the rate directly to the traveler in an opaque fashion. This allows the hotelier to save the fee that the OTA collects, which they can apply towards building loyalty with their guest. A hotelier s yield curve is shown below to demonstrate how even it stands to generate a bigger profit at a lower price in some instances through opaque pricing given that it gets to keep the percentage of the daily rate that would have otherwise been paid to the OTA. Figure 2: Opaque Pricing Makes a Difference OTA/Meta : Non-Opaque Hotelier: Opaque Price Rate Demand Curve OTA Published Rate Profit A Price Loyalty Rate Large Corporate Account Rate Friends/Family of Staff Rate Staff Rate (Best Available) Profit B OTA Commission + Hotel Costs Hotel Costs Quantity (Rooms) Quantity (Rooms) 2 And in travel, price trumps in factors that determine purchase conversation. To support, according to research from SaleCycle, OTA sites have the highest abandonment rates of

3 the various travel channels. At 89.1%, the abandonment rate (those that add a hotel/flight/car rental to their cart and never book) is more than 10 percentage points higher than the next highest (airlines at 78.7%), demonstrating the willingness of consumers to shop almost entirely based on the rate they are receiving. In addition, OTAs feature the 4 th lowest open rate at 47.9%, while Hotels enjoy one of the highest at 55.5%. Together we find this to be evidence that hotel shoppers enjoy being rewarded (in the form of lower rates) for their loyalty to certain hotels. Figure 3: OTAs Have Highest Abandonment Rate of All Channels Rate 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 89.1% 47.9% Online Travel Agents 78.7% 68.1% 67.8% 67.6% 57.0% 55.5% 48.9% 41.8% Airlines Ferries & Cruises Car Rentals Hotels & Lodgings Abandonment Rate Open Rate Source: Skift, Evercore Group L.L.C. Research Creating an Intensely Price Competitive Dynamic Between OTAs, Meta and Hoteliers Presently, Meta channels mostly demonstrate price parity between OTAs and hotel direct options, as hotels continue to be subject to stringent rate parity agreements, which prevent them from being able to undercut OTAs in an attempt to drive traffic and bookings through their own site. The result is similar to Figure 4, where one price appears across the OTA and direct booking channels through KAYAK. Figure 4: Example of Rate Parity between Marriot and KAYAK Source: Kayak, Evercore Group L.L.C. Research It is worth reminding folks that as these rates above are published, the rate parity contractual provision applies. However, thanks to mobile, social and other sources of personal identifiable information, the notion of rate parity is beginning to be questioned as we believe recent efforts by Google s Hotel Finder make clear. 3

4 Google Efforts to Level OTA Playing Field Recent efforts by Google s Hotel Finder underscore a couple of very important industry trends, namely that the one-to-one nature of mobile and social is allowing for hoteliers to use opaque pricing more freely as way of competing with the OTAs greater marketing efficiency and secondly that a growing industry ability to integrate first-party hotelier data through IBE integration is driving higher marketing efficiency for hoteliers through alternate channels to the OTAs. On the latter point, similar to Facebook s customizable audiences, hoteliers are able to introduce information on their most valued customers that is synced with other personally identifiable information on travelers to drive higher marketing performance across Search and other avenues. We find that Google s Hotel Finder, through being plugged into the booking engines of hoteliers and knowing the personally identifiable information of the traveler, is beginning to show rates beneath those set under OTA rate parity provisions. In addition, with RLSAs, or Remarketing Lists for Search Ads, Google has begun allowing the upload of first party data on an hotelier s most valued customers so that when this customer searches for travel, the hotelier bids more aggressively. Therefore, we boil Google s recent travel efforts down into three buckets: challenging the notion of rate parity through Hotel Finder, allowing marketers to introduce more first party data for the sake of better marketing efficiency against the OTAs and improving its user interface features for travelers booking through Google. #1 Challenge OTA Contractual Provisions on Rate Parity IBE Integration One Source of Rate Parity Disruption Because Hotel Finder hooks directly into hotel IBEs (internet booking engines), Google is able to uncover lower rates that are being offered opaquely to travelers through loyalty efforts or other. In addition, through personally identifiable information that Google has on individuals using Hotel Finder, Google can make the determination if that opaque offer can be applied when providing the Search results. We understand from our IBE relationships that it is not necessarily the hotelier who is making the decision to break the OTA rate parity agreement in these instances. Rather, it is Google who is making the determination on the basis of the data it is extracting from the hotelier which is matched with the personally identifiable information. As example, we offer the reader Oceanfront Litchfield Inn which is priced at $142 on Hotel Finder, $10 below the $152 rate that Expedia is paying Google to advertise through its Hotel Price Ad (HPA) format or other. 4

5 Figure 5: OTAs/Meta Make it Appear as Though They Offer the Lowest Rate $152 on OTA $142 on Direct OTA price is $10/night more than hotel direct site s offer Source: Kayak, Expedia, Evercore Group L.L.C. Research Meanwhile, if we look at the same room on KAYAK, the price of the Oceanfront Litchfield Inn is $152, same as on Expedia, regardless of the booking choice. Therefore, if a consumer were to book through KAYAK, she would not have visibility into the lower price being offered by Google s Hotel Finder. Figure 6: Example of Rate Parity for Oceanfront Litchfield Inn on KAYAK Rate parity contractual provisions observed on Meta ; Note, KAYAK transfers traveler to the Priceline.com website for booking 5 Personally Identifiable Information - Another Source of Rate Parity Disruption As we mentioned earlier, hoteliers can escape the rate parity contractual provisions by reaching out in opaque fashion. We provide an example below of an individual finding a lower price offered on Google than through the OTAs as Google seems to be making the determination either through the IBE data it receives, information on the user, or both that a lower rate is available than is accessible through the traditional travel sites. Specifically, Candlewood Suites is offered for $207 on Hotel Finder through direct booking and through Venere.com whereas Travelocity, Priceline and Booking are showing the rate required under rate parity.

