Company Quick10K Filing
Quick10K
Trivago
20-F 2018-12-31 Annual: 2018-12-31
20-F 2017-12-31 Annual: 2017-12-31
20-F 2016-12-31 Annual: 2016-12-31
LDOS Leidos 12,157
DOX Amdocs 8,943
FIVN Five9 3,798
SOGO Sogou 1,730
UPWK Upwork 1,542
FORTY Formula Systems 841
PCYG Park City Group 111
RNWK Realnetworks 60
NH Nanthealth 54
MRIN Marin Software 16
TRVG 2018-12-31
Part I
Item 1: Identity of Directors, Senior Management and Advisers
Item 2: Offer Statistics and Expected Timetable
Item 3: Key Information
Item 4: Information on The Company
Item 4A: Unresolved Staff Comments
Item 5: Operating and Financial Review and Prospects
Item 6: Directors, Senior Management and Employees
Item 7: Major Shareholders and Related Party Transactions
Item 8: Financial Information
Item 9: Offer and Listing
Item 10: Additional Information
Item 11: Quantitative and Qualitative Disclosures About Market Risk
Item 12: Description of Securities Other Than Equity Securities
Part II
Item 13: Defaults, Dividend Arrearages and Delinquencies
Item 14: Material Modifications To The Rights of Securities Holders
Item 15: Control and Procedures
Item 16A: Audit Committee Financial Expert
Item 16B: Code of Ethics
Item 16C: Principal Accountant Fees and Services
Item 16D: Exemptions From The Listing Requirements and Standards for Audit Committees
Item 16E: Purchases of Equity Securities By The Issuer and Affiliated Purchasers
Item 16F: Change in Registrant's Certifying Accountant
Item 16G: Corporate Governance
Item 16H: Mine Safety Disclosure
Part III
Item 17: Financial Statements
Item 18: Financial Statements
Item 19: Exhibits
EX-1.2 exhibit12mbrules23april2018.htm
EX-2.2(A) ex22a2019-02x07secondamend.htm
EX-4.9 ex492016omnibusincentivepl.htm
EX-8.1 exhibit81listofsubsidiari.htm
EX-12.1 exhibit121schroemgenssecti.htm
EX-12.2 exhibit122hefersection302c.htm
EX-13.1 exhibit131section1350certi.htm
EX-15.1 exhibit151consentofindepen.htm

Trivago Earnings 2018-12-31

TRVG 20F Annual Report

Balance SheetIncome StatementCash Flow

20-F 1 trvg201820-fusgaap.htm 20-F Document



 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form 20-F
o REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
o SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission file number: 001-37959
trivago N.V.
(Exact name of Registrant as specified in its charter)
trivago Corporation
(Translation of Registrant’s name into English)
The Netherlands
(Jurisdiction of incorporation or organization)
Kesselstrasse 5 - 7, 40221 Düsseldorf, Federal Republic of Germany
(Address of principal executive offices)
Rolf Schrömgens, +49 211 3876840000, Kesselstrasse 5 - 7, 40221 Düsseldorf, Federal Republic of Germany
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
American Depositary Shares, each representing one
Class A share, nominal value €0.06 per share
 
The NASDAQ Stock Market LLC
Class A shares, nominal value €0.06 per share*
 
The NASDAQ Stock Market LLC*
*
Not for trading, but only in connection with the registration of the American Depositary Shares.
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
 
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
42,559,884 Class A shares
308,687,967 Class B shares
(as of December 31, 2018)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    o  Yes    x  No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    o  Yes    x  No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes   o  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
    x  Yes    o  No
Indicate by check mark whether the registrant is a "large accelerated filer," an "accelerated filer," a "non-accelerated filer" or an "emerging growth company."
Large accelerated filer  o       Accelerated filer  x       Non-accelerated filer  o       Emerging growth company  o
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.    o
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 
U.S. GAAP  x
 
International Financial Reporting Standards as issued by the
International Accounting Standards Board  o
 
Other o

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:    
o  Item 17    o  Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    o  Yes    x  No






Table of contents
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART I
 
 
 
 
 
 
 
Item 1
 
 
 
 
Item 2
 
 
 
 
Item 3
 
 
 
 
Item 4
 
 
 
 
Item 4A
 
 
 
 
Item 5
 
 
 
 
Item 6
 
 
 
 
Item 7
 
 
 
 
Item 8
 
 
 
 
Item 9
 
 
 
 
Item 10
 
 
 
 
Item 11
 
 
 
 
Item 12
 
 
 
 
 
 
 
 
 
PART II
 
 
 
 
 
 
 
Item 13
 
 
 
 
Item 14
 
 
 
 
Item 15
 
 
 
 
Item 16A
 
 
 
 
Item 16B
 
 
 
 
Item 16C
 
 
 
 
Item 16D
 
 
 
 
Item 16E
 
 
 
 
Item 16F
 
 
 
 
Item 16G
 
 
 
 
Item 16H
 
 
 
 
 
 
 
 
 
PART III
 
 
 
 
 
 
 
Item 17
 
 
 
 
Item 18
 
 
 
 
Item 19
 
 
 
 







General
As used herein, references to “we,” “us,” the “company,” or “trivago,” or similar terms in this Annual Report on Form 20-F shall mean trivago N.V. and, as the context requires, its subsidiaries.
Our financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles, or U.S. GAAP. Unless otherwise specified, all monetary amounts are in euros. All references in this annual report to “$,” “US$,” “U.S.$,” “U.S. dollars,” “dollars” and “USD” mean U.S. dollars, and all references to “€” and “euros,” mean euros, unless otherwise noted.
We have historically conducted our business through trivago GmbH, and therefore our historical financial statements prior to our initial public offering, or IPO, present the results of operations and financial condition of trivago GmbH and its controlled subsidiaries. In connection with our IPO, trivago N.V. became the holding company of trivago GmbH, and the historical consolidated financial statements of trivago GmbH became the historical consolidated financial statements of trivago N.V. On September 7, 2017, the merger of trivago GmbH into and with trivago N.V. became effective. We refer to such merger as the cross-border merger. Pursuant to the cross-border merger, Messrs. Schrömgens, Vinnemeier and Siewert (whom we collectively refer to as our Founders) exchanged all of their units of trivago GmbH remaining after our pre-IPO corporate reorganization for Class B shares of trivago N.V.
The historical financial statements of trivago GmbH and its controlled subsidiaries made reference to the members’ equity as trivago GmbH Class A units and trivago GmbH Class B units. The equity of a GmbH is not unitized into shares under German corporate law. However, pursuant to the company’s articles of association, we unitized members’ equity into trivago GmbH Class A units and Class B units, with each trivago GmbH Class B unit having 1/1,000 of the voting rights and economic rights of a trivago GmbH Class A unit.
Special note regarding forward-looking statements
This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than present and historical facts and conditions contained in this annual report, including statements regarding our future results of operations and financial positions, business strategy, plans and our objectives for future operations, are forward-looking statements. When used in this annual report, the words “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology identify forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
our ability to grow our revenue in future periods, or at rates deemed sufficient by the market without reducing our profits or incurring losses;
our dependence on a relatively small number of advertisers for our revenue and adverse impacts that could result from their reduced spending or changes in their bidding strategy;
factors that contribute to our period-over-period volatility in our financial condition and result of operations;
our dependence on general economic conditions and adverse impacts that could result from declines in travel or discretionary spending;
the effectiveness of our Advertising Spend, including as a result of increased competition or inadequate or ineffective innovation in or execution of our advertising;
the effectiveness of our measures to increase advertiser diversity on our marketplace;

1





increasing competition and consolidation in our industry;
our focus on hotel and other accommodations if users expect other services;
our ability to innovate and provide tools and services that are useful to our users and advertisers;
our dependence on relationships with third parties to provide us consumer reviews;
our reliance on search engines, which may change their business models or algorithms;
changes to and our compliance with applicable laws, rules and regulations;
the impact of any legal and regulatory proceedings to which we are or may become subject;
potential disruptions in the operation of our systems, security breaches and data protection; and
impacts from our operating globally.
You should refer to the section of this annual report titled “Item 3 D. Risk factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this annual report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
You should read this annual report and the documents that we reference in this annual report and have filed as exhibits to this annual report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.


2





PART I
Item 1: Identity of directors, senior management and advisers
Not applicable.
Item 2: Offer statistics and expected timetable
Not applicable.
Item 3: Key information
A.
Selected financial data
We have derived the data we present in the tables below from our audited consolidated financial statements for the years presented. You should read all of the data in the tables below together with the consolidated financial statements and notes included in “Item 18 Financial statements” and the information we provide in “Item 5 Operating and financial review and prospects.” For fiscal years ended December 31, 2014, 2015 and 2016, refer to our previously filed annual reports on Form 20-F. Our financial statements are prepared in accordance with U.S. GAAP.

3





Statement of operations data
(in thousands, except per share data)
Year ended December 31,
 
2014

 
2015

 
2016

 
2017

 
2018

Consolidated statement of operations:
 
 
 
 
 
 
 
 
 
Revenue
209,137

 
298,842

 
485,942

 
667,802

 
583,395

Revenue from related party
100,195

 
194,241

 
268,227

 
367,581

 
331,421

Total revenue
309,332

 
493,083

 
754,169

 
1,035,383

 
914,816

Costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of revenue, including related party, excluding amortization(1)(3)
1,443

 
2,946

 
4,273

 
5,930

 
5,435

Selling and marketing(1)(3)(6)
286,234

 
461,219

 
673,224

 
946,925

 
805,633

Technology and content, including related party (1)(2)(3)
15,388

 
28,693

 
51,658

 
52,232

 
66,904

General and administrative, including related party (1)(2)(3)
6,536

 
18,065

 
55,602

 
47,444

 
54,326

Amortization of intangible assets(2)  
30,025

 
30,030

 
13,857

 
3,220

 
1,684

Operating loss
(30,294
)
 
(47,870
)
 
(44,445
)
 
(20,368
)
 
(19,166
)
Other income (expense):
 
 
 
 
 
 
 
 
 
Interest expense
(11
)
 
(147
)
 
(137
)
 
(44
)
 
(1,839
)
Gain on deconsolidation of entity

 

 

 
2,007

 

Other, net
(1,435
)
 
(2,667
)
 
(139
)
 
592

 
539

Total other income (expense), net
(1,446
)
 
(2,814
)
 
(276
)
 
2,555

 
(1,300
)
Income/(loss) before income taxes
(31,740
)
 
(50,684
)
 
(44,721
)
 
(17,813
)
 
(20,466
)
Expense/(benefit) for income taxes
(8,644
)
 
(11,318
)
 
6,670

 
(4,764
)
 
1,086

Income/(loss) before equity method investment
(23,096
)
 
(39,366
)
 
(51,391
)
 
(13,049
)
 
(21,552
)
Income from equity method investment

 

 

 

 
63

Net loss
(23,096
)
 
(39,366
)
 
(51,391
)
 
(13,049
)
 
(21,489
)
Net loss attributable to noncontrolling interests

 
239

 
710

 
568

 

Net loss attributable to trivago N.V.
(23,096
)
 
(39,127
)
 
(50,681
)
 
(12,481
)
 
(21,489
)
 
 
 
 
 
 
 
 
 
 
Earnings per share attributable to trivago N.V. available to common stockholders(4)
 
 
 
 
 
 
 
 
 
Basic and diluted
 
 
 
 
0.00

 
(0.05
)
 
(0.06
)
Shares used in computing earnings per share(4)
 
 
 
 
 
 
 
 
 
Basic and diluted
 
 
 
 
237,811
 
274,666
 
350,852
 
 
 
 
 
 
 
 
 
 
Key performance indicator:
 
 
 
 
 
 
 
 
 
Adjusted EBITDA(5)
3,513

 
(1,062
)
 
28,217

 
6,679

 
14,590



4





(1) Includes share-based compensation as follows:
 
Year ended December 31,
(in thousands)
2014

 
2015

 
2016(a)

 
2017

 
2018

Cost of revenue

 
238

 
737

 
115

 
184

Selling and marketing
1,052

 
3,360

 
10,913

 
3,514

 
3,273

Technology and content, net of capitalized internal-use software and website development costs
1,207

 
4,545

 
15,816

 
3,614

 
5,260

General and administrative
123

 
5,986

 
26,256

 
8,782

 
11,985

(a) Share-based compensation expense is primarily attributable to liability award accounting treatment for share-based awards granted in prior periods, see Note 10—Share-based awards and other equity instruments in the notes to our consolidated financial statements.

