Alan Pickerill - Director, Investor Relations Michael Adler - Chief Financial Officer and Executive Vice President Dara Khosrowshahi - Chief Executive Officer, President, Director, Member of Preferred Stock Subcommittee and Member of Executive Committee

Sandeep Aggarwal - Caris & Company Michael Millman - Millman Research Associates Imran Khan - JP Morgan Chase & Co Kevin Crissey - UBS Investment Bank Ross Sandler - RBC Capital Markets Corporation Justin Post - BofA Merrill Lynch Douglas Anmuth - Barclays Capital James Mitchell - Goldman Sachs Group Inc. Herman Leung - Deutsche Bank AG Scott Kessler - S&P Equity Research Mark Mahaney - Citigroup Inc

Good day, ladies and gentlemen, and thank you for standing by. Welcome to Expedia Inc. Third Quarter Earnings Conference Call. [Operator Instructions] Now I'd like to hand the conference over to Alan Pickerill, Vice President, Investor Relations. Please go ahead.

Thank you, Josh. Good afternoon, and welcome to Expedia Inc.'s financial results conference call for the third quarter ended September 30, 2010. I'm pleased to be joined on the call today by Dara Khosrowshahi, Expedia's CEO and President; and Michael Adler, our CFO. The following discussion, including responses to your questions, reflects management's views as of today, October 28, 2010, only. We do not undertake any obligation to update or revise this information. As always, some of the statements made on today's call are forward looking, typically preceded by words such as we expect, we believe, we anticipate or similar statements. Please refer to today's press release and the company's filings with the SEC for information about factors which could cause our actual results to differ materially from these forward-looking statements. You'll find reconciliations of non-GAAP measures to the most comparable GAAP measures discussed today in our earnings release, which is posted on our company's IR website at expediainc.com/ir. I encourage you to periodically visit our IR site for important content, including today's earnings release and our updated investor presentation. Finally, unless otherwise stated, all references to cost of revenue, selling and marketing expense, general and administrative expense and technology and content expense excludes stock-based compensation and all comparisons in this call will be against our results for the comparable period of 2009. And with that, let me turn the call over to Dara.

Thanks, Alan, and thanks, everyone for joining us this afternoon. We're pleased to be announcing solid Q3 results today. Unit growth was quite healthy, with growth in air tickets and hotel room nights outpacing the growth that we posted last quarter. And as expected, per unit revenue improved with flat revenue per room night and 4% growth for revenue per air ticket. We also saw another terrific quarter for our Advertising and Media business, with revenue growing a robust 40% driven by TripAdvisor's third-party revenue growth of 59%. Our corporate travel business, Egencia, again posted solid gross bookings and revenue growth, and it's showing continued strength in new client sales across SME, mid-market segments as well as among large accounts. Recent notable new accounts include the U.S. and Canadian divisions of Procter & Gamble and NASDAQ. Now while these Q3 results are quite good, we still have a ton of work to do to address our opportunities and to continue to grow our business over the long term. And although I can't really do a justice in a short call, I'd like to cover a few key focus areas. The quality of our product and the value for the consumer is of utmost importance to maximizing our conversion rates. Recently, we spent a significant amount of time and effort advancing our platform migration and other back end work that will help us ensure that we've got the right foundation to innovate quickly and deliver real, new valuable products and services to our customers. I'll list just a couple of examples amongst many. Our new opaque product in the retail path on Expedia.com. The inventory comes from Hotwire and is a great example of cross-company collaboration and the integration between two of the world's great travel brands. We launched over the summer in the U.S. and just this week, we began to roll it out on Expedia in certain international markets. We plan to continue to experiment with opaque products in international markets more broadly in the future, both on the Expedia point-of-sale as well as directly with the Hotwire brand. Loyalty programs. We've spoken before about the success of the Hotels.com loyalty program WelcomeRewards, and we've now begun rolling it out internationally. In the third quarter, we announced that the Expedia brand is also building out a new loyalty program, which will begin to roll out domestically in January. These are robust programs which we think will differentiate our product offering over the long term. At the same time, our pace of testing, learning and optimizing our product set to consumers has and will continue to accelerate, from improved mapping to automated sort order, improved site speed, mobile sites and applications and many, many more. We're also highly focused on our international opportunities. We've talked a lot about Europe in the past, but today I'd like to focus on the Asia-Pacific region. The market opportunity there is vast, and in many countries, largely untapped. Today, the annual travel market in the APAC region is over 200 billion, of which only around 20% is online. Our total annual gross bookings in the region are just north of $1 billion, representing roughly half a point of share of the total travel market compared to nearly 7% in the U.S. So we're planning to increase our investment level to be sure we're appropriately positioned to grow our share over time. Much of this investment will come in the way of stronger localized product, deeper hotel supply and increased marketing along with new points-of-sale. Expedia, Hotels.com, eLong, TripAdvisor and Egencia are all pushing hard in APAC. And while these efforts will hurt short-term profitability in the region, we expect them to pay off over the long term. Now let me touch a bit more on TripAdvisor. The business continues to grow quite fast and is nearing $500 million annual run rate in gross revenue. Domestically, we recently launched a new cycle, SniqueAway, which is the first private sale meets crowd sourcing site. All the hotels have earned a minimum of four star rating and four out of five review ratings on TripAdvisor. While it's too early to comment on the numbers, we're pleased with the launch and have seen quite a positive customer reaction. And outside the U.S., Trip's international third-party revenue is now roughly 40% of the business and grew over 100% year-over-year in each of the last four quarters. We've recently launched four new international sites in Korea, Thailand, Singapore and just this week, in Russia. We're now in 24 countries, 17 languages. And lastly, on capital allocation, we continue to have confidence in our ability to grow the business while also returning cash to our shareholders. So far in 2010, we've returned over $440 million to our shareholders through share repurchases and dividends, and it's our expectation that we'll continue to return cash to shareholders over the next few years. Now over to Mike.