6 Figure 7: Google Hotel Finder s Assisted Booking Source: Google Hotel Finder, Evercore Group L.L.C. Research Additionally, it is worth mentioning that in addition to allowing for an opaque rate to be offered, social also allows it to be shared without technically violating the OTA rate parity contractual provisions since sharing technically counts as opaque. While not on Google specifically, Google can pull such rates into Hotel Finder presuming they are being booked through the booking engines to which Google is now linked. Figure 8: Opaque Pricing Offered through Facebook Through social targeting, hotels could extend their use of opaque pricing As such, friends can offer better rates to their friends 6

7 #2 Allow First-Party Data Integration into Search In addition to Hotel Finder, Google is providing hoteliers with new tools to drive higher marketing. RLSAs, or Remarketing Lists for Search Ads, allow hoteliers to upload short lists of customers so that when searches are performed by these customers, maximum bid levels by the hotelier can become more aggressive. This essentially combines elements of customizable audiences, retargeting and Search. The data that is provided to Google can include names of customers who have previously stayed with the hotel or browsing histories on individuals who have visited the hotel s website. According to our conversations with CRM-focused ad agencies using these tools, Google is presently limiting the amount of data available for upload to about 1,000 names given the important ramifications this data stands to have on marketing efficiency. However, we think it will be an important trend to watch. Figure 9: Remarketing List Search Ad (RLSA) Example Hotel Brand Direct Site Future Google Search Hotels can target ads within search based on your browsing history Do PLAs Offer Read-Throughs for Travel? While we can appreciate the pushback that Google s travel efforts have been relatively inconsequential to date, the same could have been said about their efforts in the retail vertical until Google introduced Product Listing Ads (PLAs) which provided Google with the data it needed to create a better shopping experience directly within the web search interface. For instance, while it is true that Google Hotel Finder remains small with just under 700,000 US unique visitors in February 2014 (versus Expedia and Priceline s 15 and 12 million, respectively), we are nonetheless bullish on what IBE data integration, more PII, and a better Web shopping interface stands to provide. 7

8 Figure 10: Google s Hotel Finder Small Relative to Major Online Travel Players February 2014 Unique Visitors (MMs) Expedia Priceline TripAdvisor Google Hotel Finder 0.7 Source: comscore, Evercore Group L.L.C. Research As support for this argument, we find that Google s Shopping experience, which is just a subset of its retail search traffic but a good enough proxy, has outperformed its major retail web competitors / customers following its rollout of Product Listing Ads which provided Google with the inventory data that helped support a better customer search experience in retail. Therefore, just as Google PLA ads helped accelerate activity within Google Shopping and retail-based web search, we think IBE integration into Hotel Finder and more PII will stand to do the same for Google from a travel experience standpoint. Figure 11: PLA Inventory Integration Supported Google s Outperformance US Unique Visitors (MMs) Amazon ebay Walmart.com Google Shopping February 2013 Uvs February 2014 UVs Source: comscore, Evercore Group L.L.C. Research; Note above shows desktop unique visitors. Finally, similar to Google s use of PLA imagery to assist its retail efforts, Google Carousel and Hotel Price Ads (HPAs) stand to ultimately support a similar outcome. 8

9 Figure 12: Carousel, Reviews, and HPAs Offer More for Shoppers Carousel banner features hotel listings and rates More promotion of Google reviews New Hotel Price Ads (HPAs) Why Mess with One s Largest Customers? Encourages More Auction Participants Google s travel advertisers happen to be among its most important from a total spend standpoint. Therefore, it begs the question why Google would want to run the risk of upsetting these important advertiser relationships. The reason is that Google makes its money from an auction on keywords and what supports a healthy auction is a healthy number of bidders. However, as we look at the travel Search vertical, we see a potentially disturbing trend which is that the largest auction bidder is growing bookings at a rate considerably faster than the other bidders. This trend, left unchecked, stands to undermine the auction for travel keywords as it could ultimately leave Google with one major one, if we allow this example to be taken to the extreme. Figure 13: Marketing Budgets as % of Google Revenue 6% 37.7% 40% Marketing as % of Google Revenue 5% 4% 3% 2% 1% 3.0% 16.1% 3.8% 23.8% 0.8% 35% 30% 25% 20% 15% 10% 5% Y/Y Bookings Growth 0% EXPE PCLN TRIP 0% Marketing Expense as % of GOOG Net Revenue 2013 Bookings Growth ; Note: TRIP represents 2013 total revenue growth. PCLN marketing expense is online advertising expense. Expedia online ad expense is estimated by taking PCLN s ratio of online expense to their total sales and marketing efforts (Online+Offline+Personnel+S&M) and applying that ratio to EXPE s S&M. 9

10 Addresses Travel Industry s Potential for Innovator s Dilemma Second, even though we are seeing new tools become available to allow for more opaque pricing in Search and Meta, we suspect that most Meta site experiences will be careful to extend opaque prices as neither the Meta site nor the hotelier want to be accused by the OTA of violating their rate parity contractual provision given the mutual reliance on the Meta sites and hoteliers on the OTAs. Meanwhile, from an OTA perspective, rate parity contractual provisions confine the competitive landscape to marketing scale and efficiency, an area where the OTAs have undisputed advantage. TripAdvisor Is Navigating the Tension but Remains Heavily OTA Reliant Similar to what Google has done with Hotel Finder, TripAdvisor has announced two forms of deeper IBE integration, an assisted mobile bookings path and TripConnect, which allows for marketers to leverage more booking data into their marketing efforts on TripAdvisor. However, given the current reliance of TripAdvisor on the OTAs, we would expect these initiatives to proceed with more caution than what we might expect through Google, as TRIP may remain that destination where bookings occur that are review driven while Google Hotel Finder becomes the place to go to book when the traveler is price driven and is looking to take advantage of loyalty potential through opaque pricing. Figure 14: TRIP Controls Nearly the Full Booking Funnel Mobile Reviews on TripAdvisor Choose a destination Find a hotel Within price range Out of price range TripAdvisor Checking reviews is the last step before booking Check reviews Good Reviews Find another hotel Bad Reviews BOOK Source: Company data, Tnooz, Evercore Group L.L.C. Research OTA Response: More Atomic Deals and Mobile Conveniences We would expect to see OTAs promote their own loyalty programs and atomic (i.e., last minute) deals on mobile which tend to be less threatening to the published rate prices published on the web and of less consequence to the industry value chain. The OTAs will likely also emphasize more mobile conveniences such as through in-app management of itinerary, allowing one to change reservations, make on-property purchases, or unlock a door. The thinking here is that if the OTAs can graph the travel behaviors of their members better than the other platforms, the integration of IBEs and PII data is less disruptive. Target & Estimate Changes Google (Overweight): Target to $1,450 (from $1,400) Thesis: Google s ability to monetize experiences through engagement-based services will allow it to further disrupt hardware and software layers over time, and we see the sale of Motorola s handset division as helping focus the company on more of these emergent areas. While this theme is still rather nascent within online travel, the tools that Google supplies to both merchant and consumer suggest that they may soon become a bigger player within the space. On higher outer year estimates, our target increases from $1,400 to $1,450, which implies that Google shares can trade at 13x and 20x our 2015 EBITDA 10

