Dara Khosrowshahi - President and Chief Executive Officer Michael Adler - Chief Financial Officer Stu Haas - Senior Vice President of Investor Relations and Treasurer

Aaron Kessler – Piper Jaffray Mark Mahaney – Citigroup Imran Khan - J.P. Morgan Michael Millman - Soleil Securities Jennifer Watson - Goldman Sachs Scott Kessler with Standard and Poor’s Equity Doug Anmuth - Lehman Brothers Justin Post - Merrill Lynch Brian Fitzgerald - Bank of America Securities Marianne Wolk - Susquehanna Financial Group

Good morning, ladies and gentlemen. Thank you so much for standing by, and welcome to the Expedia Inc First Quarter 2008 Conference Call. (Operator Instructions) I’ll now turn the conference over to Stu Haas, Senior Vice President of Investor Relations and Treasurer for Expedia. Please go ahead, sir.

Thank you, Michael. Good morning, and welcome to Expedia Inc’s financial results conference call for the first quarter ended March 31, 2008. I am pleased to be joined in the call today by Dara Khosrowshahi, our CEO and President and Michael Adler, our CFO. The following discussion including responses to your questions reflects management’s views as of today, May 1, 2008, only. As always, some of the statements made on today’s call are forward-looking including our comments on financial expectations and performance, operational results, margins, planned investments and spending, and growth of business lines. Actual results may differ materially. We do not undertake any obligation to update or revise this information. Please refer to today’s press release and the company’s filings with the SEC including our Form 10-K for the year ended December 31, 2007, for additional information about factors that could potentially affect our financial and operational results. During this call, we will discuss certain non-GAAP measures, including OIBDA, operating expenses excluding stock-based compensation, free cash flow, adjusted net income, and adjusted EPS. In our press release, which is posted on the company’s IR website at www.expediainc.com/ir, you will find additional disclosures regarding these non-GAAP measures including reconciliations of these measures with the most comparable GAAP measures. Finally, unless otherwise stated, all references to gross margin, selling and marketing expense, general and administrative expense, and technology and content expense exclude stock-based compensation, and all comparisons in this call will be against our results for the comparable period of 2007. With that, let me turn the call over to Dara.