Thanks, Dara. Just a few additional details about the quarter, and then I'll cover some thoughts about our expectations for the balance of the year. Total revenue grew 16% in Q3, a nice broad-based acceleration from the 8% growth we saw last quarter. In fact, we saw faster growth rates in every major product line, including air, hotel, car, cruise and advertising and media. Revenue margins were nearly flat year-on-year as we've now lapped almost all of the booking fee cuts and reductions that we took last year. In air, the momentum continued, with ticket volume growth of 10% as year-over-year fare increases moderated. Domestic tickets grew nicely, and we're just a couple percentage points below the worldwide growth rate, while international ticket growth continue to outpace domestic. And revenue per ticket grew 4%, all of which led to 14% revenue growth for air, our best quarterly performance for air since the first quarter of 2008. In hotel, healthy room night growth of 14% was accompanied by a flat year-over-year revenue per room night on slightly rising ADRs. As we expected, the gap between ADR growth and revenue per room night growth narrowed considerably. Both domestic and international room right growth accelerated relative to second quarter growth rates. Room night growth in APAC continues to be strong. Hotels.com, for example, saw room night growth in excess of 100% for four of its APAC points-of-sale, with another four growing at least 50%. On the expense side, as expected, we saw leverage in cost of goods sold and in G&A with some deleverage in tech new content in sales and marketing. We'll likely see these general trends continue in the next several quarters as we continue to benefit from operational efficiencies, while also making the investments that Dara mentioned to further expand internationally and to improve our products and services. Sales and marketing included roughly $4 million associated with moving our global lodging supply headquarters to Geneva. For the full quarter, we expect the Geneva expenses to be almost $20 million in 2010, with a recurring annual incremental run rate of about $14 million. And briefly, on occupancy taxes, we recorded an expense of $6 million in the second quarter this year with another $1 million in Q3. Each quarter we evaluate reserve and the balance could fluctuate over time, resulting in additional expense. In addition, in 2011, we expect to pay an incremental $10 million in New York sales tax due to recent legislation. You'll also notice that our effective tax rate this quarter was below 26%. This especially low rate was driven by completion of some IRS audits and the resulting decrease of our liability for uncertain tax positions. We estimate that this resulted in favorability of about $0.06 in earnings per share for the quarter. Looking forward, we expect the effective tax rate to be roughly 34% for the fourth quarter and around 31% for full year 2011. Bolstered by the lower effective tax rate and the impact from share repurchases, adjusted EPS grew 38% for the quarter. As far as our financial expectations are concerned, we're still expecting to deliver low double-digit OIBA growth for the full year 2010, with Q4 revenue and OIBA growth rates similar to those we saw in Q3. Regarding 2011, we are in the midst of our annual planning process and we plan to update you on our thinking for 2011 on the Q4 earnings call. With that, let's turn to questions. Operator, would you please remind listeners how to ask a question.

[Operator Instructions] Our first question comes from the line of Doug Anmuth with Barclays Capital. Douglas Anmuth - Barclays Capital: I just wanted to ask about international bookings and in particular, obviously a tougher comp versus the last quarter. But looks like you did see some deceleration there. Can you talk about what you're seeing in Europe in particular and how you think you're doing in terms of share and in particular, on the agency hotel program with Easy Manage?