11 and adj. EPS, consistent with our L/T growth assumptions. As of Friday s close, our new target represents roughly 23% upside to where shares currently trade. Estimate Changes: While we are leaving our 1Q14 and 2014 estimates unchanged, we are increasing 2015 estimates and beyond as we recognize the increased opportunity for Google in travel through Hotel Finder and other means as this report illustrates. For 2015, our core net revenues increase 2% to $77.9 billion, or 17% y/y from 15%, with the increase largely driven by increases in search revenues. This flows through to a similar 1.5% increase in adj. EBITDA, where we are looking for $34.1 billion, a 54.5% margin as a % of net. For 1Q14, our estimates remain largely unchanged as we expect the implications of this report to primarily impact outer year estimates. For 1Q14, we estimate net ad revenues to grow 20% y/y to $10.7 billion on -8% CPC decline and 28% paid click growth versus - 11% and 31% in the prior quarter, respectively. Including Licensing Revenue and Other, we are calling for $12.3 billion in total net revenue, or 23% y/y. TripAdvisor (Underweight): Target to $85 (from $74) Thesis: Despite the challenging Meta transition being behind them, valuation of more than 10x our 2015 revenue estimate on mid-twenties guided revenue growth this year leaves us cautious on shares. Nevertheless, as we recognize the disruptiveness of deeper IBE integration and more PII to upset the status quo in online travel, we are assigning TRIP with a higher multiple for the time being. Our new $85 target implies that TRIP can trade at 8x and 19x our 2015 revenue and EBITDA estimates, respectively. Figure 15: TRIP Most Expensive on EV / 2015 Revenues / Growth EV / 2015 Revenues / Growth 50x 45x 40x 35x 30x 25x 20x 15x 10x 5x 0x 45.6x 61% 34.9x 34.5x 30.7x 42% 36.1x 33% 32% 20% 21% 25.4x 23.1x 13.4x 23% 12% TRIP TWTR FB AWAY PCLN YELP LNKD EXPE 70% 60% 50% 40% 30% 20% 10% 0% 2015 Revenue Growth EV / Revenue / 2015 Revenue Growth 2015 Revenue Growth Source: FactSet, Evercore Group L.L.C. Research; Note estimates reflect 2015 consensus figures, not Evercore estimates. Estimate Changes: For TripAdvisor, we are leaving both our near-term and long-term estimates largely unchanged. However, our higher target reflects the fact that the deeper IBE integrations that Trip is pursuing should give it additional opportunity to provide opaque deals to travelers and allow for first-party data integrations similar to what Google has achieved. Our first quarter estimates call for total revenue of $285 million (24% y/y) with CPC revenue of $217 million (21% y/y), both of which are slightly above consensus. Our bottom line estimates call for EBITDA of $116 million, a 41% margin, slightly below Street. 11 Priceline (Overweight): Target to $1,450 (from $1,480) Thesis: On the basis of marketing efficiency, Priceline dominates its competitive set. We see this reflected in its ability to capture new markets and ultimately drive further marketing efficiencies through scale and R&D advances. Moreover, as we contemplate the potential challenge to rate parity contractual provisions through efforts by Google and others, which could be disruptive to Priceline and the other OTAs, we remind ourselves that the hotel industry remains extremely fragmented and slow to change. Therefore, we are choosing to only very modestly reduce our estimates on Priceline until more signs of such disruption are evidenced. Our new Priceline target of $1,450 suggests shares can trade at 17x and 23x our 2015 EBITDA and adj. EPS estimates, a slight premium to our 18% 5-year EPS CAGR.