Thanks Stu, and thank you to everyone for making the time to join us on the call. Expedia is off to a good start here in 2008. Our worldwide employees delivered strong Q1 top line growth of 20% in bookings and 25% in revenue, with Q1 operating income before amortization growing 21% on the strength of our merchant hotel and advertising businesses. Expedia continues to meaningfully diversify its business mix. With our international businesses accounting for 32% of worldwide revenue compared with 29% in Q1 of ’07, and our advertising and media businesses grew 73% to account for more than 9% of worldwide revenue compared with less than 7% a year ago. On a trailing 4-quarter basis, our ad and media business now exceeds $200 million in high-margin revenue and is an integral piece of our travel marketplace strategy. From an air and hotel standpoint, I’d say the first quarter came in about as we expected when we last gave you some color back in February. The US airline industry had another fairly robust quarter aided by Easter falling in March this year, compared to April in ’07. Expedia drove double-digit ticket growth once again this quarter, albeit at a lower growth rate than recent quarters due in part to an 8% increase in air fares as the carriers struggled with oil’s steady upward climb. Air revenue per ticket grew 6% indicating further stabilization in our air economics, although we don’t anticipate that type of growth continuing throughout the year. Going forward, I think it’s pretty safe to say that the air environment is going to get more challenging from here, and the carriers’ bias towards continued fare increases will only take on increased urgency given the price of oil and record crack spreads, accelerating capacity reductions in the back half of the year, recent bankruptcy filings, and a long rumor but now materializing industry consolidation. Frankly, this will not only directly impact demand, they also eat into traveler’s travel budgets, so let’s continue to keep a close eye on developments there. On the hotel side, Expedia continued to see strong performance in Q1 with merchant hotel revenue growth above 20% for the third straight quarter. The difference in Q1 was our growth came exclusively from room nights with revenue per room night down 1% on lower ADR growth and lower margins. This margin reduction came from reducing barriers to purchase through package discounts, eliminating change fees at Hotels.com, and more competitive hotel pricing in general. As we indicated the trend on our last call, ADR growth of 3% in Q1 was down several hundred basis points from growth in Q4 reflecting the industry-wide decelerating in ADR growth anticipated for ’08, as well as Expedia’s high relative exposure to the leisure weekend and mid-scale markets which have all seen slower growth in ’08 compared with the overall hotel sector. Looking ahead, based on based on everything we’re hearing from travel suppliers and seeing forward booking patterns, I’d say we’re incrementally more cautious about the traveler than we were last time we reported earnings, particularly as it relates to the back half of the year. That said, there are also portions of our business that will benefit from price-sensitive travel. Turning to our brand portfolio, Expedia.com had a solid quarter, but we do expect challenges going forward due to the US economy and higher ticket prices. Conversion has held steady, but traffic growth has been so much of a challenge in part due to our trimming marketing spend based on the macro environment. Room night growth accelerated, but lower ADR growth cut into some of the improvement. Looking ahead, we are very excited about our recently launched Summer of Adventure promotion which piggy-backs on the upcoming release of Indiana Jones and the Kingdom of the Crystal Skull. We’ve got great advertising tie-ins with Burger King, Dr. Pepper, and some other great brands promoting the movie, as well as package savings up to 30% with 80% higher hotel participation than in our ’07 summer sale. Our European points of sale drove 34% bookings growth in Q1. While this is strong absolute performance that we believe remains ahead of overall industry growth in Europe, it does mark a deceleration from the levels we saw in the back half of 2007. Our UK point of sale accounted for roughly half the deceleration from Q4 on a bookings basis due to the economy, reduced brand spend, and reduced tailwind from FX appreciation. As we said before, we do expect comps in Europe overall to get tougher as the year progresses and we comp high back half growth from ’07. Hotwire had another great quarter with strong year on year growth in booking and revenue on robust traffic growth and improved conversion. I’m particularly pleased with Hotwire’s continued top line success considering that we have a tough comp against 2007 without the travel port business. As always, Hotwire continues to innovate for its value-driver travelers with its recently debuted Deal Engine improving deal-based merchandising on the site including geographically targeted offers. Hotels.com grew worldwide gross bookings 22% in Q1—its third straight quarter of above 20% growth. In the US, Hotels.com launched new branding and creative focused on hotel reviews, which seems to be resonating nicely with travelers. Both traffic and conversion are up on the site as the team aggressively monitors and addresses conversion inhibitors, and Hotels.com Europe continues to perform well, with bookings growth yet again over 50%. ECT grew bookings and revenue ahead of overall growth rates for Expedia Inc. We continue to keep a close eye on corporate demand, particularly in the US, but as of yet we’ve seen no signs of broad-based softness from corporate travelers. We will be watching this closely as we move into the back half of the year. Our APAC businesses continued along their high-growth trajectory in Q1 with booking and revenue both up over 50%. We were very pleased to launch the 17th Expedia-branded website in India in early March. Expedia.co.in offers India-based travelers access to our Expedia-wide platform benefits such as nearly 80,000 hotels and over 3000 attractions, but also local benefits such as payments in Rupees and dedicated care agents speaking both Hindi and English. As with many of our APAC sectors, it’s very early days in India, but we are delighted to have meaningful foothold in longer term markets such as Australia, China, Japan, New Zealand, and now India. Our advertising and media businesses continued to flourish in Q1 with over 50% organic growth on the acquisition of Airfarewatchdog.com and Holidaywatchdog.com in the UK. Trip-Advisor itself had another great Q1, not only financially but operationally. The content acceleration inherent in a business model like Trip-Advisor is reflected in Trip’s attaining the 15-million reviews and opinions threshold less than a year after hitting the 10-million mark. We’re further leveraging Trip’s media leadership position, extending its search engine marketing and search engine optimization expertise across our own network and to the larger Expedia brand portfolio. Advertising revenue on our transaction sites continued to gain traction in Q1 with acceleration in growth compared with Q4. We continue to iterate on our nascent Travel Ads product to rigorous AB testing and have seen dramatically improved click-through as a result. Later this month, we’ll be launch version 2.0 of Travel Ads in test markets featuring an improvements based on feedback from hoteliers including invoice billing, weekend versus weekday bucketing as an implementation of travel ads also on Hotels.com. On the supply front, PSG continues to excel. Just last week, we signed Air Berlin, Germany’s #2 airline to a full content multi-year agreement. In hotel supply, we’ve welcomed some initial IHG properties back to our sites and we’re continuing to add market managers in Europe to drive our continental hotel acquisition. We’ve got a long way to go in adding hotels, but net property additions in Q1 exceeded our goal. The upcoming edition of local language capability to our extranet should improve Expedia’s appeal to smaller market hoteliers. Before turning things over to Mike, I did want to make some brief comments around air booking fees as some of you have no doubt noticed that we’ve recently been testing these ranging from 0 to $8 on Expedia.com. I think the first thing to note is that this really is not a change of approach, as we’ve been experimenting with various fees in a number of geographies over the past year or so, and while I don’t think we’ve reached any permanent conclusion on fees, we do believe that the fee level on a given market depends on many factors—from competitor rates and reactions to the maturity of the market to demand elasticity. I would also say that we don’t view booking fees in isolation but in conjunction with other pieces of the customer value proposition that may change over time. The only thing that I can promise is that we’ll continue to test and learn in each market and focus on assuring that we’re delivering appropriate total value to our travelers. In closing, 2008 is off to a good start, but we’re well aware of the challenges in the macro environment, consumer spend, and confidence, particularly as we move past the summer travel months. That said, we believe Expedia is well diversified and executing to drive sustained growth and long-term shareholder value, well positioned as a leader in travel to help our supply partners in times of need, and of course helping our travelers find great deals and great service. World-class companies deliver value in good times and bad times, and Expedia’s goal is to make good on that standard. With that, I’ll turn the call over to Mike.