(2) Includes amortization as follows:  
 
Year ended December 31,
(in thousands)
2014

 
2015

 
2016

 
2017

 
2018

Amortization of Internal use software and website development costs included in technology and content
191

 
475

 
1,410

 
1,742

 
2,214

Amortization of Internal use software costs included in general and administrative
0

 

 

 
408

 
785

Amortization of acquired technology included in amortization of intangible assets
19,927

 
19,927

 
3,750

 
59

 
278


(3) Includes related party expense as follows:  
 
Year ended December 31,
(in thousands)
2014

 
2015

 
2016

 
2017

 
2018

Cost of revenue

 

 

 
68

 
59

Selling and marketing

 

 

 

 
42

Technology and content

 

 

 
361

 
700

General and administrative
1,506

 
3,015

 
5,128

 
109

 
9


(4) Represents earnings per share of Class A and Class B common stock and weighted-average shares of Class A and Class B common stock outstanding for the period from December 16, 2016 to December 31, 2016, the period following the capitalization of the parent company and IPO, and for the period from January 1, 2017 to December 31, 2018 (see Note 14—Earnings per share).
(5) We define adjusted EBITDA as net loss plus: (1) income/(loss) from equity method investment (2) expense (benefit) for income taxes; (3) total other income (expense), net; (4) depreciation of property and equipment, including amortization of internal use software and website development; (5) amortization of intangible assets; and (6) share-based compensation.
Adjusted EBITDA is a non-GAAP financial measure. A “non-GAAP financial measure” refers to a numerical measure of a company’s historical or future financial performance, financial position, or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP in such company’s financial statements. We present this non-GAAP financial measure because it is used by management to evaluate our operating performance, formulate business plans, and make strategic decisions on capital allocation. We also believe that this non-GAAP financial measure provides useful information to investors and others in understanding and evaluating our operating performance and consolidated results of operations in the same manner as our management and in comparing financial results across accounting periods.
Our use of adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results reported in accordance with GAAP, including net loss. Some of these limitations are:
Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

5





Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; and
Other companies, including companies in our own industry, may calculate adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
(6) Includes €1.0 million of selling and marketing expense for the year ended December 31, 2018 that was not included in our unaudited results for the fourth quarter ended December 31, 2018.

We have provided a reconciliation below of adjusted EBITDA to net loss, the most directly comparable GAAP financial measure.
 
 
Year ended December 31,
(in thousands) (unaudited)
2014

 
2015

 
2016

 
2017

 
2018

Net loss
(23,096
)
 
(39,366
)
 
(51,391
)
 
(13,049
)
 
(21,489
)
Income from equity method investment

 

 

 

 
63

Loss before equity method investment
(23,096
)
 
(39,366
)
 
(51,391
)
 
(13,049
)
 
(21,552
)
Expense (benefit) for income taxes
(8,644
)
 
(11,318
)
 
6,670

 
(4,764
)
 
1,086

Loss before income taxes
(31,740
)
 
(50,684
)
 
(44,721
)
 
(17,813
)
 
(20,466
)
Add/(less):
 
 
 
 
 
 
 
 
 
Interest expense
11

 
147

 
137

 
44

 
1,839

Gain on deconsolidation of entity

 

 

 
(2,007
)
 
0

Other, net(i)
1,435

 
2,667

 
139

 
(592
)
 
(539
)
Operating loss
(30,294
)
 
(47,870
)
 
(44,445
)
 
(20,368
)
 
(19,166
)
Add:
 
 
 
 
 
 
 
 
 
Depreciation (property and equipment, internal-use software and website development)
1,400

 
2,649

 
5,083

 
7,802

 
11,370

Amortization of intangible assets
30,025

 
30,030

 
13,857

 
3,220

 
1,684

EBITDA
1,131

 
(15,191
)
 
(25,505
)
 
(9,346
)
 
(6,112
)
Add:
 
 
 
 
 
 
 
 
 
Share-based compensation
2,382

 
14,129

 
53,722

 
16,025

 
20,702

Adjusted EBITDA
3,513

 
(1,062
)
 
28,217

 
6,679

 
14,590

(i) Consists primarily of foreign exchange gain/loss in the years ended December 31, 2014, 2015, 2016, 2017 and 2018, the non-recurring reversal of a €1.6 million indemnification asset in 2015 related to the 2013 acquisition by Expedia Group, Inc. (formerly Expedia, Inc.), income from American Depositary Shares offset by custodial fees related to American Depositary Shares in 2017 and 2018, income from the canteen of our corporate headquarters in 2018, government subsidies for research and development activities in 2017 and 2018, and and rent income for office subleases in 2018.


6





Balance sheet data
The following table sets forth selected consolidated statement of financial position data as of the dates indicated:
 
As of December 31,
(in thousands)
2014

 
2015

 
2016

 
2017

 
2018

Cash and cash equivalents
6,142

 
17,556

 
227,298

 
190,201

 
161,871

Total assets
750,798

 
760,255

 
1,007,246

 
1,078,454

 
1,095,543

Total current liabilities
15,975

 
72,009

 
61,103

 
78,387

 
60,921

Net assets
664,568

 
624,356

 
854,071

 
853,975

 
853,583

Retained earnings (accumulated deficit)
(90,029
)
 
(129,156
)
 
(179,837
)
 
(192,318
)
 
(213,664
)
Total stockholders' equity
664,568

 
622,280

 
654,258

 
853,975

 
853,583


As of December 31, 2018, we had American Depositary Shares, or ADSs, representing 42,559,884 Class A shares outstanding and 308,687,967 Class B shares outstanding. Prior to our corporate reorganization in connection with our IPO, we operated as trivago GmbH, a limited liability company formed under the laws of the Federal Republic of Germany. The equity of a GmbH is not unitized into shares under German corporate law. However, pursuant to the company’s articles of association, we unitized members’ equity into trivago GmbH Class A units and Class B units, with each trivago GmbH Class B unit having 1/1,000 of the voting rights and economic rights of a trivago GmbH Class A unit. The subscribed capital of trivago GmbH as of December 31, 2014 and 2015 was €0.04 million and €0.05 million, and the issued capital of trivago N.V. as of December 31, 2016, 2017 and 2018 was €127.2 million, €193.7 million and €187.8 million, respectively.
Selected consolidated cash flow statement data
The following table sets forth selected consolidated cash flow statement data for the periods indicated:
 
Year Ended December 31,
(in thousands)
2014

 
2015

 
2016

 
2017

 
2018

Cash provided by (used in):
 
 
 
 
 
 
 
 
 
Operating activities
630

 
(831
)
 
31,346

 
(8,521
)
 
(4,584
)
Investing activities
(4,623
)
 
(6,510
)
 
(8,995
)
 
(18,286
)
 
(24,145
)
Financing activities
1,039

 
18,971

 
187,644

 
(7,216
)
 
161

Effect of exchange rate changes on cash
105

 
(32
)
 
(54
)
 
(1,259
)
 
(24
)

B.
Capitalization and indebtedness
Not applicable.
C.
Reasons for the offer and use of proceeds
Not applicable.


7





D.
Risk factors
Our business faces significant risks. You should carefully consider all of the information set forth in this annual report and in our other filings with the United States Securities and Exchange Commission, or the SEC, including the following risks that we face and that are faced by our industry. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. This annual report also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements as a result of certain factors including the risks described below and elsewhere in this annual report and our other SEC filings. See “Special note regarding forward-looking statements” above.
Risks related to our industry and business
We may not be able to grow our revenue in future periods, or at rates deemed sufficient by the market without reducing our profits or incurring losses.
We achieved positive net income in the second half of 2018 by making significant reductions in our Advertising Spend to adapt to the changing dynamics on our marketplace. These reductions resulted in a decline in revenue for the year 2018 compared to 2017. We expect to continue to report declines in revenue until comparable prior periods also include the impact on revenue from reductions in our Advertising Spend. After these reductions are also reflected in our prior-period financial results, we believe the degree to which we are able to return to revenue growth without reducing our profits or incurring losses will be an important factor in how our business will be valued by the market. We may not be able to increase our revenue in future periods without reducing our profits or incurring losses, or our revenue may decline even when we are unprofitable. This may occur for any number of reasons, and may reflect:
declines in the emphasis that our advertisers wish to place on our hotel metasearch as an advertising channel, particularly as we increasingly compete with them for traffic on other advertising channels, including on television and in auctions for search engine keywords (including bidding for trivago-related keywords);
possible reductions in the marginal returns from our Advertising Spend reflecting changes in the effectiveness of our advertising over time, and our brand awareness in light of the strategies of our competitors as they may choose to increase their Advertising Spend;
the possibility that our advertisers prioritize profitability over of traffic growth when they set their return-on-investment targets for their spend on our marketplace;
a slowdown or reduction in our ability to attract and retain users in an increasingly competitive environment, or a loss of users for other reasons, such as a failure to deliver satisfactory search results, transaction experiences or high-quality services;
the maturation of our business such that future growth rates could be muted unless we reduce our profits or incur losses from increased Advertising Spend;
the emergence of alternative business models and new competitors; and
slowing growth of the overall online hotel search market, for example, as a result of market saturation in more mature markets or deteriorating general or local economic conditions.
In any event, we do not expect our revenue growth rate in coming years to be as high as those we experienced in years prior to 2017 and, accordingly, we expect the variability, cyclicality and seasonality in our business to continue to be more pronounced or at least more apparent. This may result in greater fluctuations of our revenue, cash flows, results of operations and other key performance measures from period to period or among segments, and may affect the price of our ADSs and increase their trading volatility. In addition, our revenue may not increase at the same rate as in years prior to 2018 or at all. If our revenue continues to decline, our business, results of operations, financial condition and prospects may be adversely affected, and the price of our ADSs may decline.