12 Outer-year estimate changes: our 2015 bookings and gross profit estimates each fall 1% to $62.8 billion and $9.2 billion respectively, implying growth of 21% for each. On unchanged margin assumptions, this flows through to a 1% decrease in EBITDA, which we expect to come in at $4.3 billion, or a 46.8% margin, in-line with Street. Additionally, our 6- year bookings CAGR is reduced by 1% from 20% to 19% as we model similar top-line growth deceleration in the outer years. Comparisons Figure 16: Comparative EV/EBITDA Multiples, 2015E 3/23/2014 GOOG YHOO AOL AMZN EBAY LNKD FB GRPN ZNGA PCLN EXPE TRIP TWTR MM FUEL Stock Price $1, $37.94 $43.62 $ $56.96 $ $67.24 $8.29 $4.95 $1, $74.20 $ $50.92 $7.35 $47.12 x Shares Outstanding 341 1, , , = Equity Market Cap $403,420 $39,410 $3,642 $168,410 $74,618 $24,479 $187,454 $5,538 $4,061 $67,170 $10,059 $14,747 $40,022 $817 $2,026 + Net Debt (Cash) (58,717) (3,887) (96) (9,256) (7,837) (2,329) (6,973) (1,240) (1,133) (4,859) 2,271 (84.3) (2,041) (87) (86) + Other Adjustments $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $302.2 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 = Adjusted Enterprise Value $344,703 $35,524 $3,547 $159,154 $66,781 $22,150 $180,481 $4,298 $3,230 $62,311 $12,331 $14,663 $37,980 $730 $1,940 - Off Balance Sheet Assets $0.0 $30,912 $0.0 $0.0 $875.8 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $250.0 $0.0 $0.0 + Minority Interest $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 = Enterprise Value $344,703 $4,611 $3,547 $159,154 $65,905 $22,150 $180,481 $4,298 $3,230 $62,311 $12,331 $14,663 $37,730 $730 $1,940 / Adj. EBITDA (excludes SBE) $34,082 $1,650 $574 $10,309 $6,753 $960 $9,981 $464 $106 $4,271 $837 $637 $1,022 $64 $47 = EV/Adj. EBITDA Multiple 10.1x 2.8x 6.2x 15.4x 9.8x 23.1x 18.1x 9.3x 30.5x 14.6x 14.7x 23.0x 36.9x 11.4x 41.2x Figure 17: Comparative P/E Multiples, 2015E 3/23/2014 GOOG YHOO AOL AMZN EBAY LNKD FB GRPN ZNGA PCLN EXPE TRIP TWTR MM FUEL Stock Price $1, $37.94 $43.62 $ $56.96 $ $67.24 $8.29 $4.95 $1, $74.20 $ $50.92 $7.35 $47.12 / GAAP EPS $63.35 $1.56 $2.78 $6.29 $2.65 $1.61 $1.53 $0.14 ($0.10) $56.70 $2.95 $2.52 $0.57 $0.27 $0.28 = P/E (incl-stock Comp) 18.7x 24.3x 15.7x 57.4x 21.5x 121.9x 44.0x 59.6x n.m. 22.4x 25.1x 40.3x 89.8x 27.2x 169.9x = Adj. P/E (x-stock Comp) 16.3x 21.1x 13.0x 35.1x 17.3x 25.0x 34.6x 26.9x n.m. 20.3x 15.7x 36.6x 57.5x 18.3x 64.7x / 4 Year Growth Rate 14.1% 6.7% 7.6% 65.0% 11.4% 59.0% 27.9% 31.6% n.m. 17.3% 13.1% 31% 46% 36% 79% = PEG 1.2x 3.1x 1.7x 0.5x 1.5x 0.4x 1.2x 0.9x n.m. 1.2x 1.2x 1.2x 1.2x 0.5x 0.8x Adjusted EPS $72.43 $1.80 $3.36 $10.29 $3.29 $7.88 $1.94 $0.31 ($0.01) $62.65 $4.74 $2.77 $0.89 $0.40 $0.73 Figure 18: Comparative P/FCF Multiples, 2015E 3/23/2014 GOOG YHOO AOL AMZN EBAY LNKD FB GRPN ZNGA PCLN EXPE TRIP TWTR MM FUEL Op. Cash Flows $26,033 $1,482 $498.0 $11,818 $4,995 $935.9 $7,675.0 $424.2 $156.1 $3,435 $1,392.6 $443.0 $1,502.0 $30.8 $ CAPEX $5,011 $438 $82 $5,204 $1,874 $453 $2,767 $86 $17 $119 $380 $123 $584 $20 $44 = FCF $21,022 $1,044 $416 $6,614 $3,121 $483 $4,908 $339 $139 $3,316 $1,013 $320 $918 $11 $10 / EBITDA $34,082.2 $1,650.1 $574.3 $10,308.8 $6,753.3 $959.6 $9,981 $464.1 $106.0 $4,270.9 $836.7 $637.3 $1,022.2 $63.8 $47.1 = FCF/EBITDA Conversion 61.7% 63.3% 72.5% 64.2% 46.2% 50.4% 49.2% 73.0% 131.3% 77.6% 121.0% 50.2% 89.8% 16.6% 21.7% Free Cash Flow $21,022.0 $1,044.0 $416.2 $6,613.7 $3,121.2 $483.4 $4,908.1 $338.6 $139.2 $3,316.1 $1,012.8 $320.0 $917.9 $10.6 $10.3 / Shares Outstanding 341 1, , , = Free Cash Flow per Share $61.65 $1.01 $4.98 $14.16 $2.38 $3.88 $1.76 $0.51 $0.17 $62.64 $7.47 $2.20 $1.17 $0.10 $0.24 Stock Price $1, $37.94 $43.62 $ $56.96 $ $67.24 $8.29 $4.95 $1, $74.20 $ $50.92 $7.35 $47.12 / Free Cash Flow per Share $61.65 $1.01 $4.98 $14.16 $2.38 $3.88 $1.76 $0.51 $0.17 $62.64 $7.47 $2.20 $1.17 $0.10 $0.24 = P/FCF Multiple 19.2x 37.7x 8.8x 25.5x 23.9x 50.6x 38.2x 16.4x 29.2x 20.3x 9.9x 46.1x 43.6x 77.2x 197.6x FCF Yield 5.2% 2.6% 11.4% 3.9% 4.2% 2.0% 2.6% 6.1% 3.4% 4.9% 10.1% 2.2% 2.3% 1.3% n.m. 12