Great! Thanks Dara. Good morning everyone! Rather than review information sufficiently covered in today’s release I’m going to provide more fulsome commentary in three areas of investor interest: Marketing efficiencies, the impact of foreign exchange on our business, and cash flow trends. I’ll close with an update on our financial expectations for 2008. Selling and marketing costs are by far our single biggest expense, and as such the efficiency of this spend has a significant impact on both OIBDA margins and operating leverage. In Q1, selling and marketing expense increased 29%, ahead of revenue growth of 25%. This translated to 141 basis points of OIBDA margin deleverage. There are two key drivers. The first is increased personnel cost and higher growth in strategic areas of our business, including the Trip Advisor network and our other advertising teams, as well as our expanding staff, our European focus market managers and PSG to attract and retain properties in that market. We added twice as many merchant hotels in Q1 ’08 in Europe compared to Q4 ’07. As would be expected, there is a ramp up where we are incurring costs without an immediate payoff, but our firm belief is that these are the right long-term investments to make. The second driver is our direct advertising efforts in Europe and APAC markets. In Europe, SCM is becoming a larger part of our marketing mix and we’re experiencing keyword inflation. We’ve also ramped offline spend in Europe to support the emerging Hotels.com brand, and we’ve seen lower efficiencies from our more recent private label deals. Another variable at play here is mix. On average, our international businesses have less sufficient marketing compared with our US businesses, since the latter has had the benefit of extensive long-term branding behind it. So as our international mix grows, it pulls down our overall marketing efficiency. Over time, we expect international efficiency to improve, but as we expand into more countries, it’s a near term headwind. We continue to expect that selling and marketing expense will increase as a percentage of revenue for full year ’08, but less so than the 235 basis points of deleverage in 2007. We also expect more deleverage from these expenses in Q2 compared to Q1 given the absence of Easter stay revenue. Turning to foreign exchange, this is a topic that is rightfully receiving more and more attention from the investment community. Expedia currently derives 32% of worldwide revenue from international markets, and we have our sights set on reaching the 50% mark, so understanding the FX impact on our model is becoming increasingly important. As with any company reporting in US dollars, our international operations generally benefit from the strengthening of foreign currencies versus the dollar. In Q1, our gross bookings revenue both grew approximately 3% more than they would have had exchange rates remained the same as they were in the prior year period. Note that this is greater than the 1% to 2% benefit to Q1 ’07 top line figures. While we neither want nor deserve credit for these currency fluctuations, the fact is our results measured in dollars are better due to FX and have been since mid 2006. Needless to say, this is a double-edged sword, and if foreign currencies in places we do business were to begin depreciating against the dollar, our results would be negatively impacted. Another place in our financials where you see an impact from FX is in the Other Net line on our P&L. We take a gain or loss here to reflect the impact of FX on our foreign-denominated assets and liabilities including those due to intra-quarter movements in exchange rates. A final note on FX: This is hard to quantify with precision, but obviously movements in currencies impact travel patterns. US travelers have found it increasingly more expensive to travel to Europe, while Europeans have been riding the strong Euro and Pound to New York, Las Vegas, and other popular US destinations. Q1 was fairly unique in that the Pound lost ground to the Dollar and the Euro, so we saw a negative impact on both our UK to Europe and UK to US businesses. Fortunately, we have meaningful traffic between the UK, continental Europe, and the US, so we have a bit of a natural hedge, but this dynamic is certainly something to be aware of. On cash flow, you will notice in today’s release that while Expedia’s Q1 OIBDA grew 21%, our year on year operating cash flow was up just 5%. While most of the difference is in working capital related to our merchant hotel business, cash payments related to annual incentive comp net interest and taxes were approximately $30 million higher in Q1 ’08 compared with Q1 ’07. On the working capital front, Easter was certainly a large factor, as our February to March ramp in hotel bookings and in turn cash flow was more pronounced last year as people were still booking Easter travel in march, whereas that bookings ramp occurred in February in 2008, and the seasonal post-Easter low in bookings and cash hit us in March this year compared with April in ’07. Further, revenue and OIBDA associated with Easter stays in Q1 ’08 were reflected in Q2 in ’07, so we think comparing first half results in each year will be a more accurate indicator of year on year cash flows than either the first or second quarter in isolation. Lastly our working capital benefit from merchant hotel in Q1 was also impacted by some year on year compression in the booking window, particularly at Hotels.com as well as more efficient payment processing. It’s unclear whether the booking window compression is a reflection of an early Easter or perhaps later planning by families in uncertain economic times, but on the payables side we do expect the shorter pay cycle to continue going forward. I’ll close with our revised expectations for ’08. We remain appropriately cautious about the economic environment, and we’ve certainly seen some impact here early ’08 on travelers and suppliers. We have slightly scaled back some of our investments in the business and continue to take measures to ensure flexibility as conditions evolve. Therefore, despite the challenges, we continue to expect full year OIBDA will grow in the low double digits in full year ’08 absent any meaningful worsening in the ADR or airfare environment. We expect free cash flow to grow more slowly than OIBDA, given $140 to $150 million in CapEx and a lower working capital benefit for the reasons I touched on earlier. While we don’t provide quarterly expectations, I do want to remind investors that Q2 will be a particularly tough comp due to the shift of revenue to Q1 due to an early Easter, our plan to aggressively market in Q2 to seat spring and summer travel, and our having to service most of our media acquisitions. As such, we anticipate modest Q2 OIBDA growth. Before moving to Q&A, two brief housekeeping items. Our gross bookings and other operational metrics now exclude results from a French joint venture in which we have a minority interest. Since results from the JV are not consolidated in our financial statements, we thought it more consistent from an analytical perspective to exclude them from these metrics as well. This has no impact on revenue, OIBDA, or cash flows. Second, we are excluding gains and losses relating to changes in the value of eLong’s USD cash balances from adjusted net income and adjusted EPS as these amounts do not reflect changes in the economic value of these cash balances to Expedia, and they are not directly tied to the core operations of the business. Please note that this change increased Q1 adjusted EPS by a penny to $0.24 from $0.23 under our historical method of calculation. We’ve provided adjusted metrics for bookings and adjusted EPS back to Q1 ’06 on page 14 of this morning’s release. I want to thank everyone for your time today, and I’ll now turn the call back to Stu to kick off Q&A.