I'd say in Europe, we're doing well. I think that we can do better. In general, the gross bookings number on a year-on-year basis in Europe came down a bit as we were rolling over the fee cuts that we put through last year. Revenue on an international basis x FX improved on it on kind of a quarter-to-quarter basis mostly because of revenue per room nights getting much better than they did last quarter. So I'd say on an international basis, in general, we're satisfied with our progress. In Europe, we're satisfied with our progress. Hotels.com on balance, I think, in Europe is doing better. I think Expedia's performance is okay, and it's something that we expect to get better on a go-forward basis. The Easy Manage properties, we've got around 8,000 of them. We've added around 8,000 of them year-to-date. The concentration of those properties is in secondary and tertiary markets. And in some of those markets, we are seeing ranges of 10% to 20% of our bookings being Easy Manage properties. And we think over time, as we establish those Easy Manage properties, as we move them up in the sort order and the new hotels that we're adding mature in our inventory set, we would expect that the percentage of bookings that come through Easy Manage as a percentage of our total bookings especially in secondary and tertiary markets should get higher than the levels that they are now, which is kind of a 10% to 20% level. So we think that we'll see improvement there, and we're happy with the progress. But we think we can do better.

And our next question comes from the line of Imran Khan with JPMorgan. Imran Khan - JP Morgan Chase & Co: Two questions. One, I think you talked about 21% increase in selling and marketing driven by -- one of the big reason is keyword pricing. Could you give us some sense about what kind of conversion and return on investment you were seeing from those increased spending? And secondly, Dara, I think you talked about 43% of the bookings are merchant. Can you give us some sense like what percent of your hotel booking is merchant versus agency and how that trend is trending?

Sure. As far as on the keyword pricing, et cetera, I'll answer that, and then Mike can talk about merchant. The 21% increase in sales and marketing wasn't necessarily all keyword pricing. But it does reflect an increase in aggression on our part in the CPC space and search engine marketing in general. Both and are being very aggressive than some of the new territories that we're going into, new markets in Europe, Asia-Pacific, where we go in with more aggressive efficiencies, so to speak. So that's not necessarily keyword pricing going up. That's just our getting into new markets, which tend to be less efficient from a marketing perspective than, call it, our more mature markets where we have more repeat users, et cetera. So I think while there is some keyword pricing in there, while we are, on balance, being more aggressive in certain markets and we do anticipate being more aggressive in the European, Asia-Pacific markets, it's a combination of our getting into new markets and our being more aggressive on the keyword pricing front. As far as ROI goes, as we get into these new markets, as we increase our spend, our ROI is lower than, call it, the mainline spend that we have in place now. So my expectation will be that for a couple of quarters as we spend up, our CPC ROI will go down, and then what we do is we spend time optimizing the ROI there, understanding which keywords work, understanding which keywords don't, optimizing our landing pages, the presentation to the customer, which usually gets us some efficiency back. But right now, we're in a mode of spending up. You see it in our sales and marketing numbers but also, again, it's something that we manage and you see it in our revenue numbers and gross bookings numbers, which are quite healthy.

On the merchant bookings question, so the vast majority of our Hotel business remains merchant. That 10% to 15% is agency. As between Expedia and Hotels.com, Hotels.com does have a higher agency penetration. And the agency hotel business is growing, and we are working, as Dara indicated earlier, to really deliver more demand to the growing number of EDM [ph] hotels that we have. I think we're up to 20,000, 24,000 in Europe at this time.

And our next question comes from the line of Ingrid Chung with Goldman Sachs. James Mitchell - Goldman Sachs Group Inc.: It's James Mitchell calling on behalf of Ingrid Chung. Could you talk a little bit about what drove the improvement in U.S. hotel room night growth? And in particular, to what extent is the direct function of the incremental sales and marketing spending in the quarter versus any other trends?

I think it was a combination. First of all, the room night growth was fairly broad, and it was a combination of a bit more aggressive sales and marketing. I would say more conversion improvement, especially on the front of Hotels.com. Since we have integrated the platforms last year, the team has been working pretty hard on conversion improvement, site improvement et cetera, and we're seeing some nice results there. So that certainly helped the U.S. room night growth, and Expedia room night growth in the U.S. is very, very solid as well. So I'd say pretty broad strength and something that we're happy about and something that we hope continues.