13 Financial Models Google Figure 19: GOOG Income Statement, 1Q12-4Q14E Qtr. Ending Mar Qtr. Ending Jun Qtr. Ending Sep Qtr. Ending Dec 1Q12 1Q13 1Q14E 2Q12 2Q13 2Q14E 3Q12 3Q13 3Q14E 4Q12 4Q13 4Q14E Site Revenues (Net of TAC) $6,844 $7,960 $9,663 $7,035 $8,162 $9,856 $7,171 $8,639 $10,234 $8,006 $9,727 $11,405 + Network (Net of TAC) $871 $982 $1,082 $890 $886 $1,012 $919 $931 $1,077 $994 $1,035 $1,220 = Net Advertising Revenue $7,715 $8,942 $10,746 $7,925 $9,048 $10,867 $8,090 $9,570 $11,312 $9,000 $10,762 $12,625 + Licensing & Other $420 $1,049 $1,545 $439 $1,046 $1,619 $666 $1,230 $1,789 $829 $1,647 $2,097 = Net Google Core Revenue $8,135 $9,991 $12,291 $8,364 $10,094 $12,487 $8,756 $10,800 $13,101 $9,829 $12,409 $14,722 + MMI $0 $1,018 $0 $843 $998 $0 $1,778 $1,139 $0 $1,514 $1,151 $0 = Net Revenues $8,135 $11,009 $12,291 $9,207 $11,092 $12,487 $10,534 $11,939 $13,101 $11,343 $13,560 $14,722 - Other Cost of Revenue (x-tac) $1,205 $2,875 $2,642 $1,985 $2,904 $2,534 $2,998 $3,304 $2,641 $2,966 $3,958 $2,979 - Research & Development $1,142 $1,457 $1,514 $1,238 $1,541 $1,538 $1,416 $1,558 $1,624 $1,487 $1,642 $1,826 - Sales & Marketing $1,172 $1,453 $1,753 $1,279 $1,583 $1,723 $1,479 $1,661 $1,808 $1,611 $1,983 $2,032 - General & Administrative $671 $1,000 $1,000 $766 $1,074 $1,016 $882 $1,074 $1,066 $1,007 $1,138 $1,198 = Operating Income Adjusted (Non-GAAP) $3,945 $4,224 $5,382 $3,939 $3,990 $5,675 $3,759 $4,342 $5,962 $4,272 $4,839 $6,688 + Interest (Expense) Income $156 $134 $168 $253 $247 $168 $65 $24 $168 $152 $125 $168 = Pretax Income (Non-GAAP) $4,101 $4,358 $5,550 $4,192 $4,237 $5,843 $3,824 $4,366 $6,130 $4,424 $4,964 $6,856 - Provision for income taxes $773 $436 $891 $830 $1,004 $956 $869 $723 $1,021 $791 $857 $1,162 - Extraordinary Items $0 $23 $0 $0 $0 $0 $0 $0 $0 $65 $11 $0 = Net Income After Ex. Items (Non-GAAP) $3,328 $3,899 $4,659 $3,362 $3,233 $4,888 $2,955 $3,643 $5,109 $3,568 $4,096 $5,694 / Diluted Shares Outstanding = Diluted EPS (Non-GAAP) $10.08 $11.58 $13.63 $10.16 $9.56 $14.26 $8.87 $10.74 $14.87 $10.65 $12.01 $16.53 EPS (GAAP) $8.75 $9.94 $10.73 $8.42 $9.54 $11.60 $6.53 $8.75 $12.12 $8.62 $9.90 $13.43 EPS (GAAP) from continuing operations $8.75 $9.87 $11.75 $8.56 $7.55 $6.47 $8.71 $8.68 $9.91 Adjusted EBITDA $4,456.0 $5,123.0 $6,505 $4,609 $5,020 $6,893 $4,587 $5,316 $7,283 $5,225 $5,875 $8,123 Q/Q Growth Site Revenues (Net of TAC) 0% -1% -1% 3% 3% 2% 2% 6% 4% 12% 13% 11% Network (Net of TAC) 0% -1% 5% 2% -10% -7% 3% 5% 7% 8% 11% 13% Net Advertising Revenue 0% -1% 0% 3% 1% 1% 2% 6% 4% 11% 12% 12% Licensing & Other 2% 27% -6% 5% 0% 5% 52% 18% 10% 24% 34% 17% Net Google Core Revenue 0% 2% -1% 3% 1% 2% 5% 7% 5% 12% 15% 12% MMI % -100% % % 14% % 1% --- Net Revenues 0% -3% -9% 13% 1% 2% 14% 8% 5% 8% 14% 12% Y/Y % Change Google Site Revenues (Net of TAC) 23.5% 16.3% 21.4% 19.8% 16.0% 20.8% 12.8% 20.5% 18.5% 16.8% 21.5% 17.2% The Google Network (Net of TAC) 19.8% 12.7% 10.2% 21.3% (0.4)% 14.2% 19.7% 1.3% 15.7% 14.4% 4.1% 17.9% Net Advertising Revenue 23.1% 15.9% 20.2% 20.0% 14.2% 20.1% 13.5% 18.3% 18.2% 16.6% 19.6% 17.3% Licensing & Other 56.1% 149.8% 47.2% 41.6% 138.3% 54.8% 73.0% 84.7% 45.4% 102.2% 98.7% 27.3% Net Google Core Revenue 24.4% 22.8% 23.0% 20.9% 20.7% 23.7% 16.6% 23.3% 21.3% 20.9% 26.2% 18.6% MMI (100.0)% % (100.0)% --- (35.9)% (100.0)% --- (24.0)% (100.0)% Net Revenues 24.4% 35.3% 11.6% 33.1% 20.5% 12.6% 40.3% 13.3% 9.7% 39.5% 19.5% 8.6% Adjusted EBITDA 22.8% 15.0% 27.0% 22.2% 8.9% 37.3% 11.3% 15.9% 37.0% 14.9% 12.4% 38.3% % of Net Revenues Other Cost of Revenue (x-tac) 14.8% 26.1% 21.5% 21.6% 26.2% 20.3% 28.5% 27.7% 20.2% 26.1% 29.2% 20.2% Gross Margin (% of Net) 85.2% 73.9% 78.5% 78.4% 73.8% 79.7% 71.5% 72.3% 79.8% 73.9% 70.8% 79.8% Research & Development 14.0% 13.2% 12.3% 13.4% 13.9% 12.3% 13.4% 13.0% 12.4% 13.1% 12.1% 12.4% Sales & Marketing 14.4% 13.2% 14.3% 13.9% 14.3% 13.8% 14.0% 13.9% 13.8% 14.2% 14.6% 13.8% General & Administrative 8.2% 9.1% 8.1% 8.3% 9.7% 8.1% 8.4% 9.0% 8.1% 8.9% 8.4% 8.1% Operating Income (Excl. Stock Comp) 48.5% 38.4% 43.8% 42.8% 36.0% 45.5% 35.7% 36.4% 45.5% 37.7% 35.7% 45.4% Adjusted EBITDA 54.8% 46.5% 52.9% 50.1% 45.3% 55.2% 43.5% 44.5% 55.6% 46.1% 43.3% 55.2% 13