Thanks Mike. Let’s move on to the Q&A portion of the call with Dara and Mike. As a reminder, please limit yourself to one or two questions, so we can fit more questioners into the call today. Michael, would you please remind our listeners how to ask a question?

(Operator Instructions) Our first question is coming from Aaron Kessler - Piper Jaffray. Aaron Kessler – Piper Jaffray: Hi guys, a couple of questions. First on the Hotwire business, it appears they had a good quarter. Do you believe Hotwire is somewhat countercyclical, or is it just that people are looking for a better deal, and on the European side, are you seeing similar growth in UK as opposed to continental Europe and any signs of a macro slowdown yet, or is this just really made tougher comps year over year? Thank you.

Sure, Aaron, on Hotwire, we definitely think that there are countercyclical elements in Hotwire. The kind of inventory that we are getting in the Hotwire marketplace is actually very very good, and there are certainly consumers coming and looking for deals. Through a lot of good work that the Hotwire team has done, we’ve been able to push up conversion there, which then allows the team to go out and bid higher on terms on search engine marketing terms and also be more aggressive on the marketing side, which leads to higher volume, and if you look at Hotwire’s performance versus the macro environment, last year was a dynamite year. This year, I think is going to be a very very good year, and it happens to correlate with somewhat with the economy and also I think really good work again done by that team. Also, just a reminder to you, top line comps are tough for Hotwire because we lost the Travels Gate business, but the business is performing really, really well regardless. You can also see a little bit of that countercyclical element in our package business as well; again, a little bit similar to the opaque channel, even though we’re not getting the kind of [inaudible] that we got two or three years ago on the package business, you’re seeing growth again in the package business, and that’s because the inventory in the package path is better, and consumers are definitely shopping around and looking for deals. As far as Europe goes, we definitely saw a macro slowdown in the UK, but I wouldn’t put the slowdown in our business in the UK entirely on the macro environment. I think it is a more competitive marketplace, and we proactively took some marketing back on on UK in Q1. We are going to market a bit more aggressively in Q2, and we’re seeing decent volumes in the UK. If you look at revenue growth, in the continental business ex-UK in Europe, this quarter was 56% versus 58% in Q4 of ’07, so ex-UK, the continental European revenue growth is essentially identical on a quarter to quarter basis. So, we’re watching the continental. We definitely don’t see macro signs as far as any effect on travel there as of yet.

Thank you. Our next question is from the line of Marianne Wolk with Susquehanna. Marianne Wolk - Susquehanna Financial Group: Thanks. A couple of quick questions. On the advertising surge, in the past you told us that Trip-Advisor was roughly two-thirds of advertising. Is that still the case, or did some of the benefits that you saw on the Expedia.com site shift that balance? Also just wondering on the merchant hotel inventory in Europe, I thought you were riding around 15,000 merchant hotels over there. Is that the right property account? Just hoping you can give us a little update there too?