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We derive a large portion of our revenue from a relatively small number of advertisers. A reduction in spending or any change in their bidding strategy by one or more of these advertisers could harm our business and negatively affect our financial condition and results of operations.
Our "cost-per-click," or CPC, pricing for click-based advertising depends, in part, on competition among advertisers on our marketplace, with advertisers that pay higher CPCs generally receiving better advertising placement and more referrals from us. Although we aim to improve advertiser diversification and competition on our marketplace in the long term, we continue to generate the great majority of our revenue from our largest online travel agency, or OTA, advertisers. For the years ended December 31, 2016, 2017 and 2018, we generated 43%, 44% and 39% of our total revenue, respectively, from Booking Holdings (formerly, The Priceline Group), including its affiliated brands Booking.com and Agoda. Brands affiliated with our majority shareholder, Expedia Group, Inc., or, together with its subsidiaries, Expedia Group, accounted for 36% of our total revenue for each of the years ended December 31, 2016, 2017 and 2018, respectively.
Our ability to grow revenue from our existing advertisers, whether large or not, is dependent to a significant extent on our ability to maintain and diversify our relationships with them. Advertisers are likely to reduce their advertising on our platform or cease it altogether if their Advertising Spend does not generate referrals, customers, bookings or revenue and profit for them on a basis they deem to be cost-effective. Advertisers may reduce or cease their advertising on our platforms for reasons not related to the value we can deliver to them, such as a weakening of their own financial or business conditions or external economic effects. The loss of any of our major advertisers, including Booking Holdings, Expedia Group or their affiliated brands, on some or all of our platforms, or a reduction in the amount they spend, could result in significant decreases in our revenue and profit, as well as an increase in credit losses if such advertisers or affiliated brands fail to pay us, and could have a material adverse effect on our business, results of operations, financial condition and prospects.
Even if we improve our product and deliver value to our advertisers, the fact that a significant portion of our revenue is generated from brands affiliated with Booking Holdings and Expedia Group can permit them, depending on marketplace dynamics, to adjust their CPC bids and obtain the same or increased levels of referrals, customers, bookings or revenue and profit at lower cost. This can occur if one or more advertisers with sufficient market share to influence our aggregate CPC levels change their return-on-investment targets for their spend on our marketplace. We believe that, in 2018, changes in our advertisers' return-on-investment targets negatively affected our share of the overall booking revenue generated by them from referrals on our platform and negatively impacted our Referral Revenue levels. Our advertisers may also change their CPC bidding on our marketplace in response to changes we may make to our sorting and ranking algorithm, which may, in turn, negatively impact our revenue levels and profitability. This appeared to be the case in the fourth quarter of 2017 when some of our largest advertisers tested their landing pages in response to a new version of the relevance assessment, which reflects our assessment of the quality of users' experience after clicking out to an advertiser from our website and functions as an adjustment to advertisers’ CPC bids in our marketplace auction process. This could also be the case in the future if we make further changes to the relevance assessment or decide, as a result of discussions with our advertisers, to eliminate it entirely.
Our advertisers may also change their bidding strategies on our marketplace to maximize the effectiveness of their spend on other marketing channels, particularly in auctions for search engine keywords on Google. We regularly compete with our advertisers on these marketing channels and adjust our spending on those channels based on trends we see in our results. If changes in large advertisers’ strategies on our marketplace cause us to spend significantly less on these marketing channels, we would also generate fewer Qualified Referrals and, as a result, our revenue and results of operations would be adversely affected. Such advertisers may also experience improvements in their competitiveness on such other channels, providing them with additional financial benefits from pursuing such a strategy.

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If we are unable to increase the diversity of our advertiser base, we will continue to be subject to the risks that advertiser concentration could lead to the adverse effects described above. The manifestation of any of these risks is likely to have a material adverse effect on our business, results of operations, financial condition and prospects.
We are subject to a number of factors that contribute to significant period-to-period volatility in our financial condition and results of operations. These factors have impacted and may continue to negatively impact our ability to meet the financial guidance that we communicate to the market.
Our financial condition and results of operations have varied and may continue to vary considerably from period to period. This was reflected in the quarter-to-quarter changes in our profitability in 2018, the decline in revenue that we experienced in 2018 and the rapid slowdown in revenue growth that we experienced in the second half of 2017. We cannot reliably predict our advertisers' future advertising spend or CPC levels or other strategic goals they hope to achieve through changes in bidding on our marketplace and, as a result, it is difficult for us to forecast advertiser demand, especially since our advertisers can and often do change their CPC bidding levels with little or no notice to us. Resulting changes in Referral Revenue, especially as a result of changes in CPC bidding levels by our largest advertisers, can result in our not having enough time to pull back our Advertising Spend, particularly on television, quickly enough to respond to the speed of the change in revenue levels. As we spend the great majority of our revenue on advertising, such a failure to pull back Advertising Spend quickly enough can have a rapid and significant adverse effect on our profitability and results of operations.
In addition, almost all of our agreements with OTAs, hotel chains and independent hotels may be terminated at will or upon three to seven days’ prior notice by either party. As a result, the financial guidance that we provide is subject to significant uncertainty, especially when the factors above are considered together with other trends, such as changing foreign exchange rates, user demand for travel services, regional and global economic conditions and other external factors that may impact our users’ discretionary spending. These fluctuations and any resulting inability to meet financial guidance may have a material adverse effect on our business, results of operations, financial condition and prospects.
We are dependent on general economic conditions, and declines in travel or discretionary spending generally could reduce the demand for our services.
Our results of operations and financial prospects are significantly dependent upon users of our services and the prosperity and solvency of the OTAs, hotel chains and independent hotels that have relationships with us. Travel, including hotel room reservations, is dependent on personal and business discretionary spending levels. Demand for travel services tends to decline, along with the advertising budgets spent by hotels and other accommodation aggregators, during general economic downturns and recessions. Events and developments that cause deteriorations in economic conditions on a national, regional or global level, or are perceived as likely to lead to such deteriorations, can quickly affect our business. In particular, our financial results may be adversely impacted by economic uncertainty arising from continued uncertainty relating to the United Kingdom’s anticipated withdrawal from the European Union, or Brexit. Conditions that reduce disposable income or consumer confidence, such as an increase in interest rates (which, among other things, could cause consumers to incur higher monthly expenses under mortgages), unemployment rates, direct or indirect taxes, fuel prices or other costs of living, may lead users to reduce or stop their spending on travel or to opt for lower-cost products and services, and these conditions may be particularly prevalent during periods of recession, economic downturn or market volatility and disruption. International travel may also be affected by changes in exchange rates among significant origin and destination countries.
Any significant decline in travel, consumer discretionary spending or the occurrence of any of the foregoing conditions may reduce demand for our services. They can also cause advertisers to become financially distressed, insolvent or fail to pay us for services we have already provided. The occurrence of any of the above could have a material adverse effect on our business, results of operations, financial condition and prospects.

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Our ability to maintain and increase brand awareness in order to improve our financial performance and return to revenue growth is dependent on the effectiveness of our Advertising Spend. Increased competition, or inadequate or ineffective innovation in and execution of our advertising could harm our business and negatively affect our financial condition and results of operations.
We rely heavily on the trivago brand. Awareness, perceived quality and perceived differentiated attributes of our brand are important aspects of our efforts to attract and expand the number of users of our websites and apps. Many of our competitors have more resources than we do and can spend more on advertising their brands and services. As a result, we are required to spend considerable amounts of money and other resources to preserve and increase our brand awareness . Competition for top-of-mind awareness and brand preference is intense among online hotel search services, globally and in key geographies. If we are unable to effectively preserve and increase our brand awareness, we may be unable to successfully maintain or enhance the strength of our brand.
In recent years, we have engaged in successful broad-reaching TV marketing campaigns. We expect to continue to invest in TV marketing campaigns, including in geographies where our brand is less well known. As we make these investments, we may observe increasing prices in light of increased spending from competitors or may see reduced benefits from our advertising due to, among other things, increasing traffic share growth of search engines as destination sites for users. In addition, our advertising efforts may become less cost-effective or less efficient than they have been historically.
In order to maintain or increase the effectiveness of our TV advertisements, we may need to develop new creative concepts in our advertisements, and these advertisements may not be as effective in terms of Return on Advertising Spend as those we have used in the past.
In addition, our competitors may increase their spending on advertisement campaigns, which could cause the marginal returns on our advertisements to decline. This may occur even if we make substantial investments in innovative technologies and concepts in our advertising. Increased Advertising Spend by our competitors could also result in significant increases in the pricing of one or more of our marketing and advertising channels, which could increase our costs for advertising (which already consume most of our revenue) or cause us to choose less costly but less effective marketing and advertising channels.
TV advertising accounts for a large percentage of our Advertising Spend, and often has higher costs than other channels. Our marginal returns from TV advertising may also be negatively affected over time by declining viewership in certain age groups and changes in viewing patterns that reduce viewer exposure to advertising. If TV advertising becomes less effective or if we experience diminishing returns from TV advertising overall or in key markets, we may instead invest in other, more expensive channels, which may not be as successful. In order to maintain our brand awareness, we may also need to invest in new advertising formats, such as online video, with which we have less experience. If we are unable to maintain or enhance consumer awareness of our brand or to generate demand in a cost-effective manner, it may have a material adverse effect on our business, results of operations, financial condition and prospects.
We are currently taking steps to increase advertiser diversity on our marketplace. If these measures are unsuccessful and we are unable to integrate additional inventory to our platform, or to successfully monetize that inventory, our financial performance could be materially adversely affected.
We continue to take steps to increase advertiser diversity on our marketplace, including increasing the representation of new advertisers in our marketplace and integrating the vacation rental and private apartment inventory of HomeAway, Inc., or HomeAway, and other advertisers onto our search platform. We aim to integrate additional inventory of alternative accommodation going forward. Increasing the representation of additional advertisers on our platform requires large, skilled, multi-lingual sales teams that will continue to be substantially smaller and less experienced than the advertising teams of many of our competitors. In the case of vacation rentals, we face challenges in integrating alternative accommodations into our platform since those properties have attributes substantially different from hotel rooms, our traditional area of focus. In addition, the online vacation rental market is rapidly evolving, and if we fail to predict the manner in which

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that market develops or if large vacation rental providers are able to acquire a larger share of the alternative accommodation market at our expense, our financial performance may be harmed.
If our efforts to integrate additional inventory and diversify our marketplace are unsuccessful or if our competitors can provide more attractive advertising terms to potential advertisers, we may be unable to provide as broad a set of search results and as detailed pricing information to our users as our competitors are able to provide, which may have a material adverse effect on our business, results of operations, financial condition and prospects.
Increasing competition and consolidation in our industry could result in a decrease in the amount and types of hotel and other accommodation information we display, the value of our services to users and a loss of users, which would adversely affect our business, results of operations, financial condition and prospects.
We operate in an increasingly competitive travel industry. Many of our current and potential competitors, including hotels themselves (both hotel chains and independent hotels), and metasearch engines, such as Kayak, TripAdvisor and Google Hotel Ads, locally focused metasearch engines, such as Qunar, OTAs, such as Booking.com, Ctrip and Brand Expedia, alternative accommodation websites, such as Airbnb and HomeAway, and other hotel websites, have been in existence longer, may have larger user bases, may have a wider ranges of products and services and may have greater brand recognition and customer loyalty in certain markets and/or significantly greater financial, marketing, personnel, technical and other resources than we do. Some of these competitors may be able to offer products and services on more favorable terms than we can. Metasearch websites, particularly Google Hotel Ads, are also expanding globally, are becoming increasingly competitive and are, in some cases, adopting strategies and developing technologies and websites that are very similar to ours. Competition could result in higher traffic acquisition costs, lower CPC levels and reduced margins on our advertising services, loss of market share, reduced user traffic to our websites and reduced advertising by hotel companies and other accommodation advertisers on our websites. If fewer advertisers choose to advertise on our website, we will have less information available to display, which makes our services less valuable to users.
In addition, many of these competitors may be able to devote significantly greater resources to marketing and promotional campaigns; attracting and retaining key employees; securing participation of hotels and access to hotel information, including proprietary or exclusive content; website and systems development; research and development; and enhancing the speed at which their services return user search results. Our competitors may also be able to adjust their marketing spend more quickly or allocate it more efficiently than we can or improve their product more quickly and effectively, especially since they have more complete information about their users than we do about ours. Many of these competitors may also offer user incentives, such as loyalty points or priority access to services, which may not be available if users book through third-party sites or services. Some of our competitors continue to conduct advertising campaigns expressly designed to drive consumer traffic directly to their websites. Furthermore, certain alternative accommodation and OTA websites have added other travel services, such as tours, activities, hotel and flight bookings, any of which could further extend their reach into the travel market.
As a result, competition and consolidation, individually or in the aggregate, could result in higher traffic acquisition costs, reduced operating margins, loss of market share, reduced user traffic to our websites and reduced advertising by OTAs and hotels on our websites, which could have an adverse impact on our CPCs. This, in turn, may have a material adverse effect on our business, results of operations, financial condition and prospects. In addition, competition and consolidation among our advertisers may cause some of them to have financial difficulties, default on or materially delay their obligations to pay us for services we have already provided or become insolvent. As a result, we may not be able to compete successfully against current and future competitors, and competition and/or consolidation among advertisers may have a material adverse effect on our business, results of operations, financial condition and prospects.