Our next question comes from the line of Justin Post with Bank of America. Justin Post - BofA Merrill Lynch: Two things. You had OIBA growth, I think, 15% but 22% x currency, and presumably, currency is getting quite a bit better in the fourth quarter. So is your guidance for the kind of the higher number or the lower number? And then the second question is just on TripAdvisor. Can you help us and just remind us what that third-party growth that grew 59% and whether that's attractive growth and that's what you're really trying to drive?

So on FX, we were absolutely hurt on a year-on-year basis as foreign currencies were weaker on a year-on-year basis. As Q3 progressed and now into Q4, we've seen a strengthening of FX rates, but they still are below where they were last year. So we will have another headwind in Q4 as well. So when we are looking at our figures, we're basically using current rates and projecting them through the rest of the quarter.

And I think our TripAdvisor and the third-party revenue, we're pretty neutral as to whether the revenue is third party or intercompany. I would say if you look at TripAdvisor's patterns, really, TripAdvisor and Expedia-Hotel point-of-sale support each other in that as TripAdvisor gets into a new country, it has automatically launch partners with Expedia and Hotels.com, Hotwire to the extent. Well, Hotwire not internationally. But automatically, it has Expedia and Hotels.com as launch partners, which helps TripAdvisor monetize immediately and then allow TripAdvisor to spend marketing money to grow that point-of-sale, so to speak. With time, then TripAdvisor goes out and acquires domestic players to play in the TripAdvisor marketplace and to increase the marketplace. So the average number of OTAs that TripAdvisor works with typically increases as we establish a new TripAdvisor point-of-sale. So that's where you're seeing the third-party revenue growth very quickly. It's growing internationally very quickly. We're accelerating the pace of new TripAdvisor sites on an international basis, and those revenues are growing at triple-digit growth rates along with collect [ph] and a lot of that is third-party revenue after kind of anchor clients come in, which is Expedia and Hotels.com. So I think Trip runs a fair game, and they take all takers. And as long as quick growth grows as fast as it is, it is and will continue to be a perfect business for us.

I'd note that Trip also is growing its CPM advertising and that is almost exclusively third parties as well. Justin Post - BofA Merrill Lynch: So just to confirm, the OIBA guidance is for 15% or roughly in the fourth quarter?

Yes, revenue OIBA similar to Q3, yes.

Our next question comes from the line of Kevin Crissey with UBS. Kevin Crissey - UBS Investment Bank: When I'm thinking about the airlines, you're seeing them start, at least the U.S. airlines anyway, are focusing their growth on international markets, which makes sense. And they're kind of keeping their domestic capacity flat. When you look at your business, as far as the U.S. point-of-sale airline business, do you capture a decent chunk of the international sales relative to the domestic? Or is that a bad trade-off for you to have the airlines growing international at expense of domestic?

No, it's actually pretty balanced. We have seen with the economy struggling a reduction in U.S. to international flights and also, along with that, bookings, kind of room night bookings, from consumers in the U.S. going internationally. And part of that was because tickets going out to Europe, going out to Asia, ticket prices were very, very expensive on a year-on-year basis. The year-on-year comps seem to be easing in general because I think prices started getting a little stronger last year. So as international becomes more affordable, so to speak, we're seeing actually U.S. to international volumes improve both on the air side and the hotel side. So I'd say in general, adding capacity from airlines for us is a good thing. We're happy to see capacity coming into the system. It eases ATPs. And with easier ATP comps, so to speak, our business tends to pick up. I would say, if anything, our business tends to be a bit more internationally focused than domestically focused as far as U.S. consumers go. So international capacity is definitely a positive for us. Kevin Crissey - UBS Investment Bank: And the airlines are commenting that they're seeing nice strong holiday bookings, Thanksgiving, Christmas. Can you confirm that you're seeing that as well?

I don't want to speak specifically to what we're seeing, but generally, what we see is pretty similar to the industry. It's good to see the industry healthy. It's good to see some capacity coming in, and it seems like the capacity is coming in, in a disciplined manner along with demand. And we think that's a good balance.

Our next question comes from the line of Mark Mahaney with Citi. Mark Mahaney - Citigroup Inc: So I guess I'll follow up on that last question just about the overall demand environment. Dara, you've been pretty forthright in your comment two years ago. I think you referred to the dog's breakfast. Is it the opposite of that now, whatever that is?