Sure Marianne. On Trip-Advisor, it still is more than two-thirds of the advertising there. There are seasonal effects there, but we expect it to be more than two-thirds. With some of the acquisitions that we have added into the Trip-Advisor Media Network, my anticipation is that it’s going to be well past two-thirds of the revenue there, but organic revenue growth in that whole sector is over 50%, very very healthy, and there’s a ton of growth there not only in the US, but especially internationally. For example, Trip-Advisor we expect to be in Japan and China by the end of the year, just expanding the network. We’re really not after revenue growth there, but it’s kind of establishing the Trip-Advisor profile there, trying to get local language reviews, etc., so very healthy growth on both sides and still over two-thirds. On the merchant hotel side, we are at 15,000 hotels in Europe. It’s up 1000 this quarter, and we actually expect that pace going forward to accelerate because we’re pretty focused on investing not only in people and systems there which should ease the acquisitions of hotels in Europe and Asia Pacific region as well.

Thank you. Our next question is from the line of Mark Mahaney with Citi. Please go ahead. Mark Mahaney – Citigroup: Okay, a couple of questions. First is any comments, Dara, on ability to gain greater access to hotel inventory in the US in this declining occupancy rate environment? Secondly, is there any way to know the European deceleration you saw? To what extent that was due to market share losses in the quarter? Are there any specific examples of hotels—I know the overall hotel count increased, but if you will were there major hotels that fell off, and then the advertising revenue, any comments on the international element of that and how that’s growing? I know that’s relatively small, but where that is. Thank you.

Sure. As far as access to hotels in the US or hotel inventory in the US, in the past three years, we have had very good access to inventory in the US, so as far as having the inventory and having the availability, that hasn’t fundamentally changed. What has changed a bit in this kind environment is access to what I will call promotional inventory for the hotels, where to the extent that at least the pattern that we are seeing of the hoteliers in this kind of a market is occupancies are coming down, but remember that supply is up in the market place, so I still think that the number of room nights being bought are up on a year on year basis, and what hotels are trying to do is holding on to ADR gain to drive RevPAR. Now what they’re doing with a channel like ours which is a significant channel but it’s a promotional channel is they are using our channel to drive promotional inventory, and the amount then of promotional inventory that we have available is increasing on a year on year basis which is also being reflected in our consumer behavior. If you look at the percentage of hotel bookings in a market like Miami, that is on promotional inventory; let’s say, stay three nights, get a free night or 30% off, etc. The percentage of deals and transactions that are happening off promotional inventory is up pretty significantly. Another review of that for example is with our summer sale last year, we had around 1000 participating hotels, around 200 destinations, and this year, we’ve got 1800 participating hotels and around 200 destinations as well, so we had the inventory last year, we have the inventory this year. The difference is the access to the promotional inventory that we have. As far as Europe goes, the deceleration again I think is significantly attributable to the UK, and if you look at our growth rate, certainly in the continent, I think that the growth rates are significantly in excess of market growth rate in Europe. That said, certainly seeing Bookings.com growth rates last quarter, unless there’s been significant deceleration there, I do think that they’re going to be growing faster than we are in Europe, but as far as the other competitors go, I think that we are doing just fine in Europe and we continue to share overall in Europe. As far as the hotel supply in Europe goes, we’re in good shape there. There are net adds. We don’t see hotels dropping off in any kind of significant manner at all, and we’ve got IHG coming back towards the back half of the year, so on an inventory basis, we actually expect our hotel inventory in Europe to be significantly stronger by the end of this year than it is not. We think we’ve got good strength there. I think your last question was on international advertising. Mike, do you have the number there?

Yeah. International advertising makes up approximately 20% to 25% of our total advertising revenue. It is an accelerating growth rate within Trip-Advisor, and then with respect to advertising on the transaction sites, our European advertising business is starting to scale very quickly as well, so we expect that number to increase.

And it’s significantly lower than the amount traffic that comes from the international sites, so we think that as you have the advertising dollars catch up to the traffic, you are going to have goodness there.

Thank you. Brian Fitzgerald with Bank of America Securities, please go ahead. Brian Fitzgerald - Bank of America Securities: Thanks guys. I wanted to drill down a bit on the impact of mergers in the airline business. Can we expect bookings to be impacted or would it be more subtle where you see an impact to ticket prices increasing on the consumers perhaps, same bookings levels but with less disposable income on higher prices, so you’re getting less other things booked there, and I assume you took this consideration into your outlook going forward.