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We have chosen to focus exclusively on providing search services for hotels and other types of accommodation. If users expect to be able to book other services when they book accommodation, they may choose to utilize the websites of our competitors rather than ours, which would negatively impact our financial condition and results of operations.
We are focused exclusively on helping users find their ideal hotel room, with an increasing focus on other types of accommodation. Because we believe this focus will help us develop a platform that displays hotels that match individual users’ ideal hotel characteristics, we have decided that our search engine should not cover services that are outside our core area of focus. As a result, users cannot use our platform to book air travel, rental cars, tours, cruises and other services with our advertisers, while they can book or otherwise obtain information about at least some of these services on the websites of nearly all of our major competitors. If we are unable to provide users with information they deem useful, or our competitors are able to provide more attractive offers for accommodation coupled with attractive offers for other services, or our users demand to see more comprehensive offers akin to those of our competitors, we may not realize the anticipated benefits of this strategy, which could negatively impact our competitiveness, financial condition and results of operations.
If we do not continue to innovate and provide tools and services that are useful to users and advertisers, we may not remain competitive, and our revenue and results of operations could suffer.
Our success depends on continued innovation to provide features and services that make our websites and apps useful for users. Our ability to attract users to our services depends in large part on providing a comprehensive set of search results and a broad range of offers across price ranges. To do so, we maintain relationships with OTAs, hotel chains and independent hotels to include their data in our search results. Although we maintain a very large searchable database of hotels from around the world, we do not have relationships with some significant potential advertisers, including some major hotel chains, many independent hotels, smaller chains and certain large providers of alternative accommodations. In addition, consolidation among advertisers, or a change to more coordinated or centralized marketing activities within OTA groups and hotel chains, could reduce the number of offers we have available in our marketplace for each hotel. The loss of existing relationships with advertisers, our inability to continue to add new ones, including providers of alternative accommodations or the decision by one or more advertisers to deactivate part or all of their of their inventories in one or more geographical regions, may reduce the comprehensiveness of our search results, which could reduce user confidence in the search results we provide, making us less popular and could, because there are fewer offers made on our marketplace, enable advertisers to bid less for offers.
In addition, our competitors are constantly developing innovations in online hotel-related services and features. As a result, we must continue to invest significant resources in research and development in order to continuously improve the speed, accuracy and comprehensiveness of our services. We have invested, and in the future may invest, in new business strategies and services. These strategies and services may not succeed, and, even if successful, our revenue may not increase. In addition, we may fail to adopt and adapt to new technology, especially as Internet search, including through Google and Amazon, potentially moves from a text to voice interface over the coming years. If we are unable to continue offering innovative services, we may be unable to attract additional users and advertisers or retain our current users and advertisers, which may have a material adverse effect on our business, results of operations, financial condition and prospects.
One of our product features depends, in part, on our relationship with third parties to provide us with consumer reviews.
Certain third parties provide us with consumer reviews that we provide to our users along with our proprietary rating score. If these third-party data providers terminate their relationships with us, the information that we provide to users may be limited or the quality of the information may suffer, which may negatively affect our users’ perception of the value of our product and our reputation.

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The measures we are implementing that are designed to maximize the lifetime value of our users may not generate the long-term financial benefits that we anticipate.
We continue to implement measures that are designed to focus less on the click-based revenue generated by our users in each session and more on the booking value that our users generate for our advertisers over multiple sessions (or over the "lifetime" of the user). These measures include, on the one hand, changes to how we make decisions about allocating Advertising Spend to our performance marketing campaigns by tracking how likely a user that comes to us from a channel is to book a hotel with an advertiser (which we refer to our "attribution model"). On the other hand, these measures involve enhancements to our site that encourage users to spend more time exploring and interacting with our site and its features before being referred to one of our advertisers.
Although we aim for these measures to have a long-term positive effect on our profitability and revenue by focusing on traffic quality instead of volume, they may not produce the long-term financial benefits that we expect. We rely on assumptions, estimates and test data to determine whether these changes to our product and Advertising Spend are effective, particularly in terms of booking conversion. In particular, we assume that our advertisers will ultimately be willing to pay more for referrals that are more likely, in our view, to lead to a completed booking. However, this assumes that our definition of value matches that of our advertisers, who may instead perceive value in referrals that do not result in an immediate hotel booking but have the potential to deliver repeat users of their websites in the future. If our advertisers do not perceive added value for them from enhancements we make, they may be unwilling to pay us more after we have introduced these enhancements, in which case our user growth, business and our results of operations could be negatively impacted.
In addition, while we expect these initiatives may lead to short to medium-term reductions in our revenue and profitability, the extent of these effects is difficult to predict, and the initiatives could cause revenue to grow more slowly than we anticipate or lead to revenue declines, and could lead to losses. They may also lead to increased volatility in our quarterly results.
We rely on assumptions, estimates and data to make decisions about our business, and any inaccuracies in, or misinterpretation of, such information could negatively impact our business.
We take a data-driven, testing-based approach to managing our business, where we use our proprietary tools and processes to measure and optimize end-to-end performance of our platform. Our ability to analyze and rapidly respond to the internal data we track enables us to improve our platform and make decisions about allocating marketing spend and ultimately convert any improvements into increased revenue. While the internal data we use to judge the effectiveness of changes to our platform and to make improvements to our attribution model are based on what we believe to be reasonable assumptions and estimates, our internal tools are not independently verified by a third party and have a number of limitations. We only have access to limited information about user behavior compared to many of our competitors that in many cases can record detailed information about users who log onto their websites or who complete a booking or other transaction with them. Although we aim to increase how often our users log in to our site, our efforts in this respect are only in their early stages.
In addition, our ability to track user behavior is also subject to considerable limitations, for example, relating to our ability to use cookies and browser extensions to analyze behavior over time, and to difficulties pertaining to users who use multiple devices to conduct their search for accommodation. In particular, users can block or delete cookies through their browsers or “ad-blocking” software or apps. The most common Internet browsers allow users to modify their browser settings to prevent cookies from being accepted by their browsers, or are set to block third-party cookies by default. At least one major browser has introduced extensive privacy features, including the imposition of a strict time limit on tracking tools' lifespans. Any of these developments may inhibit our ability to use cookies to better understand and track our users’ preferences to improve our platform, to optimize our marketing campaigns and our advertisers’ campaigns and to detect and prevent fraudulent activities. In addition, we are to a significant extent dependent upon certain advertisers for specific types of user information, including, for example, as to whether a user ultimately completed a booking. Furthermore, our or our advertisers’ methodologies for tracking this information may change over time.

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If the internal tools we use to judge the effectiveness of changes to our platform produce or are based on information that is incomplete or inaccurate, or we do not have access to important information, or if we are not sufficiently rigorous in our analysis of that information, or if such information is the result of algorithm or other technical or methodological errors, the decisions we make relating to our website, marketplace and allocation of marketing spend may not result in the positive effects in terms of profitability, revenue and user experience that we expect, which may negatively impact our business, results of operations, financial condition and prospects.
We rely on search engines, which may change their business models or search engine algorithms in ways that could have a negative impact on our business, financial performance and prospects.
We use Bing, Google, Naver, Yahoo! and other Internet search engines to generate traffic to our websites, principally through the purchase of hotel-related keywords. We obtain a significant amount of traffic via search engines and therefore utilize techniques such as search engine optimization and search engine marketing to improve our placement in relevant search queries. Google and other search engines frequently update and change the logic that determines the placement and display of results of a user’s search. If a major search engine changes its algorithms in a manner that negatively affects the search engine ranking, paid or unpaid, of our websites or that of our third-party distribution partners, or if competitive dynamics impact the costs or effectiveness of search engine optimization, search engine marketing or other traffic generating arrangements in a negative manner, it may have a material adverse effect on our business, results of operations, financial condition and prospects.
To the extent that Google or other leading search or metasearch engines that have a significant presence in our key markets, disintermediate OTAs or travel content providers, whether by offering their own comprehensive travel planning or shopping capabilities, or by referring leads to suppliers, other favored partners or themselves directly, there could be a material adverse impact on our business and financial performance. In particular, Google appears to continue to direct an increasing amount of traffic to its own hotel search platform (which it refers to as “Hotel Ads”) at the expense of traditional keyword auctions. We purchase hotel-related keywords on Google to obtain a significant amount of traffic. The introduction of Hotel Ads may have a negative impact on the attractiveness of our brand in these auctions. In addition, we have introduced Hotel Ads as a marketing channel in some markets. Our placement in Hotel Ads’ results is dependent on factors used by its algorithm to rank and display our offers, resulting in dynamics significantly different from search engine marketing in the form that we are currently familiar with. This may present a challenge since we may have significantly less flexibility to direct traffic to our website using that platform compared to traditional hotel-related keyword advertising. In addition, our major advertisers might not be amenable in some cases to our using their inventory to compete with them on Hotel Ads, which may present a further difficulty if Google continues to direct traffic in this manner.
In addition, a significant amount of traffic is directed to our websites through our participation in DEA campaigns on search engines, advertising networks, affiliate websites and social networking sites. Pricing and operating dynamics for these traffic sources can experience rapid change, both technically and competitively. Any of these providers could also, for competitive or other purposes, alter their search algorithms or results, causing our websites to place lower in search results, which may reduce our user traffic and may have a material adverse effect on our business, results of operations, financial condition and prospects.

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A failure to comply with current laws, rules and regulations or changes to such laws, rules and regulations and other legal uncertainties may adversely affect our business, financial performance, results of operations or business growth.
Our business and financial performance could be adversely affected by unfavorable changes in or interpretations of existing laws, rules and regulations or the promulgation of new laws, rules and regulations applicable to us and our businesses, including those relating to hotels, the Internet and online commerce, Internet advertising, presentation of online offers, consumer protection, anti-corruption, anti-trust and competition, economic and trade sanctions, tax, banking, data security and privacy. Regulatory authorities or courts could prevent or temporarily suspend us from carrying on some or all of our activities or otherwise penalize us (including imposing financial penalties and restricting our conduct going forward) if our practices were found not to comply with applicable legal, regulatory or licensing requirements or any binding interpretation of such requirements. Changes we might be required to make to our practices as a result of regulatory or judicial action, could decrease demand for our services, limit marketing methods and capabilities available to us, affect our margins and increase our costs.
Regulators continue to increase their focus on the consumer facing business practices of companies active in the Internet search sector, in particular with respect to the providers of online travel search and booking services. A number of regulators in various countries have been investigating marketing and selling practices in the sector generally as well as of individual companies. For example, the U.K. Competition & Markets Authority, or CMA, announced the launch of a consumer law investigation into online hotel booking sites in the United Kingdom in October 2017. On July 26, 2018, the CMA informed us of its decision to open an investigation into certain of our display practices in the United Kingdom that the CMA questioned under U.K. consumer law. On January 31, 2019, we submitted voluntary undertakings to the CMA to make changes to certain disclosure and other display practices in the United Kingdom. The undertakings provide for an implementation period of six months and resolved the CMA's investigation into our practices in the United Kingdom without any admission or finding that our practices violated U.K. law. In addition, on December 12, 2018, the German Federal Cartel Office (Bundeskartellamt) published its draft report for consultation relating to its sector inquiry focused on the consumer facing practices of online price comparison websites active in the travel, insurance, financial services, telecommunications and energy sectors in Germany, covering topics such as rankings, financing, corporate links, reviews, availability and relevant market coverage. The German Federal Cartel Office has invited comments on its draft report and is now considering these comments with the finalization of the report expected to occur soon. While the German Federal Cartel Office’s draft report acknowledged the importance to consumers of comparison platforms, it also identified certain areas in which the disclosure and display practices of market participants generally could be improved. Should changes in our business practices or those prevalent in our sector brought about by this regulatory attention or by the Australian litigation referenced below reduce the attractiveness, competitiveness or functionality of our platform and the services we offer, or should our reputation or that of our sector suffer, or should we have to pay substantial amounts in respect or as a result of any such regulatory action or proceeding, our business, results of operations, financial condition and prospects could be adversely affected.
In addition, many governmental authorities in the markets in which we operate are also considering additional and potentially diverging legislative and regulatory proposals that would increase the level and complexity of regulation on Internet display, disclosure and advertising activities. For example, in the European Union there is an ongoing revision of EU consumer directives ("A New Deal for Consumers"), and the European Union is considering a proposal for a regulation of the European Parliament and of the Council for business users of online intermediary services (the P2B Regulation). There also are, and will likely continue to be, an increasing number of laws and regulations pertaining to the Internet and online commerce that may relate to liability for information retrieved from, transmitted over or displayed on the Internet, display of certain taxes, charges and fees, online editorial, user-generated or other third-party content, user or other third-party privacy, data security, behavioral targeting and online advertising, taxation, liability for third-party activities and the quality of services. Furthermore, the growth and development of online commerce may prompt calls for additional or more complex consumer protection laws and higher levels of regulatory review and enforcement activities, which may impose additional burdens, costs or limitations on online businesses generally.