I wouldn't say that it's a cat's meow yet, but it's gone a lot better. I think that in general, demand has stabilized. In general, I would say we feel better, and I'd say the travel industry feels better than what we see in the overall economic numbers. We are seeing corporate travel coming back pretty nicely, both for us on a same-store basis and as far as signing up new clients. And we are seeing some tightness in occupancy and ADR strength in some of the metropolitan markets where you see a lot of business travel, in the New Yorks of the world, in Hong Kong, in Singapore, in London, et cetera. So I would say all of the signs that we see are pointing upward. Now I'll note that they are against very easy comps. And I think the comps are going to get harder as the year goes on. So I wouldn't declare all systems go yet, but I think the trends are good. And I think to the extent that we have a balanced business, a good, strong domestic business, a strong international business, a strong leisure business, a corporate business that's growing very, very quickly and on top of that, a terrific, terrific media business, I think we'll benefit from all those listings, so to speak. Mark Mahaney - Citigroup Inc: And then can I ask about the SniqueAway opportunity? There's clearly been a kind of market proof of concept of group sales, flash sales, but there's an open question as whether that gets all verticalized, you should have a highly qualified customer base. How big do you think that opportunity is, and can you just walk through some of the simple economics of how you make money on SniqueAway?

Mark, I'd be happy to go through the opportunity as the business matures a little bit. I think in general, if you look at major platforms that have been introduced in the e-commerce space and in travel in general, the core of the introduction of a significant platform has been the opportunity for people to save money. Originally, when we came onto the scene, Hotels.com was on the scene, we were offering merchant rates below rack rates. Then the Internet became the rack rate, so to speak. So opaque models got introduced. Priceline, the Hotwires of the world, the dynamic package business, which allow you to save money. Those were kind of, call it, a second leg of growth for the business. And I think that these flash sales, what you see going on now, these new retail concepts could be a third leg because again, they offer consumers a chance to save significant amounts. SniqueAway is kind of a toe in the water for us. It's being introduced with the Smarter Travel team inside of TripAdvisor, which is a terrific team. And we've introduced it to a small percentage of our email database, which is frankly huge database, really with inventory focused on the East Coast now. And then over the next months, we're going to expand the inventory to the south, to the west, et cetera and build the concept. Early results are very good. We're getting fan mail from our hotel partners, and consumers love it as well. So I'd say the early results are very good, but this is a long journey. It's a very new concept, and we're not ready to declare whether it's long-term, how large it's going to be or exactly what the opportunity is going to be.

Our next question comes from the line of Michael Millman with Millman Research Associates. Michael Millman - Millman Research Associates: A couple of questions. One is you, apparently with a few others, are joining to battle the ITA approval -- FTC approval, and maybe you can talk to that in light of previous comments when they didn't see it necessarily as a big problem. Secondly, at the Choice today, Hotels, one of your favorites I guess, was talking about how it's pushing its loyalty programs because they're much more profitable, for example, than OTAs. I was wondering if you're seeing the hotel industry being better equipped to do that than they have in the past. And then could you talk about car revenues? Are fleets still tight, or is it much more that some of the companies are getting smarter at least from their standpoint in making cars available for the opaque market?

Sure, Michael. I'll try to take of each of them. As far as ITA Google goes, we've been pretty consistent in our view that, first of all, Google was a great partner of ours and we're going to be working more closely together with them on a CPC basis certainly than we ever have. So we certainly don't object to Google as a partner as they are now. We do think that it's just a bad idea to put together the dominant kind of search engine on a worldwide basis with a dominant airline search technology. We just think it squeezes out competition or has the potential of squeezing out competition in the marketplace. It's bad for advertisers. And ultimately, we think that it could be very bad for consumers. So we're a member of this coalition. We think that the coalition will certainly make its case. And we think that the case is, hopefully, will be well received by the government. In the meantime, we're going to work with Google. We're a big spender there, and on a ground level, on a tactical basis, we have a good relationship with them. We just think that this transaction is a bad idea. As far as Choice goes and loyalty programs there, we have a very good relationship with Choice. The CEO there came from Marriott, and Marriott has one of the best loyalty programs there. So it's not a surprise that they are pushing loyalty. I think it makes sense to them. I think any player out there knows that repeat customers are the most profitable customers out there. And I think to try to build out a repeat base is good business, whether you're an airline, whether you're a hotel or whether you're an OTA. And we, along with Choice, see the wisdom of this. And we've made fairly significant investments and we think differentiated investments in the OTA field, both with Hotels.com, WelcomeRewards, which is quite differentiated from what anyone else has and the new Expedia royalty program coming in next year, which I think will be quite differentiated from any other OTA out there. So we believe in loyalty, and we think that there are customers who are going to be Expedia loyal customers and Hotels loyal customers, and they are fundamentally and typically different from, call it, a Choice brand loyal customers. So I don't think that one addition to us is a subtraction to any of the brands out there like Choice. They tend to be more, call it, business customers, et cetera, where we tend to be more leisure-specific. Michael Millman - Millman Research Associates: Well, I didn't really mean it to focus on Choice, but to focus generally and broadly if you're seeing -- and you kind of answered it -- seeing any impact from hotel companies attempting to move away from OTAs in terms of the economics.