Brian, I think the answer is it depends. Ultimately the most relevant factor that we see affecting our bookings is ticket prices, and I’m talking about our air bookings, and the depends part is it depends on what the airlines do as a result of consolidation. If they do take out capacity, that will naturally just by the laws of supply and demand drive up prices, and if they do drive up prices, along with lower capacity, that is going to have a negative effect on our air ticket volumes. After the follow-on effect that it has on hotel bookings, travel, etc., I wouldn’t expect that effect to be positive, but it’s soon to tell what that effect would be, so it might have some kind of negative effect on downstream spend, and if the consumer has a certain amount to spend on travel, if they have to spend more of their dollars on air ticket prices, they’re going to have less to spend on hotels and other local activities. The other effect that we would expect to see is that a higher percentage of travelers traveling to drive markets, so more driving on vacation and kind of a quick one-level [inaudible] on that is that markets that we would expect to see most affected in the US are “fly to domestic” markets, so markets where you’ve got drive-to markets I think are going to be less affected as far as downstream impact, but fly-to markets are going to be somewhat effective because there’ll be less capacity flying in, and if people are flying, prices are going to be higher.

Thank you. Our next question is from the line of Justin Post with Merrill Lynch. Please go ahead. Justin Post - Merrill Lynch: Dara, you talked about the company’s philosophy with the tax spend. It’s clearly higher than some of your competitors. I was just wondering when you think we might start seeing that if we are not already and some of your results have already started affecting your bookings or do you think you will start to see some improvements on the marketing side or the customer efficiency side that we can start seeing, and then if you could also comment on the tax situation with cash flow. Which line in the cash flow statement would the year over year differences in paying more cash taxes show up in?

Sure. As far as the tax paying goes, Justin, I’d say that you’re seeing some returns on that spend, but certainly we’re not in the final innings there as far as the returns go. In general, if you look at conversion rates across our businesses, in the past, and again I’m generalizing so there may be differences between point of sale, in general, conversion rates have been stable to going up. If you compare that to where we were three years ago, conversion rates were dropping. Past of the reason now is you could argue that there’s actually more competition now than there was two to three years ago. Everyone is getting better at the game. Part of the reason for the stability of conversion and part of the reason for increases in conversion are because of the technology investments that we’re making, very focused on why it is that consumers drop off, why it is that they don’t convert and going in and fixing those issues and frankly having much better measurement tool than we did in the past. Again, the returns that we are seeing, that’s not the full returns that we expect, and I think that by end of the year, especially on Expedia.com point of sale and eventually in Europe, you want to go in to see different UIs. You will see our ability to move much faster and test and learn much more quickly as far as user interfaces and what works and what doesn’t than we have in the past, and that’s going to start this year towards the end of the year. Last but certainly not least, we’ve talked about search engine optimization a lot, and getting our sites much more optimized for search which it isn’t right now, that is also going to roll in this year, so that by the end of the year, I think our site will be significantly stronger on the SCO part, which will attract traffic that right now we essentially don’t. So we do think that by the end of the year, it’s going to be a combination of traffic and it’s going to be hopefully continued goodness on the conversion side, and Mike is going to answer your cash tax question.

I want to make sure I understand the question, as I heard it as which line item does the year on year change in cash tax payments appear on the cash flow. Is that right? Justin Post - Merrill Lynch: Yeah. I’m assuming one of the payable lines.

It’s an accounts payable/other accrued spending expenses and other current liabilities. Justin Post - Merrill Lynch: Great. One followup – you did the deceleration in Europe bookings. Do you think that levels off at some point or is it some trend that we can expect to continue to see as we go through the year?

It’s hard to tell, Justin. I think that the UK on a year on year basis for the balance of the year should be better. We’ve made some adjustments there, and so I think that will see better performance from the UK in the back half of the year versus the front half of the year. On the negative side, if you remember last year, we were rolling through decreases in air booking fees in Europe, and as we comp over kind of a light to light, which is no booking period to no booking fee, or low booking fee to low booking fee, some of the year on year growth is going to naturally decrease because of just the laughing effect. So we’re going to have positives and negatives. I don’t want to be more specific than that. Justin Post - Merrill Lynch: Okay, and Dara have you ever given people the data on the mix between air and hotel in Europe? Can you help us out at all with that?

What I would say on the mix, and Mike, correct me if I am wrong, is that in general EU has a lower air mix than the US. I think that’s all we’ve said.

Thank you. Our next question is from the line of Doug Anmuth with Lehman Brothers. Please go ahead. Doug Anmuth - Lehman Brothers: Thank you for taking my question. Dara, you mentioned your experiments with booking fees. Can you talk a little bit about what you’ve learned there so far and also whether you have any view on what the airlines could do with their booking fees? And then a second question – can you comment on the growth in revenue per air ticket – a little bit surprised to that positive this quarter.

As far as booking fees go, I don’t think that we’re ready to make any kind of statements as far as what we’ve learned. We are still in the test and learn phase. Our ability to test what we are now is partially a result of some of the technology improvements that we made. We weren’t able to before test the way that we are now, and we’re in data collection mode. As I said in my prepared remarks, in the US, we don’t see ourselves eliminating booking fees. We think as ticket prices go up as a percentage of the whole is fairly low and we don’t see ourselves allocating more capital as a cut of booking fees would be to the domestic air business for Expedia.com. For Hotwire, we have cut booking fees; we’ve seen good response there and we don’t see that changing on a go-forward basis. Again, if we have more to tell you, we’ll certainly come out with it. Mike, do you want to talk about air revenue per ticket?