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Also, following the U.K. Brexit vote, it may be the case that regulations and policies in the United Kingdom may diverge from those of the European Union, following the United Kingdom’s withdrawal from the European Union, possibly giving rise to greater regulatory complexity and additional compliance costs.
The promulgation of new laws, rules and regulations, or the new interpretation of existing laws, rules and regulations, in each case that restrict or otherwise unfavorably impact the ability or manner in which we provide our services could require us to change certain aspects of our business, operations and commercial relationships to ensure compliance, which could decrease demand for services, reduce revenue, increase costs or subject the company to additional liabilities.
Increasing enforcement of international trade and anti-corruption regulations could affect our ability to remain in compliance with such regulations and could have a materially adverse effect on our business, results of operations, financial condition and prospects.
The SEC, U.S. Department of Justice and U.S. Office of Foreign Assets Control, or OFAC, as well as other foreign regulatory authorities, have continued to increase the enforcement of economic and trade regulations and anti-corruption laws, across industries. U.S. trade sanctions restrict transactions involving designated foreign countries and territories, including the Crimea region of Ukraine, Cuba, Iran, North Korea and Syria, as well as certain specifically targeted individuals and entities. We believe that our activities comply with applicable OFAC trade regulations and anti-corruption regulations, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act. As regulations are amended and the interpretation of those regulations evolves, we cannot guarantee that our programs and policies will be deemed compliant by all applicable regulatory authorities. In the event that our controls should fail or are found to be not in compliance for other reasons, including as a result of changes to our products and services or the behavior of our advertisers, we could be subject to monetary damages, civil and criminal penalties, litigation and damage to our reputation and the value of our brand.
Litigation could distract management, increase our expenses or subject us to material monetary damages and other remedies.
On August 23, 2018, the Australian Competition and Consumer Commission, or ACCC, instituted proceedings in the Australian Federal Court against us, alleging breaches of Australian consumer law relating to our advertisements in Australia concerning the hotel prices available on our Australian site and our Australian strike-through pricing practice. An outcome adverse to us in this matter could have a material adverse effect on our business, results of operations, financial condition and prospects.
We could also become involved from time to time in various other legal proceedings, including, but not limited to, actions relating to breach of contract, consumer protection matters and intellectual property infringement that might necessitate changes to our business or operations. Regardless of whether the litigation described above or any other claims against us have merit, or whether we are ultimately held liable or subject to payment of damages, claims may be expensive to defend and may divert management’s time away from our operations. Outcomes adverse to us in any legal proceedings could have a material adverse effect on our business, results of operations, financial condition and prospects. Any adverse publicity resulting from actual or potential litigation may also materially and adversely affect our reputation and brand, which in turn could adversely affect our business, results of operations, financial condition and prospects.
Companies in the Internet, technology and media industries are frequently subject to allegations of infringement or other violations of intellectual property rights. We are currently subject to several claims and may be subject to future claims relating to intellectual property rights. As we operate a global business, we may be subject to intellectual property claims by third parties. We intend to vigorously defend our intellectual property rights and our freedom to operate our business; however, regardless of the merits of the claims, intellectual property claims are often time-consuming and extremely expensive to litigate or settle and are likely to continue to divert managerial attention and resources from our business objectives. Successful infringement claims against us could result in significant monetary liability or prevent us from operating our business or portions of our business. Resolution of claims may require us to obtain licenses to use intellectual property rights belonging to third parties, which may be expensive to procure, or we may be required to cease using intellectual property of third parties altogether. Many of our agreements with hotels, OTAs and

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other partners require us to indemnify these entities against third-party intellectual property infringement claims, which would increase our defense costs and may require that we pay damages if there were an adverse ruling in any such claims. Any of these events may have a material adverse effect on our business, results of operations, financial condition and prospects.
We process, store and use personal data which exposes us to risks of internal and external security breaches and could give rise to liabilities, including as a result of governmental regulation and differing legal obligations applicable to data protection and privacy rights.
We may acquire personally identifiable information or confidential information from users of our websites and apps. Breaches or intrusions to our system, whether resulting from internal or external sources, could significantly harm our business. It is possible that advances in computer circumvention capabilities, new discoveries or other developments, including our own acts or omissions, could result in a compromise or breach of personally identifiable information and/or confidential user information.
We cannot guarantee that our existing security measures will prevent all security breaches, intrusions or attacks. A party, whether internal or external, that is able to circumvent our security systems could improperly obtain user information or proprietary information or cause significant disruptions to our operations. In the past, we have experienced “denial-of-service” type of attacks on our system, which have made portions of our website unavailable for periods of time. We may need to expend significant resources to protect against security breaches, intrusions, attacks or other threats or to address problems caused by breaches. Any actions that impact the availability of our website or apps could cause a loss of substantial business volume during the occurrence of any such incident and could result in reputational harm and impact negatively our ability to attract new customers and/or retain existing ones. The risk of security breaches, intrusions and other attacks is likely to increase as the tools and techniques used in these types of attacks become more advanced. The new European data protection laws (described in detail below), introduce mandatory breach reporting to regulators and individuals across Europe. Security breaches could result in negative publicity, damage to our reputation, expose us to risk of loss or litigation and possible liability and subject us to regulatory penalties and sanctions as well as civil litigation. Security breaches could also cause users and potential users to lose confidence in our security, which would have a negative effect on the value of our brand.
We also face risks associated with security breaches affecting third parties conducting business over the Internet. Users generally are increasingly concerned with security and privacy on the Internet, and any publicized security problems impacting other companies could inhibit the growth of our business. Additionally, security breaches at third parties upon which we rely, such as hotels, could result in negative publicity, damage to our reputation, expose us to risk of loss or litigation and possible liability and subject us to regulatory or criminal penalties and sanctions as well as civil litigation. We currently provide users with the functionality to book directly with certain hotels, by completing a form on our website which enables users’ details to be transferred directly to the hotel’s booking forms. In connection with facilitating these transactions, we receive and store certain personally identifiable information, including credit card information. This information is increasingly subject to legislation and regulations in numerous jurisdictions around the world, including throughout the member states of the European Union as a result of the EU’s General Data Protection Regulation 2016/679, or GDPR, which has been in effect since May 25, 2018, and of national GDPR implementation acts on an EU member state level. In particular, EU laws regulate transfers of EU personal data to third countries, such as the United States, that have not been found to provide adequate protection to such personal data. A considerable number of our service providers and hotels operate in such jurisdictions. There are recent regulatory concerns about certain measures that can be used to validate such data export, as well as litigation challenging some of the mechanisms for adequate data transfer (i.e., the standard contractual clauses and the EU-US Privacy Shield). We could be impacted by changes in law as a result of the current challenges to these mechanisms by regulators and in the European courts which may lead to governmental enforcement actions, litigation, fines and penalties or adverse publicity which could have an adverse effect on our reputation, business, results of operations, financial condition and prospects.
Government regulation of privacy and data security is typically intended to protect the privacy of personally identifiable information that is collected, processed and transmitted in or from the governing jurisdiction.

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Since we collect, process and transmit personally identifiable information in and from numerous jurisdictions around the world, we are subject to privacy, data protection and data security legislation and regulations in a number of countries around the world. We are in particular affected by the GDPR. The GDPR applies to any company established in the European Union as well as to those outside the European Union if they collect and use personal data in connection with offering goods or services to individuals in the European Union or the monitoring of their behavior (for example, trip booking services). The GDPR enhances data protection obligations for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification requirements and onerous new obligations on services providers. Non-compliance with the GDPR can trigger significant fines of up to €20 million or 4% of total worldwide annual turnover per case of violation, whichever is higher. We may incur substantial further expense in ensuring and maintaining compliance with the new obligations imposed by the GDPR and by national GDPR implementation acts and we may be required to make significant further changes in our business operations and product and services development, all of which may adversely affect our business, results of operations, financial condition and prospects. We may have to undertake substantial effort to comply with new data protection laws in the United Kingdom and new requirements and restrictions for data transfers between the European Union and the United Kingdom in the event that the United Kingdom leaves the European Union. We could be adversely affected if we fail to comply fully with all of these requirements and other laws in jurisdictions where we operate or target users. In addition, we could be adversely affected if legislation or regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that may have a material adverse effect on our business, results of operations, financial condition and prospects.
In recent years, U.S. and European lawmakers and regulators have expressed concern over the use of third-party cookies, web beacons and similar technology for online advertising, which is fundamental to our business model. The current European laws that cover the use of cookies and similar technology and marketing online or by electronic means are under reform. Unlike the current law, the new proposed e-Privacy Regulation will apply directly in each EU member state, without the need for further enactment at the member state level. When effective, the e-Privacy Regulation is expected to alter rules on third-party cookies, web beacons and similar technology for online behavioral advertising and to impose stricter requirements on companies using these tools. The current draft also extends the strict opt-in marketing rules with limited exceptions to business-to-business communications, and significantly increases penalties. Regulation of cookies and web beacons may lead to broader restrictions on our advertising activities, including efforts to understand users’ Internet usage. Such regulations may have a detrimental effect on businesses, such as ours, that collect and use online usage information in order to attract and retain advertisers and may increase the cost of maintaining a business that collects or uses online usage information, increase regulatory scrutiny and increase the potential for civil liability under consumer protection laws.
In the past, we identified a material weakness in our internal control over financial reporting. If the measures we have implemented, including internal controls, fail to be effective in the future, any such failure could result in material misstatements of our financial statements, cause investors to lose confidence in our reported financial and other public information, harm our business and adversely impact the trading price of our ADSs.
Our management is responsible for establishing and maintaining internal controls over financial reporting, disclosure controls, and compliance with other requirements of the Sarbanes-Oxley Act and the rules promulgated by the SEC thereunder. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. In addition, our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. Satisfying these requirements requires us to dedicate a significant amount of time and resources, including for the development, implementation, evaluation and testing of our internal controls over financial reporting. Although no material weaknesses were identified in connection with the attestation of the effectiveness of our internal control over financial reporting as of December 31, 2018, our management cannot guarantee that our internal controls and disclosure controls will prevent all possible