Yes, I think the volumes speak for themselves, right? Our volumes are healthy both on a domestic and international basis. And I think that the big brands out there are doing what's smart, which is they have a diversified base. They advertise to bring direct players out there. They've got loyalty programs. They work with OTAs. They work with Google, and all of that helps them build out an occupancy base, which hopefully will allow them to build up ADRs. So I don't think that one, again, is exclusive over the other. I think a smart player builds a multichannel strategy and builds strength in every single channel that they have. If they're stronger with us, they will be able to build out their occupancy base inside their hotel and that will be able to drive premium ADRs in the industry, which is how you win. Again, we haven't seen any kind of negative trends, and our relationship with the brands are, frankly, terrific. As far as the Car business goes, we did see some increase in fleets kind of over the summer. The fleets have tightened up again. And I would say that, yes, the car companies in general, like the airline companies, are more disciplined on a capacity basis. Our Car business is growing nicely, and we want it to grow more. We're looking at opportunities to grow that business. But I would say in general, the Car business for us remains healthy. And in an ideal world, we'd like to see a bit more capacity, but we are seeing to date some capacity restraint, which reflects a bit more discipline on our car vendors than at least we saw two, three years ago.

Our next question comes from the line of Herman Leung with Deutsche Bank Securities. Herman Leung - Deutsche Bank AG: First, ADR trends looks like it's in a pretty good position right now, increasing 4% year-over-year right now. It looks like it's stabilizing there. Can you give us a bit of a breakout in terms of how it trended in domestic versus international markets? And second question is, you guys raised some money on the debt and you guys used it for some buybacks. And there's been some speculation about some potential expansion into Europe through acquisitions. Curious on what your thoughts there are from an acquisition standpoint.

Sure, Herman. As far as ADRs go, I'd say on balance, domestic ADRs are a bit stronger than international ADRs. I'm not sure what effect FX had on that, whether that was a positive or not. So domestic ADRs in U.S. dollars this quarter were stronger than international ADRs in U.S. dollars. And I would expect, again, we've talked about in the past, which is we think we're a bit of a leading indicator as far as ADRs go. We're not sure, we're not counting on ADR strengthening further in Q4, but we certainly don't think they're going to get weaker. If anything, they might get a little bit stronger. Mike, you want to talk about capitalization?

Sure. So on the use of proceeds from the bond offering over the summer and the use of proceeds we stated at the time is general corporate purposes, stock buybacks, M&A. You saw some of the stock buyback activity in the quarter. On M&A, I think you'll continue to see a little bit of more of the same. We'll be looking to continue to make acquisitions in the media side of the business. We'll continue to look for international, say tuck-in acquisitions on the transaction side of the business. So if there's a particular market or markets where we think we can grow better or expand more quickly, we could make an acquisition in that market as well. And also, just given the strong performance of the Egencia business and the huge opportunity that we see there, yes, we're also looking at tuck-in acquisitions for Egencia as well.

And I think in general, Herman, whenever we look at acquisitions, cash acquisitions, we compare the long-term return of those acquisitions to the long-term return of buyback on stock. And just to remind you, since our spin-out, we've bought back around 91 million shares for around $2 billion in cash. And if you look at our capital allocation this year, this year we've been buying back more in stock and returning more capital to shareholders versus acquisition. So far this year, we found that a better use of our capital and the opportunity had certainly been there. We think over time as that cash flow generation of the business is good enough and our balance sheet is certainly good enough with additional cash that we have raised, that we'll be able to do both, with the balance of smart acquisitions and we'll continue to return cash to our shareholders over time.

Our next question comes from the line of Ross Sandler with RBC Capital Markets. Ross Sandler - RBC Capital Markets Corporation: First, on TripAdvisor. The margin there compressed a little bit for the first time in a while. Can you talk about what investments you're making and what's driving that? And then second is more of a hypothetical question around ITA. But according to Hitwise, you guys get around 25% of your traffic from the search engine, the majority of which comes from Google. So if we were to hypothetically assume that the Google ITA deal goes through and that worst case scenario, a couple of years down the road, you lose a meaningful chunk of that organic traffic, how would your marketing mix or your kind of go-to-market strategy change under those hypothetical circumstances?