Yes, thanks. First thing to note is that we actually have a fairly easy comp. If you go back and you look at Q1’07, you’ll see that the air revenue per ticket was down 20%. We did have some timing benefits in our favor in Q1, and I would say as compared to the 6%, a more normalized number is closer to 3% growth. I would also note that there’s no real benefit to increased fees in that number as the tests that we ran really had an immaterial impact. Generally, we expect to there to be some unevenness in revenue per ticket, but we think that’ll be pretty stable on a sequential basis in ’08, but we certainly don’t expect increases of this size in any of the subsequent quarters this year.

Thank you. Our next question is from the line of Scott Kessler with Standard and Poor’s Equity. Please go ahead. Scott Kessler - Standard and Poor’s Equity: Thanks a lot. Two questions about Europe. One is indications are that route rationalization is starting to occur there. Obviously there’s been discussion about that occurring in the US as well. I’m wondering if you’ve seen the impact in Europe at all, and if so, what do you think the affect would be on Expedia’s business. The second question I have is you highlighted a notion of keyword inflation in Europe. I’m wondering if somehow you could quantify that. That would be helpful.

As far as Europe goes with route rationalization, we haven’t seen any kind of direct impact there. Again, similar to what you say, we’ve seen carriers talk about capacity and obviously to the extent that capacity does come down or growth in capacity comes down, we’ll see some effect on pricing and we think that the same rules that apply to US will apply to Europe, which is higher ticket prices will probably result in lower demand, but we haven’t seen anything as of yet, Scott, so I think it’s too soon to comment as far as the effect on us. If we see anything next quarter, we’ll certainly update you on that. As far as keyword inflation goes on Google, etc., we have seen keyword inflation. It’s in the double digits. More than that we’re not to quantify. Now as an entity, the good part about our advertising and media business is that to some extent we’re hedged against that. We’re a big spender on search, but we’re a big “spendee” as well, and when you look at Trip-Advisor and the assets that we have there, some of the revenue growth that we’re seeing there is coming from higher CBC prices that travel companies out there are spending, and we certainly haven’t see any kind of effect on CPMs, etc. CPM in the advertising business is pretty strong. We haven’t seen any kind of economic effect as of yet.

Thank you. Our next question is from the line of Jennifer Watson with Goldman Sachs. Please go ahead. Jennifer Watson - Goldman Sachs: Great, thank you. Can you talk a little bit about the margin structure of the business longer term and where you think it will stabilize? Obviously we’ve seen come contraction over the past several years, so I just wanted to get a sense of are you guys more focused targeted margin over time, or operating dollars?

I’d say over the long term, we are focused on free cash flow generation and quantum OIBDA and quantum free cash flow, so we don’t measure ourselves by the specific margin. We measure ourselves by the bottom line growth and how much cash that that company is throwing off. Now, there are puts and takes as far as margin on a go-forward basis, and I can certainly go through some of the puts and takes for you. The international business in general is a lower margin business than the US , the vast majority of that being on the marketing side. The marketing spend internationally is significantly higher than that of the US, and as the international business becomes a higher percentage of our overall business, you’re going to see sales and marketing spend on an overall basis increase. Over a long-term period, typically the more mature international markets have better marketing efficiencies, so over a long-term period, you might see some of that mitigated as some of the markets mature and we get more repeat passengers, etc. You will see as our media and advertising businesses grow as a percentage of total, you should see higher margins as a result of that, which could be offset with a fee cut, etc., that we’re taking in Europe for example. We are trying to remove barriers of entry for consumers. We’ve been cutting fees in Europe. We’ve eliminated change/cancel fees on Hotels.com. Those kinds of actions definitely take a hit on short term profitability, but we think it’s the right long-term action to take. So I guess if I put it all together, again lots of puts and takes. I do think that on the G&A side of the business over the long term, we absolutely expect to see leverage there, and then otherwise, depending on the growth of the business internationally and domestically, you may see different effects on sales and marketing, etc.

And I would add leverage on the tech and content line.

Yeah, that should start happening, and again if you look on for example, last year we increased the spend on tech and content in G&A fairly significantly between Q4 of last year to Q1 of last year. You are not going to see that kind of increase this year.

Thank you. Our next question is from the line of Michael Millman with Soleil Securities. Please go ahead. Michael Millman - Soleil Securities: Thank you. You mentioned that promotional hotels particularly in the US have increased. Can you talk about what the impact is on the bottom line or other lines and how that may impact your packaging, and secondly particularly in Europe, can you talk about hotel tenuring—by that I mean once you have inventory, there is some natural growth in the amount of business you do between 1 year, 2 years, and sort of evening out at some point.