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errors or fraud. In addition, the internal controls that we have implemented could fail to be effective in the future. This failure could result in material misstatements in our financial statements, result in the loss of investor confidence in the reliability of our financial statements and subject us to regulatory scrutiny and sanctions. This could in turn could harm our business and the market value of our ADSs. In addition, we may be required to incur costs in improving our internal controls system and the hiring of additional personnel.
We may experience difficulties in implementing new business and financial systems.
We continue to transition certain business and financial systems to systems that reflect the size, scope and complexity of our operations. These systems include an internally developed tool to manage our invoicing and various third-party developed tools to assist us with internal system integration, financial management and consolidation. The process of migrating our legacy systems could disrupt our ability to timely and accurately process and report key aspects of our financial statements as we will rely on these systems for information that is included in or otherwise relevant for our financial statements. In addition, while the implementation of these systems is intended to increase accuracy of financial reporting and reduce our reliance on manual procedures and actions, the transition may affect the accuracy of reporting as we align our new systems to our internal processes. With respect to these systems, certain financial controls and processes will be required and may result in changes to the current control environment. These changes will need to be assessed for effective implementation and effectiveness in mitigating inherent risk in these processes. This evaluation could result in deficiencies in our internal control over financial reporting, including material weaknesses, in future periods. Any difficulties in implementing the new software or related failures of our internal control over financial reporting could adversely affect our business, results of operations, financial condition and prospects, and could cause harm to our reputation.
We rely on information technology to operate our business and maintain our competitiveness, and any failure to invest in and adapt to technological developments and industry trends could harm our business.
We depend on the use of sophisticated information technologies and systems, including technology and systems used for websites and apps, customer service, supplier connectivity, communications, fraud detection and administration. As our operations grow in size, scope and complexity, we need to continuously improve and upgrade our systems and infrastructure to offer an increasing number of user-enhanced services, features and functionalities, while maintaining or improving the reliability and integrity of our systems and infrastructure. In 2018, we substantially revamped our back-end infrastructure, which subsequently went fully live in early 2019. If these changes result in our infrastructure being unreliable or if they do not result in the benefits we anticipate, our business, results of operations, financial condition and prospects could be adversely affected.
Our future success also depends on our ability to adapt our services and infrastructure to meet rapidly evolving consumer trends and demands while continuing to improve the performance, features and reliability of our service in response to competitive service offerings. The emergence of alternative platforms and the emergence of niche competitors who may be able to optimize services or strategies such platforms have required, and will continue to require, new and costly investments in technology. We may not be successful, or we may be less successful than our current or new competitors, in developing technologies that operate effectively across multiple devices and platforms and that are appealing to users, either of which would negatively impact our business and financial performance. New developments in other areas could also make it easier for competitors to enter our markets due to lower up-front technology costs. In addition, we may not be able to maintain our existing systems or replace or introduce new technologies and systems as quickly as we would like or in a cost-effective manner. Failure to invest in and adapt to technological developments and industry trends may have a material adverse effect on our business, results of operations, financial condition and prospects.

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Any significant disruption in service on our websites and apps or in our computer systems, some of which are currently hosted by third-party providers, could damage our reputation and result in a loss of users, which would harm our business and results of operations.
Our brand, reputation and ability to attract and retain users to use our websites and apps depend upon the reliable performance of our network infrastructure and content delivery processes. We have experienced interruptions in these systems in the past, including server failures that temporarily slowed down the performance of our websites and apps, and we may experience interruptions in the future. Interruptions in these systems, whether due to system failures, computer viruses or physical or electronic break-ins, could affect the security or availability of our services on our websites and apps and prevent or inhibit the ability of users to access our services. Problems with the reliability or security of our systems could harm our reputation. Damage to our reputation and the cost of remedying these problems could negatively affect our business, financial condition and results of operations.
Substantially all of the communications, network and computer hardware used to operate our website are located at facilities in Germany, the United States, Hong Kong and China, while also leveraging cloud-hosted services. We either lease or own our servers and have service agreements with data center providers. Our systems and operations are vulnerable to damage or interruption from fire, flood, power loss, telecommunications failure, terrorist attacks, acts of war, electronic and physical break-ins, computer viruses, earthquakes and similar events. The occurrence of any of the foregoing events could result in damage to our systems and hardware or could cause them to fail completely, and our insurance may not cover such events or may be insufficient to compensate us for losses that may occur. Our systems are not completely redundant, so a failure of our system at one site could result in reduced functionality for our users, and a total failure of our systems could cause our websites or apps to be inaccessible to our users. Problems faced by our third-party service providers with the telecommunications network providers with which they contract or with the systems by which they allocate capacity among their users, including us, could adversely affect the experience of our users. Our third-party service providers could decide to close their facilities without adequate notice. Any financial difficulties, such as bankruptcy or reorganization, faced by our third-party service providers or any of the service providers with whom they contract may have negative effects on our business, the nature and extent of which are difficult to predict. If our third-party service providers are unable to keep up with our growing needs for capacity, this could have an adverse effect on our business, results of operations, financial condition and prospects. Any errors, defects, disruptions or other performance problems with our services could harm our reputation and may have a material adverse effect on our business, results of operations, financial condition and prospects.
Our brand is subject to reputational risks and impairment.
We have developed our trivago brand through extensive marketing campaigns, website promotions, customer referrals and the use of a dedicated sales force. We cannot guarantee that our brand will not be damaged by circumstances that are outside our control or by third parties, such as hackers, or interfaces with their clients, such as subcontractors’ employees or sales forces, with a resulting negative impact on our activities. For example, the independent actors we rely on in various countries where we advertise have come to represent our brand, such as “Mr. trivago” in the United States and “the trivago girl” in Australia. The actions of such actors are not in our control, and negative publicity about such actors could affect our brand image. Also, it is possible that the use of testimonials in the advertising and promotion of our brands could have a negative impact on customer retention and acquisition if the reputation of the testimonial provider is damaged. We may be subject to negative press accounts or other negative publicity regarding our product, brand or business practices, which may, among other things, cause us reputational harm. Such negative publicity may become more prevalent as a result of announced or future regulatory investigations or litigation relating to practices in our marketplace and related online travel-related market segments, such as that commenced by the ACCC in August 2018. Social media’s reach may magnify any negative publicity and messages can “go viral” necessitating effective crisis response in real time. A failure on our part to protect our image, reputation and the brand under which we market our products and services may have a material adverse effect on our business, results of operations, financial condition and prospects.

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Many events beyond our control may adversely affect the travel industry.
Many events beyond our control can adversely affect the travel industry, with a corresponding negative impact on our business and results of operations. Natural disasters, including hurricanes, tsunamis, earthquakes or volcanic eruptions, as well as other natural phenomena, such as outbreaks of the Zika virus, the Ebola virus, avian flu and other pandemics and epidemics, have disrupted normal travel patterns and levels in the past. The travel industry is also sensitive to events that may discourage travel, such as work stoppages or labor unrest, political instability, regional hostilities, increases in fuel prices, imposition of taxes or surcharges by regulatory authorities, travel related accidents and terrorist attacks or threats. We do not have insurance coverage against loss or business interruption resulting from war and terrorism, and we may be unable to fully recover any losses we sustain due to other factors beyond our control under our existing insurance coverage. The occurrence of any of the foregoing events may have a material adverse effect on our business, results of operations, financial condition and prospects.
Our global operations involve additional risks, and our exposure to these risks will increase as our business continues to expand.
We operate in a number of jurisdictions and intend to continue to expand our global presence, including in emerging markets. As of December 31, 2018, we derived 35% of our total Referral Revenue from our operations in the Americas, 42% of our revenue from our operations in Developed Europe and 23% of our revenue from our operations in the Rest of World. See “Item 5 Operating and financial review and prospects” for a further description of our geographical operating segments. We face complex, dynamic and varied risk landscapes in the jurisdictions in which we operate. We must tailor our services and business models to the unique circumstances of each of the many countries and markets in which we operate. This can be complex, difficult, costly and divert management and personnel resources. In addition, we may face competition in other countries from companies that may have more experience with operations in such countries or with global operations in general. Laws and business practices that favor local competitors or prohibit or limit foreign ownership of certain businesses or our failure to adapt our practices, systems, processes and business models effectively to the user and supplier preferences in each country in which we operate, could slow our growth. Certain markets in which we operate are characterized by lower margins in our business and related businesses than is the case in more mature markets, which could have a negative impact on our overall margins as our revenue from these markets grows over time.
In addition to the risks outlined elsewhere in this section, our global operations are subject to a number of other risks, including:
changing political conditions, including risk of rising protectionism, restrictions on immigration or imposition of new trade barriers, including the added uncertainty resulting from the United Kingdom's withdrawal from the European Union;
local political or labor conditions, including being individually targeted by local regulators or being adversely affected by national labor strikes;
compliance with various regulatory laws and requirements relating to anti-corruption, antitrust or competition, economic sanctions, data content and privacy, consumer protection, employment and labor laws, health and safety, and advertising and promotions;
differences, inconsistent interpretations and changes in various laws and regulations, including international, national and local tax laws;
weaker or uncertain enforcement of our contractual and intellectual property rights;
preferences by local populations for local providers;
slower adoption of the Internet as an advertising, broadcast and commerce medium and the lack of appropriate infrastructure to support widespread Internet usage in those markets;
our ability to support new technologies that may be more prevalent in certain local markets; and

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uncertainty regarding liability for services and content, including uncertainty as a result of local laws and lack of precedent.
Our global operations expose us to risks associated with currency fluctuations, which may adversely affect our business.
We conduct a significant portion of our business outside the Eurozone. As a result, we face exposure to movements in currency exchange rates around the world. Changes in foreign exchange rates can amplify or mute changes in the underlying trends in our revenue and Revenue per Qualified Referral. Although we largely denominate our CPCs in euro and have relatively little direct foreign currency translation with respect to our revenue, we believe that our advertisers’ decisions on the share of their booking revenue they are willing to pay to us are based on the currency in which the hotels being booked are priced. Accordingly, we have observed that advertisers tend to adjust their CPC bidding based on the relative strengthening or weakening of the euro as compared to the local functional currency in which the booking with our advertisers is denominated. Currency exchange-related exposures also include but are not limited to re-measurement gains and losses from changes in the value of foreign denominated monetary assets and liabilities; translation gains and losses on foreign subsidiary financial results that are translated into euro upon consolidation; fluctuations in hotel revenue and planning risk related to changes in exchange rates between the time we prepare our annual and quarterly forecasts and when actual results occur.
We do not currently hedge our foreign exchange exposure. Depending on the size of the exposures and the relative movements of exchange rates, if we choose not to hedge or fail to hedge effectively our exposure, we could experience a material adverse effect on our financial statements and financial condition. As we have seen in some recent periods, in the event of severe volatility in foreign exchange rates, these exposures can increase, and the impact on our results of operations can be more pronounced. In addition, the current environment and the global nature of our business have made hedging these exposures more complex.
We are subject to risks associated with a corporate culture that promotes entrepreneurialism among our employees, decentralized decision making and continuous learning.
We have delegated considerable operational autonomy and responsibility to our employees, including allowing our employees flexible working hours that allow them to determine when, where and for how long they work. In addition, at the core of our culture is allowing our employees to grow, ensuring that they continuously accept new challenges and take on new responsibilities. This is reflected by our approach to the career development of our employees. We encourage our employees to move into and out of internally defined leadership roles, and we rotate experienced employees to other jobs and different leadership roles within the company.
As a consequence, people in key positions may have less experience in the relevant operational areas. As our employees have significant autonomy and may lack experience when performing new operational roles, this could result in poor decision-making, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
We rely on the performance of highly skilled personnel, including senior management and our technology professionals, and if we are unable to retain or motivate key personnel or hire, retain and motivate qualified personnel, our business would be harmed.
We believe our success has depended, and continues to depend, on the efforts and talents of our senior management and our highly skilled team members, including our software engineers. The loss of the services of any key individual could negatively affect our business. In particular, the contributions of certain key senior management are important to our overall success.
The small size of our leadership team increases our exposure to the risk that we would lose the services of one or more of the remaining members of the team. Should one or more of our senior managers leave our company, we might experience dislocations while a replacement or replacements are located and they are integrated into our company. Any phase of transition to new senior managers may be accompanied by slower or inconsistent decision-making, or to the diversion of management attention to matters relating to executive