Mike, you want to talk about Trip?

Sure. So on TripAdvisor, the OIBA margin was 53% for the quarter. So we think absolutely fantastic performance for the business, and the core business continues to grow and be as efficient as ever. We are continuing to make acquisitions to try and fuel growth down the road as well. So the investments are fairly wide-ranging. There are a number of international points-of-sale that we've launched this year. Those tend to operate at a loss to breakeven in the first year or so. We have the investment in SniqueAway that Dara discussed earlier. We are also continuing to invest in the vacation rental space, where we think we have a pretty good opportunity to become pretty large in that space by leveraging the TripAdvisor brand, and we recently made an acquisition in that area to expand internationally. And then China, we've talked about our efforts with TripAdvisor in China fairly significantly, and we acquired a company called Kuxun, which is an air metasearch player. And then we also have a TripAdvisor-like product in China called Daodao. So for us, when we step back and we look at the amount of investments that we're making in this very high margin business and we see it grow as rapidly as it is and still deliver 53% OIBA margin for the quarter, we're pretty pleased with the balance that we've been able to strike between printing earnings as well as making sure that we are building a business for the future.

And Ross, on your ITA question, it's difficult to answer a hypothetical, but a couple of notes there. First of all, the majority of, at least Expedia's, and I believe Hotel.com's traffic that comes from search to our site actually come through people searching for Expedia, for example. So in typing in Expedia in Google or so on, typing in Hotels.com in Google. So of the 25% for Expedia, for example, the majority of that traffic is someone who's already looking for Expedia, and that person is going to find Expedia one way or the other because they are searching for something very specific. Of the searches that aren't Expedia searches, so to speak, there are other searches that we compete for and other players compete for. That traffic tends to be significantly less profitable than the direct traffic, the TripAdvisor traffic, the email traffic, et cetera, that we get. So hypothetical, that minority of traffic might come down. But certainly, it would not affect our profits in the same way because that traffic tends to be much, much less profitable traffic. That is one of our most expensive channels, so to speak. And we do continue to make investments in loyalty channels and loyalty programs, et cetera, to keep consumers coming on a direct basis and build up loyalty and build up reasons for them to come back directly to us, which is the most efficient customer acquisition tool for us.

Our next question comes from the line of Sandeep Aggarwal with Caris & Company. Sandeep Aggarwal - Caris & Company: Actually I have a couple of questions on the Asian market. What kind of investments do you need to make in Asia to fuel your growth further? How long will you be in investment mode there? And can you give us some sense of where you are in terms of current penetration in that market and where you can be in two, three years?

I think as far as APAC goes, the investments that we make is pretty broad. One is just an investment in opening up new points-of-sale. There's technology investment that we have to make. There's a fairly significant localization investment that we have to make as far as taking all of the content that we have, the hotel content, et cetera, and making sure that it's localized so that local customers can find the information in their own languages. There's also investments that we have to make in payments. Payments in each market differ sometimes significantly. For example, India is a big market at the Internet Bank Pay, which is a payment system that we are launching, et cetera. So as you go local, you have to make sure that you'll allow people to pay in their local market currency, so to speak. Initially, when we launch, we typically launch with variable marketing, Google, other variable marketing channels that are available in a local market. And we tend to lose money as we enter that market for the first couple of years. After we establish a presence there, we will sometimes go on with brand marketing, and I think that's the stage that you're seeing some of our points-of-sale in Asia. In Australia, we are investing in brand marketing. In Japan, some of the other points-of-sale. We are establishing a brand which increases traffic to the sites and also tends to increase our conversion number on those sites as well. That kind of brand marketing doesn't bring with it immediate returns and you have to go negative for a while before it turns positive. And I would say that that's where we are in a number of our Asian markets as far as starting the brand marketing spend and then in other markets as far as expanding the reach of our sites. The good news is that Asia, in general, for us is generally a breakeven to positive on the transactional side. With TripAdvisor, we are investing pretty aggressively in China. And then eLong, also in China, has really turned around and has accelerated its growth. So we're well established. We know the game plan there, and we're pretty confident that the investments that we're going to make in Asia are going to bring with them some pretty significant returns over the kind of two to five-year time frame. How big is it going to get is anyone's question. I think if you look at Asia five to 10 years from now, it's going to be as large as, if not larger, than the European, U.S. markets and we want to have the kind of penetrations that we have in the U.S. in Asia, and that's going to take some focus. So we're very much committed to that market.