Sure, Michael. As far as the promotional hotels go, it’s hard to tell, but we think that the effect on the bottom line is essentially neutral, and I think you kind of see in Q1. To the effect that we are getting promotional inventory from the hotels, because of our margin structure, because we get a cut of the transaction, we make less per transaction just like the hotel makes less per transaction, so we’re promoting along with the hotel. So, that transaction is less profitable, but you do see it driving transaction growth. For example, if you look in Q1, we had a higher growth rate in merchant hotel room than we’ve had in I think two to three years, so you saw an acceleration in merchant hotel room night growth, but a decrease in revenue per room night, and that’s exactly what we’d to see and call it a promotional environment, so I think on a net-net basis, the two cancel out. Now, rate is higher margin. If you get a big rate on a hotel, there are essentially no costs associated with that, so to the extent that you are making up rate with volume, there are costs associated with that, customer service costs, fulfillment costs, so maybe it might be a slight negative as far as how the bottom line goes. In Europe, on hotel tenuring, I think the way that we view it is we want our growth rates in Europe to grow consistently with our hotel inventory, and if you look at the last year, the growth rates in Europe exceeded the growth in the number of hotel that we have in place, so just doing the math on that, you’d expect that the sales per hotel would be increasing, and I think this year, we’re pretty focused on increasing the number of hotels that we have in the system as well, just to give our consumers more choice and increased breadth and depth. Michael Millman - Soleil Securities: How long does that tenuring last typically before it sort of flattens out?

I’d say there’s no typical. It depends on the market place. It depends on if the hotel is in a city center versus a seasonal hotel. There are certain hotels in New York, London, etc., where we do an enormous amount of business and we’re very very deep partners. The merchant business itself lends itself to driving very high volumes to strong hotel partners, and it’s a relationship that takes time.

Thank you. Our next question is from the line of Imran Khan with J.P. Morgan. Please go ahead. Imran Khan - J.P. Morgan: Thank you for taking my questions. Two questions—Dara, why don’t delve a little deeper on your statement that you are incrementally cautious? Can you give us some color whether is it US, UK, or Continental Europe? Which part of US are you seeing more weakness? Any geographical color will be helpful, and secondly I think in your statement you said that you are doing very well compared to most of the competitors but Bookings.com is growing faster. Can you give us some color what kind of initiatives you are taking and when do you think you can catch up with them?

Sure. As far as the more cautious stance, I think it’s based on just the intelligence that we around in the market place. If you look at the Smith Research data, Q1 occupancies down 2.7%, and I think in general the trends point to weakening occupancies on a go-forward basis, and the question is whether ADRs are going to hold up the way that they are going to hold up. If there is any sector that I am more cautious about, it is the US consumer. I think there was some economic data, for example, yesterday that came out which is all of the economic issues that we’re seeing, gas prices, etc., are hitting the consumer wallet, and while we absolutely believe that the consumer is going to travel, that they are going to take those trips, we do think that they are going to be more cautious in their approach, and that if they are hurting in the pocket book, they are going to spend a bit less on that trip than they did last year or the year before. So it’s just everything that we see around us in the US. I think that the UK is going to be a bit more like us. Again, continental Europe we’re listening to all the signals that everyone else is listening to, but for us continental Europe demand remains very strong, and continental Europe demand especially in to the US—that kind of demand is quite powerful. As far as Booking.com goes, the plan to take them on is pretty similar to the plan that we had last time around, and again we said that we can’t achieve everything overnight, which is much more aggressive supply acquisition on the European side. I think that, Mike, correct me if I’m wrong, but we doubled the number of hotels in Q1 this year in Europe than in Q4, and our targets are going up from here, so much more aggressive hotel acquisition. Most aggressive acquisition in secondary and tertiary markets, so improving supply, and then some of what I talked about as far as the technology improvements. I think our UI is going to get better. Our search engine optimization across the board is going to get more effective, and then last but certainly not least, consumer-centric initiatives—lowering booking fees for consumers in Europe even on the hotel side. Hotels.com in Europe has eliminated change/cancel fees, etc., so kind of across the board. Really trying to make our service the very best service out there, and I think we’re seeing it in the performance, and we expect a lot from that group going forward.

Thank you, and there are no further questions at this time. Please continue with any closing comments.

Thank you for joining us on the call today and your questions. A reply will be available on the IR website shortly after the completion of this call. Appreciate your interest in Expedia, and certainly look forward to talking with you again next quarter.

Thank you very much, and we’ll talk to you next quarter, and special thanks to all of our employees who are working really really hard to make this happen, so thank you.

Alright, thank you. Ladies and gentlemen, this does conclude the Expedia Inc First Quarter 2008 Conference Call. You may now disconnect.