14 Figure 20: GOOG Income Statement, E CAGR E 2015E 2016E 2017E 2018E 2019E '14-'19 Site Revenues (Net of TAC) $29,056 $34,488 $41,158 $48,753 $57,314 $65,981 $74,353 $80, % + Network (Net of TAC) $3,674 $3,834 $4,392 $4,801 $5,167 $5,521 $5,465 $5, % = Net Advertising Revenue $32,730 $38,322 $45,550 $53,554 $62,481 $71,502 $79,818 $86, % + Licensing & Other $2,354 $4,972 $7,050 $8,962 $11,082 $13,224 $15,500 $18, % = Net Google Core Revenue $35,084 $43,294 $52,600 $62,516 $73,564 $84,726 $95,318 $104, % + MMI $4,135 $4,306 $0 $0 $0 $0 $0 $0 = Net Revenues $39,219 $47,600 $52,600 $62,516 $73,564 $84,726 $95,318 $104, % - Other Cost of Revenue (x-tac) $9,154 $13,041 $10,795 $11,686 $13,619 $15,589 $17,378 $18, % - Research & Development $5,283 $6,198 $6,503 $7,802 $9,181 $10,574 $11,896 $13, % - Sales & Marketing $5,541 $6,680 $7,315 $8,627 $10,152 $11,692 $13,154 $14, % - General & Administrative $3,326 $4,286 $4,280 $4,889 $5,719 $6,549 $7,367 $8, % = Operating Income Adjusted (Non-GAAP) $15,915 $17,395 $23,707 $29,512 $34,893 $40,323 $45,523 $50, % + Interest (Expense) Income $626 $530 $672 $889 $1,167 $1,501 $1,910 $2, % = Pretax Income (Non-GAAP) $16,541 $17,925 $24,379 $30,401 $36,060 $41,823 $47,433 $52, % - Provision for income taxes $3,263 $3,020 $4,030 $5,424 $6,397 $7,378 $8,320 $9, % - Extraordinary Items $65 $34 $0 $0 $0 $0 $0 $0 = Net Income After Ex. Items (Non-GAAP) $13,213 $14,871 $20,349 $24,977 $29,663 $34,445 $39,113 $43, % / Diluted Shares Outstanding % = Diluted EPS (Non-GAAP) $39.76 $43.89 $59.30 $72.43 $85.59 $98.89 $ $ % EPS (GAAP) $32.31 $38.13 $47.42 $63.35 $74.86 $86.66 $98.11 $ % EPS (GAAP) from continuing operations $32.46 $36.05 $51.08 Adjusted EBITDA $18,877 $20,919 $27,704 $34,082 $40,046 $46,027 $51,731 $56, % Y/Y % Change Google Site Revenues (Net of TAC) 18.0% 18.7% 19.3% 18.5% 17.6% 15.1% 12.7% 8.9% The Google Network (Net of TAC) 18.6% 4.4% 14.6% 9.3% 7.6% 6.9% (1.0)% (4.2)% Net Advertising Revenue 18.1% 17.1% 18.9% 17.6% 16.7% 14.4% 11.6% 8.0% Licensing & Other 71.3% 111.2% 41.8% 27.1% 23.7% 19.3% 17.2% 17.4% Net Google Core Revenue 20.6% 23.4% 21.5% 18.9% 17.7% 15.2% 12.5% 9.5% MMI % (100.0)% Net Revenues 34.8% 21.4% 10.5% 18.9% 17.7% 15.2% 12.5% 9.5% Adjusted EBITDA 17.5% 10.8% 32.4% 23.0% 17.5% 14.9% 12.4% 9.4% % of Net Revenues Other Cost of Revenue (x-tac) 23.3% 27.4% 20.5% 18.7% 18.5% 18.4% 18.2% 18.1% Gross Margin (% of Net) 76.7% 72.6% 79.5% 81.3% 81.5% 81.6% 81.8% 81.9% Research & Development 13.5% 13.0% 12.4% 12.5% 12.5% 12.5% 12.5% 12.5% Sales & Marketing 14.1% 14.0% 13.9% 13.8% 13.8% 13.8% 13.8% 13.8% General & Administrative 8.5% 9.0% 8.1% 7.8% 7.8% 7.7% 7.7% 7.7% Operating Income (Excl. Stock Comp) 40.6% 36.5% 45.1% 47.2% 47.4% 47.6% 47.8% 47.9% Adjusted EBITDA 48.1% 43.9% 52.7% 54.5% 54.4% 54.3% 54.3% 54.2% 14

15 TripAdvisor Figure 21: TRIP Income Statement, 1Q12-4Q14E Qtr. Ending Mar. Qtr. Ending Jun. Qtr. Ending Sep. Qtr. Ending Dec. 1Q12 1Q13 1Q14E 2Q12 2Q13 2Q14E 3Q12 3Q13 3Q14E 4Q12 4Q13 4Q14E Total Revenues $183.7 $229.9 $285.2 $197.1 $246.9 $310.1 $212.7 $255.1 $324.8 $169.4 $212.7 $ Cost of revenue Selling and marketing Technology and content General and admin Related party shared service fee (G&A) = Adj. EBITDA $84.2 $109.3 $115.6 $96.9 $112.8 $134.3 $107.1 $104.4 $136.1 $64.3 $52.2 $ Stock compensation Depreciation Amortization of intangible assets = Reported Operating Income $73.4 $88.3 $96.0 $83.7 $94.1 $113.5 $92.2 $83.7 $113.8 $47.0 $28.5 $ Interest income Interest expense Other, net (1.4) = Pre-Tax Income $71.1 $84.4 $92.2 $76.7 $89.90 $110.8 $ $111.1 $43.3 $26.7 $ Provision for income taxes Extraordinary items = Net income $48.2 $62.3 $66.4 $53.2 $67.0 $79.8 $59.5 $55.9 $80.0 $33.7 $20.3 $ Net income attributable to non controlling interests = Net income attributable to TripAdvisor $48.1 $62.3 $66.4 $53.0 $67.0 $79.7 $59.4 $55.9 $79.9 $33.6 $20.3 $51.5 / Diluted Shares Outstanding = Reported EPS (after extraordinary items) $0.35 $0.43 $0.45 $0.37 $0.46 $0.54 $0.41 $0.38 $0.54 $0.23 $0.14 $0.35 Adj EPS (stock comp+intangible assets) Non-GAAP Diluted Shares Income tax rate 32% 26% 28% 31% 25% 28% 34% 33% 28% 22% 24% 28% Y/Y % Change Total revenues 23% 25% 24% 16% 25% 26% 18% 20% 27% 23% 26% 28% Cost of revenues 23% 33% 33% 7% 46% 23% -11% 81% 6% 32% 29% 1% Selling and marketing 53% 16% 45% 22% 27% 41% 11% 44% 29% 29% 60% 9% Technology and content 34% 37% 33% 50% 46% 15% 45% 42% 16% 33% 57% 15% General and admin 91% 24% 31% 106% 46% 16% 88% 33% 24% 45% 24% 1% Adjusted EBITDA 3% 30% 6% 5% 16% 19% 15% -2% 30% 17% -19% 86% Margins as % of Revenue Cost of revenues 1.5% 1.6% 1.7% 1.5% 1.7% 1.7% 1.4% 2.0% 1.7% 2.1% 2.2% 1.7% Selling and marketing 36.1% 33.5% 39.2% 32.1% 32.5% 36.6% 31.2% 37.4% 38.0% 38.7% 49.4% 42.1% Technology and content 8.9% 9.7% 10.5% 9.7% 11.3% 10.3% 9.6% 11.3% 10.3% 11.5% 14.3% 12.9% General and admin 7.7% 7.6% 8.0% 7.5% 8.8% 8.1% 7.5% 8.3% 8.1% 9.8% 9.7% 7.7% Adj. EBITDA 45.8% 47.6% 40.6% 49.2% 45.7% 43.3% 50.3% 40.9% 41.9% 38.0% 24.5% 35.6% 15

