"Can Travelzoo's (NASDAQ:TZOO) globetrotting pursuits really be a cover for an earnings warning?" I asked last week. The company had just announced several overseas initiatives, but sandbagged the passport-stamping euphoria with fears of "significant expenses related to subscriber marketing campaigns in new markets."

This brings us to yesterday afternoon's earnings release, sent out with just an hour left in the trading day. In it, Travelzoo posted a 16% improvement in revenue to $20.1 million. Earnings dipped to $0.17 per share, after a $0.23-per-share showing a year earlier.

Analysts were expecting better results from the travel publisher. They were looking for a profit of $0.26 a share on a 17% top-line gain. Investors shook off the disappointment, sending the shares 5% higher yesterday. Either the collective market knew the miss was coming, or we'll be seeing more lackluster quarterly reports coming out with 60 minutes left in the trading day.

For Travelzoo's sake, let's hope its big bet on global expansion pays off. The company would have been sitting pretty in the near term if it had stuck within its own borders. The $7.3 million North American operating profit was dragged down by $1.5 million in operating losses everywhere else.

It's a near-term problem. Despite the recent push, 93% of the company's revenue is coming from its profitable North American operation. Because the losses overseas can't be used to offset stateside profits, Travelzoo is stuck paying a whopping 54.2% of pre-tax profits in income taxes.

In short, this will be an amazingly high-margin situation if most of the company's international efforts pay off. The company's Top 20 weekly email product has struck a brand-strumming chord, with nearly 12 million willing recipients on board. There are 10.8 million confirmed double opt-in registered users in North America. Europe is up to 950,000.

It's costing a little more to land each incremental user these days, but they're worth it. Really. The company's North American revenue climbed 12% higher over the past year, despite a mere 9% uptick in Top 20 subscribers. Europe had a robust 83% surge in subscribers, yet managed to grow its top line there by a staggering 102%.

What does this mean? Well, it shows that Travelzoo is milking more out of each subscriber. Whether advertisers are paying more per lead, or free subscribers are more actively pursuing travel deals, it's working.

The Travelzoo difference
Travel providers know that Travelzoo is a high-volume solution to moving excess supply through the site's well-traveled regulars. As a publisher -- unlike more conventional portals like Expedia (NASDAQ:EXPE), newly public Orbitz (NYSE:OWW), and Priceline.com (NASDAQ:PCLN) -- Travelzoo can serve itself up as an omniscient-observer media darling. Travelzoo editor Gabe Saglie has been on NBC's Today show several times. The company's interactive marketing campaign in Las Vegas -- with airport video screens featuring virtual slots that spit out Travelzoo deals -- garnered plenty of free media publicity through coverage on USA Today, CNN Money, and MediaDailyNews.

The company is also making the most of increased traffic to its own website and its SuperSearch feature to expand its reach beyond those looking for hot deals delivered into their email inboxes.

The stakes are high, and the competition is everywhere. Yahoo! (NASDAQ:YHOO) is making no bones about its intention to cash in on its behavioral targeting strengths to play a bigger role in the market. Yahoo! Travel recently enhanced its travel site to include custom-tailored trip recommendations. Priceline rolled out its PriceBreakers offering earlier this year, serving up short-notice travel deals.

It's easy to see why envious online media companies would want a piece of the Travelzoo action. With 98% in gross profit margins, the buckets of drool fill quickly. Even after the costly tabs of marketing and expansion, operating margin this past quarter clocked in at a healthy 29%.

So what's a Travelzoo to do to keep its moat intact? If the loyalty of its 11.8 million members doesn't see the company through, its success may hinge on things like the pair of test booking centers that Travelzoo runs. There, Travelzoo hires pose as mystery shoppers to make sure that the deals being offered are legit and still valid.

Travelzoo is also warming up to the camera, even when the Today show crew is far away. The company's in-house studio has been cranking out videos, giving advertisers a little more bang for their marketing buck. For instance, this week's Top 20 deal for Virgin America's introductory fares features a Travelzoo-produced video detailing the new carrier's selling points.

Standing out may get trickier in the future, but the company's got time on its side. It will take a long time before a rival approaches the company's established base. By that time -- if Europe and Asia are accretive to the bottom line -- the flight may be departing from a gate at a much higher altitude.

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Longtime Fool contributor Rick Munarriz has been inspired by a deal or two on the Travelzoo Top 20 list, but he does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.