And our next question comes from the line of Scott Kessler with Standard & Poors Equity. Scott Kessler - S&P Equity Research: Two questions if I may. The first is, obviously, it's a small part of the overall revenue mix, let me say. But Egencia with essentially flat compares on a sequential basis, could you just provide an update on what's going on there? And my second question relates to the M&A that's been occurring in Europe on the OTA front, and obviously, there's been considerable speculations. Can you talk about whether or not you think you would potentially have an interest in participating? And do what you think of the path [ph] you'll make in that regard?

Sure, Scott. Mike, do you want to talk about Egencia?

Yes. So on Egencia, we continue to be pretty pleased with its growth, and it really is kind of across-the-board, different segments in the market, geographically dispersed as well. We are seeing much faster growth rates than we think the industry is experiencing. We grew 40-plus percent gross bookings, and AMEX, I believe, grew about 20%. And so we feel like we are taking share. The comp does start to get a little bit more difficult based upon when corporate travel started to return a bit. For us though, I think what's most positive is that we're seeing the increase in same client spending as well as a lot of the new business that we signed during the recession and then continuing on with new business today. So I think our value proposition continues to resonate very well.

And Scott, on the flat compares, are you talking about revenue Q3 versus Q2? Scott Kessler - S&P Equity Research: Right. So I mean, obviously, if you look at revenue, it's actually incrementally down on a sequential basis, and gross bookings were up very modestly. So that's...

Yes, I'm sorry. But some of that is just the seasonality of the business and particularly in Europe. We see much less travel during the summer, and Egencia did see a fairly high increases in average ticket prices. So that's what's driving the gross bookings up.

Yes, as Egencia gets more mature and actually makes money, which is a nice thing, Q3 will tend to be our weakest quarter from a revenue standpoint and from a profitability standpoint. So you'll start to see that kind of seasonality as the business gets bigger, and that's what you saw this quarter. But we're happy with how we're doing and clients sign-ups are great, and the team is executing nicely and we want to add to that business. As far as the M&A in Europe and the speculation regarding some of the OTA deals out there, listen, we have a lot of cash. We're going to look at all the transactions out there, and we'll decide whether we want to go forward or not. I would tell you, we're very happy with our footprint and anything that we do is going to be measured against buying back our own stock and the fact that we can grow the business through incremental investment in businesses that are already established and management teams that we have confidence in. That doesn't mean that we won't take an opportunity when we see it. We absolutely believe in scale. We've done, I think, quite well as far as return on capital on many of our M&A activities. So we're quite confident in our ability to execute there. But I think I won't comment on specifics. We're looking at deals, and we'll pull the trigger if we think a deal is going to be accretive to us over the long term. And Europe, Asia, Latin America, all of these markets are quite interesting to us. Scott Kessler - S&P Equity Research: And if I could just follow up really quickly. Can you give us a sense of what kind of, I don't know, criteria or touchstones you have for those types of acquisitions? You want them to be accretive, you said, over the long term. Does that mean the first full calendar year that the company has integrated? Are you looking for expansion of geographic footprint? I mean, give us a sense of how you think about these really quickly.

Yes, I'd say that there are a couple of factors that we look at. One is to the extent that it allows us to get into the geography that we think will be very difficult for us to get into, and it's also the significant opportunity that's a big positive. So eLong, for example, in China, we didn't think we could get a position in China as strong as eLong through organic growth. And while eLong had a tough time in its first couple of years, it's really turned around behind the new management team. And I'd say we're very happy that we have a position there. So one is large geographies that we don't think we can get proper scale then through typical organic growth, that's one. The second is if there's a new piece of technology or a new product that we think is an attractive product. Example there is Venere in the agency hotel market that we wanted to penetrate in Europe. It got us in there much more quickly. We're expanding that product in Europe as well as certain other areas of the world. And then the third or just kind of our big growth areas, we love media businesses that we can add to the TripAdvisor team. We would love to add some scale to Egencia because we think that's a big and growing opportunity. So those are also opportunities that we'll certainly keep an eye on. Mike, did you want to make a correction on something that you said or...

I just want to make sure that on the Geneva expenses that I referred to, the $20 million is a full year number.

All right. Well, thank you, operator, for helping us out, and thanks, everyone, for joining the call. We're looking forward to our Q4 call and letting you know how we're doing on the business. Thank you.

Ladies and gentlemen, that concludes Expedia Inc.'s Third Quarter Earnings Conference Call. Thank you for your participation. You may now disconnect.