16 Figure 22: TRIP Income Statement, E CAGR E 2015E 2016E 2017E 2018E 2019E '13-'19 Total Revenues $637.1 $763.0 $944.7 $1,192.3 $1,536.9 $1,955.7 $2,436.3 $3,010.5 $3, % - Cost of revenue % - Selling and marketing % - Technology and content % - General and admin % - Related party shared service fee (G&A) = Adj. EBITDA $322.9 $352.5 $378.8 $483.0 $637.3 $856.7 $1,129.6 $1,464.5 $1, % - Stock compensation % - Depreciation % - Amortization of intangible assets % = Reported Operating Income $276.0 $296.3 $294.6 $397.8 $543.1 $753.2 $1,015.3 $1,337.6 $1, % + Interest income Interest expense % - Other, net = Pre-Tax Income $275.2 $282.0 $284.7 $385.8 $534.0 $747.8 $1,014.7 $1,337.0 $1, % - Provision for income taxes % - Extraordinary items = Net income $177.8 $194.6 $205.4 $277.8 $373.8 $523.5 $710.3 $935.9 $1, % - Net income attributable to non controlling interests = Net income attributable to TripAdvisor $ $194.1 $205.4 $277.5 $373.8 $523.5 $710.3 $935.9 $1, % / Diluted Shares Outstanding % = Reported EPS (after extraordinary items) $1.32 $1.37 $1.41 $1.87 $2.52 $3.53 $4.79 $6.31 $ % Adj EPS (stock comp+intangible assets) % Non-GAAP Diluted Shares Income tax rate 34% 31% 28% 28% 30% 30% 30% 30% 30% Y/Y % Change Total revenues 31% 20% 24% 26% 29% 27% 25% 24% 21% Cost of revenues 48% 11% 47% 14% 36% 34% 31% 24% 21% Selling and marketing 49% 27% 37% 30% 31% 23% 19% 19% 18% Technology and content 32% 41% 46% 19% 16% 16% 13% 24% 21% General and admin 18% 78% 31% 17% 17% 20% 25% 8% 21% Adjusted EBITDA 24% 9% 7% 28% 32% 34% 32% 30% 23% Margins as % of Revenue Cost of revenues 1.7% 1.6% 1.9% 1.7% 1.8% 1.9% 2.0% 2.0% 2.0% Selling and marketing 32.3% 34.3% 37.9% 38.9% 39.6% 38.4% 36.5% 35.1% 34.4% Technology and content 8.4% 9.9% 11.6% 11.0% 9.9% 9.0% 8.2% 8.2% 8.2% General and admin 5.4% 8.1% 8.6% 8.0% 7.2% 6.8% 6.8% 6.0% 6.0% Adj. EBITDA 50.7% 46.2% 40.1% 40.5% 41.5% 43.8% 46.4% 48.6% 49.4% 16

17 Priceline Figure 23: PCLN Income Statement, 1Q12-4Q14E Qtr. Ending Mar Qtr. Ending Jun Qtr. Ending Sep Qtr. Ending Dec 1Q12 1Q13 1Q14E 2Q12 2Q13 2Q14E 3Q12 3Q13 3Q14E 4Q12 4Q13 4Q14E Total revenues $1,037.2 $1,302.0 $1,683.4 $1,326.8 $1,680.2 $2,184.2 $1,706.3 $2,269.9 $2,864.3 $1,190.6 $1,541.2 $1, Cost of revenues = Gross Profit $743.3 $1,009.7 $1,391.0 $1,004.1 $1,383.9 $1,877.5 $1,396.5 $1,989.1 $2,573.2 $939.8 $1,333.3 $1, Offline Advertising Online Advertising Sales and Marketing Personnel G&A Info Technology Depreciation Amortization of intangibles in D&A, Other = Adj. Op Income $266.2 $361.4 $464.3 $476.0 $589.6 $773.4 $781.0 $1,104.3 $1,331.5 $402.3 $573.1 $ Stock compensation Amortization of intangibles in D&A, Other = Reported EBIT $241.5 $309.8 $414.8 $458.4 $554.8 $728.6 $755.6 $1,046.9 $1,287.4 $374.3 $500.8 $ Interest income Interest expense Foreign currency exchange (3.2) Other income = Pretax Income $229.0 $290.4 $394.9 $445.7 $535.6 $708.6 $731.2 $1,020.4 $1,267.5 $356.0 $450.2 $ Income tax expense Net income attrib. to noncontrolling interests (0.2) Preferred stock dividend = Net income (GAAP) $182.0 $244.3 $335.6 $352.3 $437.3 $570.5 $596.6 $833.0 $1,014.0 $288.7 $378.1 $571.5 / Diluted Wtd avg shares = EPS (GAAP) Adj EPS (Non-GAAP) Non-GAAP Diluted Shares Tax rate 20.6% 15.9% 15.0% 20.9% 18.3% 19.5% 17.9% 18.4% 20.0% 18.7% 16.0% 20.0% Y/Y Growth Total Revenue 28.2% 25.5% 29.3% 20.3% 26.6% 30.0% 17.4% 33.0% 26.2% 20.2% 29.4% 23.9% Gross Profit 47.0% 35.8% 37.8% 34.0% 37.8% 35.7% 26.9% 42.4% 29.4% 29.7% 41.9% 26.2% Cost of revenues -3.1% -0.5% 0.0% -8.7% -8.1% 3.5% -12.1% -9.4% 3.7% -5.7% -17.2% 8.7% Advertising - Offline -3.9% 148.5% 40.0% 1.1% 223.8% 102.5% 5.1% 372.6% 90.4% -0.5% 363.9% 41.6% Advertising - Online 49.7% 45.5% 34.6% 33.1% 47.3% 36.4% 34.0% 42.1% 32.6% 40.8% 30.1% 28.8% Sales and Marketing 30.9% 14.8% 34.8% 15.6% 26.2% 29.7% 12.4% 23.2% 28.1% 25.7% 16.9% 26.1% Personnel 37.4% 33.7% 58.0% 24.5% 45.2% 51.8% 45.0% 29.1% 32.0% 44.1% 57.7% 5.7% G&A 57.2% 23.3% 11.7% 33.9% 63.1% 9.9% 33.3% 49.2% 41.3% 38.8% 48.4% -21.2% Info Technology 60.9% 23.2% 21.1% 26.7% 62.4% 23.7% 26.3% 71.6% 50.3% 13.1% 97.9% -20.5% Margins as % of GROSS PROFIT Gross Profit (as % of Rev) 71.7% 77.5% 82.6% 75.7% 82.4% 86.0% 81.8% 87.6% 89.8% 78.9% 86.5% 88.2% Cost of revs (as % of Rev) 28.3% 22.5% 17.4% 24.3% 17.6% 14.0% 18.2% 12.4% 10.2% 21.1% 13.5% 11.8% Advertising - Offline 1.5% 2.7% 2.8% 1.0% 2.3% 3.5% 0.6% 2.0% 3.0% 0.6% 2.1% 2.3% Advertising - Online 37.3% 39.9% 39.0% 31.3% 33.5% 33.6% 26.9% 26.8% 27.5% 32.6% 29.9% 30.5% Sales and Marketing 6.1% 5.2% 5.1% 4.7% 4.3% 4.1% 3.8% 3.3% 3.2% 5.3% 4.4% 4.4% Personnel 11.3% 11.1% 12.8% 9.0% 9.5% 10.6% 8.4% 7.6% 7.8% 11.0% 12.2% 10.2% G&A 5.5% 5.0% 4.0% 4.0% 4.7% 3.8% 3.0% 3.2% 3.5% 5.4% 5.6% 3.5% Info Technology 1.4% 1.3% 1.2% 1.0% 1.2% 1.1% 0.8% 0.9% 1.1% 1.2% 1.7% 1.1% EBITDA 36.5% 36.5% 35.2% 49.3% 44.9% 43.2% 55.9% 56.0% 54.0% 45.3% 43.4% 47.9% 17