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recruitment and integration. This could have a material adverse effect on our business, results of operations, financial condition and prospects or could damage our reputation.
The Amended and Restated Shareholders’ Agreement contains certain provisions that could result in the departure of certain of our senior management, including Mr. Schrömgens. If our Founders collectively, hold less than 15% of our outstanding Class A shares and Class B shares (calculated as if all securities convertible, exercisable or exchangeable for Class A shares or Class B shares had been converted, exercised or exchanged), Mr. Schrömgens loses certain contractual rights to nominate members of our management board. In such case, our supervisory board may also request from the Founders, the resignation of members of the supervisory board who have been nominated by the Founders. In addition, the general meeting of shareholders, which is controlled by Expedia Lodging Partner Services S.à r.l., or ELPS, has broad discretion to remove members of our management board with and without cause, irrespective of the Founders’ holdings. If the general meeting of shareholders has reasonable cause, as defined in the Amended and Restated Shareholders’ Agreement, for such removal, ELPS has the unilateral right, subject to certain exceptions, to purchase all of such member’s shares.
Our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Competition for highly qualified employees in all aspects of our business, including software engineers and other technology professionals who are key to designing code and algorithms necessary to our business, is intense globally. We may be unable to retain certain high-performing employees when the price of our ADS is low, as a significant portion of the compensation they receive consists of equity grants. If we do not succeed in attracting highly qualified employees or retaining and motivating existing employees and key senior management, it may have a material adverse effect on our business, results of operations, financial condition and prospects.
The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business.
As a public company with ADSs traded on an exchange located in the United States, we incur legal, accounting, audit and other expenses resulting from the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act, the listing requirements of Nasdaq, the Dutch Corporate Governance Code 2016, or the DCGC, and other applicable securities rules and regulations. Compliance with these rules and regulations has increased and will continue to increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. The Exchange Act requires that we file annual and current reports with respect to our business, financial condition and results of operations. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting. Furthermore, establishing the corporate infrastructure demanded of a public company may divert our management’s attention from implementing our strategy, which could prevent us from improving our business, financial condition and results of operations. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a public company these rules and regulations have made it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage. These additional obligations could have a material adverse effect on our business, financial condition, results of operations and cash flow.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of our management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory

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or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business, results of operations, financial condition and prospects could be adversely affected.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
We are a “foreign private issuer,” as such term is defined in Rule 405 under the Securities Act, and therefore, we are not required to comply with all the periodic disclosure and current reporting requirements of the Exchange Act and related rules and regulations. Under Rule 405, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter and, accordingly, the next determination will be made with respect to us on June 30, 2019.
In the future, we would lose our foreign private issuer status if a majority of our shareholders, directors or management continue to be U.S. citizens or residents and we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. Although we have elected to comply with certain U.S. regulatory provisions, our loss of foreign private issuer status would make such provisions mandatory. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. For example, the annual report on Form 10-K requires domestic issuers to disclose executive compensation information on an individual basis with specific disclosure regarding the domestic compensation philosophy, objectives, annual total compensation (base salary, bonus and equity compensation) and potential payments in connection with change in control, retirement, death or disability, while the annual report on Form 20-F permits foreign private issuers to disclose considerably less compensation-related information. We would also have to comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. We could also be required to modify certain of our policies to comply with good governance practices associated with U.S. domestic issuers. In addition, we could lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers. We would need to convert our systems to prepare our financial statements in U.S. dollars. Such conversion and modifications will involve additional costs and may divert our management’s attention from other business concerns, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
Integration of acquired assets and businesses could result in operating difficulties and other harmful consequences.
We have acquired businesses in the past, including tripl GmbH, or tripl and GHG Ventures LLC, or TripHappy. We expect to continue to evaluate a wide array of potential strategic transactions. We could enter into transactions that could be material to our financial condition and results of operations. The process of integrating an acquired company, business or technology may create unforeseen operating difficulties and expenditures. The areas where we face risks in respect of potential acquisitions and subsequent integrations include:
diversion of management time and focus from operating our business to acquisition diligence, negotiation and closing processes, as well as post-closing integration challenges;
implementation or remediation of controls, procedures and policies at the acquired company;
coordination of product, engineering and sales and marketing functions;
retention of employees from the businesses we acquire;
responsibility for liabilities or obligations associated with activities of the acquired company before the acquisition;
litigation or other claims in connection with the acquired company; and

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in the case of foreign acquisitions, the need to integrate operations across different geographies, cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries.
Furthermore, companies that we have acquired, and that we may acquire in the future, may employ security and networking standards at levels we find unsatisfactory. The process of enhancing infrastructure to improve security and network standards may be time-consuming and expensive and may require resources and expertise that are difficult to obtain. Acquisitions could also increase the number of potential vulnerabilities and could cause delays in detection of a security breach, or the timelines of recovery from a breach. Failure to adequately protect against attacks or intrusions could expose us to security breaches of, among other things, personal user data and credit card information that may have a material adverse effect on our business, results of operations, financial condition and prospects.
Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and investments could delay or eliminate any anticipated benefits of such acquisitions or investments, incur unanticipated liabilities and may have a material adverse effect on our business, results of operations, financial condition and prospects.
We are subject to counterparty default risks.
We are subject to the risk that a counterparty to one or more of our customer arrangements will default on its performance obligations. A counterparty may fail to comply with its commercial commitments, which could then lead it to default on its obligations with little or no notice to us. This could limit our ability to take action to mitigate our exposure. Additionally, our ability to mitigate our exposures may be constrained by the terms of our commercial arrangements or because market conditions prevent us from taking effective action. In addition, our ability to recover any funds from financially distressed or insolvent counterparties is limited, and our recovery rates in such instances have historically been very low. Because a majority of our accounts receivable are owed by three large OTAs, delays or a failure to pay by any of these advertisers could result in a significant increase in our credit losses, and we may be unable to fund our operations. In addition, as we seek to diversify our advertiser base to include additional advertisers, including alternative accommodation providers, beyond our core OTA base, we may increase our exposure to our counterparties that may fail to pay us. These counterparties may also be located in countries where enforcement of our creditors’ rights is more difficult than in the countries where our major OTA advertisers are located. If one of our counterparties becomes insolvent or files for bankruptcy, our ability to recover any losses suffered as a result of that counterparty’s default may be limited by the liquidity of the counterparty or the applicable laws governing the bankruptcy proceedings, and in any event, the customers of that counterparty may seek redress from us, even though the booking with that counterparty was not conducted on our platform. In the event of such default, we could incur significant losses, which could adversely impact our business, results of operations, financial condition and prospects.
Risks related to our ongoing relationship with our shareholders
Expedia Group controls our company and has the ability to control the direction of our business.
As of December 31, 2018, Expedia Group owned Class B shares representing 59.5% of our issued share capital and 66.8% of the voting power in us. As long as Expedia Group owns a majority of the voting power in us, and pursuant to certain rights it has under the Amended and Restated Shareholders’ Agreement, Expedia Group will be able to control many corporate actions that require a shareholder vote.
This voting control limits the ability of other shareholders to influence corporate matters and, as a result, we may take actions that shareholders other than Expedia Group do not view as beneficial. This voting control may also discourage transactions involving a change of control of our company, including transactions in which you as a holder of ADSs (representing our Class A shares) might otherwise receive a premium for your shares. Furthermore, Expedia Group generally has the right at any time to sell or otherwise dispose of any Class A shares and Class B shares that it owns, including the ability to transfer a controlling interest in us to a third party, without the approval of the holders of our Class A shares and without providing for the purchase of Class A shares.

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The Founders have contractual rights to exert control over certain aspects of our business.
Pursuant to the Amended and Restated Shareholder’s Agreement, the Founders have contractual rights to exert control over certain aspects of our business. For example, as long as the Founders collectively maintain holdings of at least 15% of our outstanding Class A shares and Class B shares (taking into account, for purposes of determining such percentage, each security convertible into or exchangeable for, and any option, warrant, or other right to purchase or otherwise acquire, any share), the Founders will have certain rights to veto decisions about certain corporate matters. These contractual rights limit the ability of ELPS to control certain corporate matters and, as a result, we may fail to take actions that other shareholders may view as beneficial. This contractual control may also discourage transactions involving a change of control or sale of substantially all assets of our company, including transactions in which you as a holder of ADSs representing our Class A shares might otherwise receive a premium for your shares or dividend of proceeds representing a premium price for such assets. Furthermore, subject to certain exceptions, so long as the Founders collectively maintain holdings of at least 15% of our outstanding Class A and Class B shares (taking into account, for purposes of determining such percentage, each security convertible into or exchangeable for, and any option, warrant, or other right to purchase or otherwise acquire, any share), the Founders who are then serving as managing directors have the ability to select the other managing directors and, as a result, the Founders and their appointees will comprise the body that has primary day-to-day operational control of the company. In addition, from the date that Mr. Schrömgens ceases to serve as our chief executive officer for a period of three years, so long as a Founder is serving as our chief executive officer and there is no set of circumstances that would constitute a reasonable cause, such Founder has the right to nominate a successor in its function of chief executive officer, subject to the approval of ELPS and thereafter, the supervisory board.
Expedia Group’s interests may conflict with our interests, the interests of the Founders and the interests of our shareholders, and conflicts of interest among Expedia Group, the Founders and us could be resolved in a manner unfavorable to us and our shareholders.
Various conflicts of interest among us, the Founders and Expedia Group could arise. Ownership interests of directors or officers of Expedia Group in our shares, and ownership interests of members of our management board and supervisory board in the stock of Expedia Group, or a person’s service as either a director or officer of both companies, could create or appear to create potential conflicts of interest, including when those directors and officers are faced with decisions relating to our company. In each of the years ended December 31, 2016, 2017 and 2018, Expedia Group, and brands affiliated with Expedia Group, consistently accounted for 36% of our revenues.
Potential conflicts of interest could also arise if we decide to enter into any new commercial arrangements with Expedia Group’s businesses in the future or in connection with Expedia Group’s desire to enter into new commercial arrangements with third parties.
Expedia Group has the right to separately pursue acquisitions of businesses that we may also be interested in acquiring and also has the right to acquire companies that may directly compete with us. Expedia Group may choose to pursue these corporate opportunities other than through trivago.
Furthermore, disputes may arise between Expedia Group and us relating to our past and ongoing relationships, and these potential conflicts of interest may make it more difficult for us to favorably resolve such disputes, including those related to:
tax, employee benefit, indemnification and other matters;
the nature, quality and pricing of services Expedia Group agrees to provide to us;
sales, other disposals, purchases or other acquisitions by Expedia Group of shares in us (including when our share price is lower than in comparable periods); and
business combinations involving us.
We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable to us than if we were dealing with an unaffiliated party. While we are controlled by Expedia Group, we may

