Crowded Runway for Expedia

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Dot-com pioneer Expedia (Nasdaq: EXPE) isn't getting much love right now. In an increasingly competitive environment, the online travel specialist suffered through a 15% tumble in its share priceWednesday night after reporting disappointing fourth-quarter results.

What's more, revenues rose a mere 13%, while adjusted profitability per share dipped by 26%. That meant the company came up short on both the top and bottom lines relative to Wall Street's expectations.

The company pointed to shortcomings in Europe, particularly in its largest overseas market -- the United Kingdom. But cutthroat competition overseas and foreign exchange fluctuations can't explain away the reality that Expedia's model is being threatened stateside as well.

During Wednesday's conference call, Expedia officials conceded that while 75% of the online audience researching an upcoming trip stops by one of Expedia's online properties, just 5% of all online transactions ultimately get booked through the company.

A decade ago, Expedia and Sabre's (NYSE: TSG) Travelocity had the online travel space to themselves. I remember writing about improving "lookers to bookers" ratios as those companies battled folks' initial reluctance to book travel plans online -- and won.

Back then, the average Internet user just wasn't sophisticated enough to trust the medium. These days, the typical user is too sophisticated to settle for the first quote he or she comes across. It has to hurt Expedia that savvy surfers now know they can save $5 booking fees on many flights by going directly through the airlines. Satisfaction promises and price guarantees sound great on paper, but they're difficult to rely on when modern online users knows what they're doing.

The changed landscape has opened things up to companies such as SideStep, which aggregates the best offerings that some of the other travel sites have to offer and presents the best deals to its visitors in a single package. The dot-com bellwethers are feeling the shift in momentum -- last month, Amazon.com (Nasdaq: AMZN) announced a new travel store by teaming up with SideStep. And you also have more traditional portals out there: Consider that Priceline.com (Nasdaq: PCLN) has now been refashioned as a more conventional travel site.

When IAC/InterActive (Nasdaq: IACI) spun off Expedia, the move was regarded as a way to unlock Expedia's value as a standalone company. But with a growing collection of popular sites such as Hotwire, Hotels.com, TripAdvisor, and its namesake site, it seems that Expedia has begun its second stint as a public company just as the challenges are starting to mount.

That's why all of those costly television ads and brand-building campaigns are unlikely to be the solutions here. Until Expedia catches a break, it's probably better to join the 95% of the online community that has chosen to take a pass on sealing the deal with Expedia.

Priceline and Amazon.com are bothMotley Fool Stock Advisorrecommendations. Want to learn why? Check it out for free with a 30-day trial subscription.

Longtime Fool contributor Rick Munarriz still relies on the portals to get basic travel information, but then he runs off to see whether better deals can be had directly with the provider. He does not own shares in any of the companies in this story.The Fool has a disclosure policy. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.