18 Figure 24: PCLN Income Statement, E CAGR E 2015E 2016E 2017E 2018E 2019E '13-'19 Total revenues $4,355.6 $5,261.0 $6,793.3 $8,640.7 $10,394.1 $12,223.3 $14,073.4 $16,019.7 $17, % - Cost of revenues 1, , , , , , , , , % = Gross Profit $3,079.9 $4,083.7 $5,715.9 $7,524.7 $9,124.9 $10,805.5 $12,528.8 $14,377.8 $16, % - Offline Advertising % - Online Advertising , , , , , , , , % - Sales and Marketing % - Personnel , , , , % - G&A % - Info Technology % - Depreciation % + Amortization of intangibles in D&A, Other % = Adj. Op Income $1,497.2 $1,925.5 $2,607.8 $3,343.3 $3,948.0 $4,699.6 $5,557.2 $6,526.7 $7, % - Stock compensation % - Amortization of intangibles in D&A, Other = Reported EBIT $1,398.9 $1,829.8 $2,412.4 $3,165.1 $3,780.4 $4,501.6 $5,330.2 $6,272.0 $7, % + Interest income % - Interest expense % - Foreign currency exchange % + Other income = Pretax Income $1,367.8 $1,761.9 $2,296.5 $3,085.3 $3,778.0 $4,510.2 $5,352.9 $6,321.8 $7, % - Income tax expense , , , % - Net income attrib. to noncontrolling interests % - Preferred stock dividend = Net income (GAAP) $1,056.4 $1,419.6 $1,892.7 $2,491.6 $3,022.4 $3,608.2 $4,282.3 $5,057.5 $5, % / Diluted Wtd avg shares % = EPS (GAAP) % Adj EPS (Non-GAAP) % Non-GAAP Diluted Shares Tax rate 22.6% 19.2% 17.6% 19.2% 20.0% 20.0% 20.0% 20.0% 20.0% Y/Y Growth Total Revenue 41.2% 20.8% 29.1% 27.2% 20.3% 17.6% 15.1% 13.8% 11.4% Gross Profit 60.7% 32.6% 40.0% 31.6% 21.3% 18.4% 15.9% 14.8% 12.4% Cost of revenues 9.2% -7.7% -8.5% 3.6% 13.7% 11.7% 8.9% 6.3% 3.3% Advertising - Offline -0.7% 0.1% 259.1% 71.9% -3.0% 11.9% 11.1% 10.8% 10.0% Advertising - Online 66.5% 38.6% 41.2% 33.2% 22.4% 18.9% 14.0% 12.5% 11.1% Sales and Marketing 39.9% 20.4% 20.4% 29.5% 31.6% 17.8% 15.3% 14.0% 11.6% Personnel 42.0% 37.9% 41.2% 34.3% 26.7% 18.1% 14.6% 12.2% 11.4% G&A 52.3% 40.0% 46.1% 8.9% 20.3% 14.3% 15.3% 14.0% 11.6% Info Technology 61.0% 29.2% 64.6% 15.8% 20.6% 17.8% 15.3% 14.0% 11.6% Margins as % of GROSS PROFIT Gross Profit (as % of Rev) 70.7% 77.6% 84.1% 87.1% 87.8% 88.4% 89.0% 89.8% 90.5% Cost of revs (as % of Rev) 29.3% 22.4% 15.9% 12.9% 12.2% 11.6% 11.0% 10.2% 9.5% Advertising - Offline 1.2% 0.9% 2.2% 2.9% 2.3% 2.2% 2.1% 2.0% 2.0% Advertising - Online 29.8% 31.2% 31.5% 31.8% 32.1% 32.3% 31.7% 31.1% 30.7% Sales and Marketing 5.3% 4.8% 4.1% 4.1% 4.4% 4.4% 4.4% 4.3% 4.3% Personnel 9.3% 9.7% 9.8% 10.0% 10.4% 10.4% 10.3% 10.0% 10.0% G&A 4.0% 4.2% 4.4% 3.7% 3.6% 3.5% 3.5% 3.5% 3.4% Info Technology 1.1% 1.1% 1.3% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% EBITDA 49.1% 48.3% 46.9% 46.5% 46.8% 47.0% 47.8% 48.8% 49.3% 18