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not have the leverage to negotiate amendments to these agreements, if required, on terms as favorable to us as those we would negotiate with an unaffiliated third party.
Risks related to our intellectual property
We may not be able to adequately protect our intellectual property, which could harm the value of our brand and adversely affect our business.
We regard our intellectual property as critical to our success, and we rely on trademark and confidentiality and license agreements to protect our proprietary rights. If we are not successful in protecting our intellectual property, it could have a material adverse effect on our business, results of operations, financial condition and prospects.
Effective trademark and service mark protection may not be available in every country in which our services are provided. The laws of certain countries do not protect proprietary rights to the same extent as the laws of the United States and, therefore, in certain jurisdictions, we may be unable to protect our proprietary technology adequately against unauthorized third-party copying or use, which could adversely affect our competitive position. We have licensed in the past, and expect to license in the future, certain of our proprietary rights, such as trademarks, to third parties. These licensees may take actions that might diminish the value of our proprietary rights or harm our reputation, even if we have agreements prohibiting such activity. Moreover, we utilize intellectual property and technology developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties at all or on reasonable terms. Also, to the extent that third parties are obligated to indemnify us for breaches of our intellectual property rights, these third parties may be unable to meet these obligations. Any of these events may have a material adverse effect on our business, results of operations, financial condition and prospects.
We have registered domain names for websites that we use in our business, such as www.trivago.com, www.trivago.de and www.trivago.co.uk. Our competitors could attempt to capitalize on our brand recognition by using domain names similar to ours. Domain names similar to ours have been registered in the United States and elsewhere, and in some countries the top-level domain name “trivago” is owned by other parties. We may be unable to prevent third parties from acquiring and using domain names that infringe on, are similar to, or otherwise decrease the value of, our brand or our trademarks or service marks. Protecting and enforcing our rights to our domain names and determining the rights of others may require litigation, which, whether or not successful, could result in substantial costs and diversion of management attention.
Claims by third parties that we infringe on their intellectual property rights could result in significant costs and have a material adverse effect on business, results of operations, financial condition and prospects.
From time to time, we could be subject to various patent and trademark infringement claims. These claims could allege, among other things, that our website technology infringes upon owned patented technology and/or trademarks of third parties. If we are not successful in defending ourselves against these claims, we may be required to pay monetary damages, which could have an adverse effect on our results of operations. In addition, the costs associated with the defense of these claims could have an adverse effect on our results of operations. As we grow our business and expand our operations, we expect that we will continue to be subject to intellectual property claims. Resolving intellectual property claims may require us to obtain licenses to use intellectual property rights belonging to third parties, which may be expensive to procure, or we may be required to cease using intellectual property of third parties altogether. Any of these events may have a material adverse effect on our business, results of operations, financial condition and prospects.
Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.
A substantial amount of our processes and technologies is protected by trade secrecy laws. In order to protect these technologies and processes, we rely in part on confidentiality agreements with our employees, licensees, independent contractors and other advisors. These agreements may not effectively prevent disclosure of confidential information, including trade secrets, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently

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discover our trade secrets and proprietary information, and in such cases we could not assert any trade secrecy rights against such parties. To the extent that our employees, contractors or other third parties with which we do business may use intellectual property owned by others in their work for us without our authorization, disputes may arise as to the rights in related or resulting know-how and inventions. Laws regarding trade secrecy rights in certain markets in which we operate may afford little or no protection to our trade secrets. The loss of trade secret protection could make it easier for third parties to compete with our services by effectively replicating our services. In addition, any changes in, or unexpected interpretations of, the trade secret and other intellectual property laws in any country in which we operate may compromise our ability to enforce our trade secret and intellectual property rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection may have a material adverse effect on our business, results of operations, financial condition and prospects.
Our use of “open source” software could adversely affect our ability to offer our services and subject us to possible litigation.
We use open source software in connection with our development. From time to time, companies that use open source software have faced claims challenging the use of open source software or compliance with open source license terms. We could be subject to suits by third parties claiming ownership of what we believe to be open source software, or claiming non-compliance with open source licensing terms. Some open source licenses require users who distribute software containing open source to make available all or part of such software, which in some circumstances could include valuable proprietary code of the user. While we monitor the use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, in part because open source license terms are often ambiguous. Any requirement to disclose our proprietary source code or pay damages for breach of contract may have a material adverse effect on our business, results of operations, financial condition and prospects and could help our competitors develop services that are similar to or better than ours.
Risks related to ownership of our Class A shares and ADSs
Our share price may be volatile or may decline regardless of our operating performance.
The market price for our ADSs has been, and will likely continue to, be volatile, and there have been relatively few ADSs outstanding. Our results of operations are also subject to material quarterly fluctuations that may affect the volatility of our ADSs. In addition, the market price of our ADSs may fluctuate significantly in response to a number of factors, most of which we cannot control, including:
actual or anticipated fluctuations in our results of operations;
variance in our financial performance from the expectations of market analysts or from the financial guidance that we have communicated;
announcements by us or our competitors of significant business developments, acquisitions or expansion plans;
changes in the prices of our competitors or those paid to us by our customers;
our involvement in litigation;
our sale of ADSs or other securities in the future;
a sale of ADSs by our major shareholders in the future;
market conditions in our industry;
changes in key personnel;
the trading volume of our ADSs;
changes in the estimation of the future size and growth rate of our markets; and

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general economic and market conditions.
The stock markets, including Nasdaq, have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many Internet companies.
Future sales and/or issues of our ADSs, or the perception in the public markets that such sales may occur, may depress our ADS price.
Sales of a substantial number of our ADSs in the public market, or the perception that these sales could occur, could adversely affect the price of our ADSs and could impair our ability to raise capital through the sale of additional ADSs. The ADSs are freely tradable without restriction under the Securities Act, except for any of our ADSs that may be held or acquired by our management board members, supervisory board members, executive officers and other affiliates, as that term is defined in the Securities Act, which will be restricted securities under the Securities Act. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available.
Our Class B shares are convertible into Class A shares, which may be sold subject to certain restrictions in the Amended and Restated Shareholders’ Agreement.
In the future, we may also issue our securities in connection with investments or acquisitions. The amount of ADSs issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding ADSs. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to you.
If securities or industry analysts publish inaccurate or unfavorable research about our business, our ADS price could decline.
The trading market for our ADSs depends in part on the research and reports that securities or industry analysts publish about us or our business. If securities or industry analyst coverage results in downgrades of our ADSs or publishes inaccurate or unfavorable research about our business, our ADS price would likely decline.
You may not be able to exercise your right to vote the Class A shares underlying your ADSs.
Holders of ADSs may exercise voting rights with respect to the Class A shares represented by their ADSs only in accordance with the provisions of the deposit agreement. The deposit agreement provides that, upon receipt of notice of any meeting of holders of our Class A shares, including any general meeting of our shareholders, the depositary will, as soon as practicable thereafter, fix a record date for the determination of ADS holders who shall be entitled to give instructions for the exercise of voting rights. Upon timely receipt of notice from us, the depositary shall distribute to the holders as of the record date (i) the notice of the meeting or solicitation of consent or proxy sent by us, (ii) a statement that such holder will be entitled to give the depositary instructions and a statement that such holder may be deemed, if the depositary has appointed a proxy bank as set forth in the deposit agreement, to have instructed the depositary to give a proxy to the proxy bank to vote the Class A shares underlying the ADSs in accordance with the recommendations of the proxy bank and (iii) a statement as to the manner in which instructions may be given by the holders.
You may instruct the depositary of your ADSs to vote the Class A shares underlying your ADSs. Otherwise, you will not be able to exercise your right to vote unless you withdraw our Class A shares underlying the ADSs you hold. However, you may not know about the meeting far enough in advance to withdraw those Class A shares. The depositary, upon timely notice from us, will notify you of the upcoming vote and arrange to deliver voting materials to you. We cannot guarantee that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the Class A shares underlying your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise your right to vote, and there may be nothing you can do if the Class A shares underlying your ADSs are not voted as you had requested.
Under the deposit agreement for the ADSs, we may choose to appoint a proxy bank. In this event, the depositary will be deemed to have been instructed to give a proxy to the proxy bank to vote the Class A

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shares underlying your ADSs at shareholders’ meetings if you do not vote in a timely fashion and in the manner specified by the depositary.
The effect of this proxy is that you cannot prevent the Class A shares representing your ADSs from being voted, and it may make it more difficult for shareholders to exercise influence over our company, which could adversely affect your interests. Holders of our Class A shares are not subject to this proxy.
You may not receive distributions on the Class A shares represented by our ADSs or any value for them if it is illegal or impractical to make them available to holders of ADSs.
The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on our Class A shares after deducting its fees and expenses. You will receive these distributions in proportion to the number of our Class A shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. We have no obligation to take any other action to permit the distribution to any holders of our ADSs or Class A shares. This means that you may not receive the distributions we make on our Class A shares or any value from them if it is illegal or impractical for us to make them available to you. These restrictions may have a material adverse effect on the value of your ADSs.
You may be subject to limitations on the transfer of your ADSs.
Your ADSs, which may be evidenced by American Depositary Receipts, are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may refuse to deliver, transfer or register transfers of your ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary think it is advisable to do so because of any requirement of law, government or governmental body, or under any provision of the deposit agreement, or for any other reason.
We do not expect to pay any dividends for the foreseeable future.
The continued operation and growth of our business will require substantial cash. Accordingly, we do not anticipate that we will pay any dividends on our ADSs for the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our management board and will depend upon our results of operations, financial condition, contractual restrictions relating to indebtedness we may incur, restrictions imposed by applicable law and other factors our management board deems relevant.
Risks related to our corporate structure
The rights of shareholders in companies subject to Dutch corporate law differ in material respects from the rights of shareholders of corporations incorporated in the United States.
We are a Dutch public company with limited liability (naamloze vennootschap). Our corporate affairs are governed by our articles of association and by the laws governing companies incorporated in the Netherlands. The rights of shareholders and the responsibilities of members of our management board and supervisory board may be different from the rights and obligations of shareholders in companies governed by the laws of U.S. jurisdictions. In the performance of their duties, our management board and supervisory board are required by Dutch law to consider the interests of our company, its shareholders, its employees and other stakeholders. It is possible that some of these parties will have interests that are different from, or in addition to, your interests as a holder of ADSs representing our Class A shares. See “Item 16 G. Corporate governance.
We are not obligated to and do not comply with all the best practice provisions of the Dutch Corporate Governance Code (DCGC). This may affect your rights as a shareholder.
We are a Dutch public company with limited liability (naamloze vennootschap) and are subject to the DCGC. The DCGC contains both principles and best practice provisions for management boards, supervisory boards, shareholders and general meetings of shareholders, financial reporting, auditors, disclosure, compliance and enforcement standards. The DCGC applies to all Dutch companies listed on a government-recognized stock exchange, whether in the Netherlands or elsewhere, including Nasdaq.

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The DCGC is based on a “comply or explain” principle. Accordingly, companies are required to disclose in their annual reports, filed in the Netherlands whether they comply with the provisions of the DCGC. If they do not comply with those provisions (e.g., because of a conflicting U.S. requirement), the company is required to give the reasons for such non-compliance. We do not comply with all the best practice provisions of the DCGC.
See “Item 16 G. Corporate governance.” This may affect your rights as a shareholder and you may not have the same level of protection as a shareholder in a Dutch company that fully complies with the DCGC.
Our dual-class share structure with different voting rights, and certain provisions in the Amended and Restated Shareholders’ Agreement, limit your ability as a holder of Class A shares to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A shares may view as beneficial.
We have a dual-class share structure such that our share capital consists of Class A shares and Class B shares. In respect of matters requiring the votes of shareholders, based on our dual-class share structure, holders of Class A shares are entitled to one vote per share, while holders of Class B shares are entitled to ten votes per share. Each Class B share is convertible into one Class A share at any time by the holder thereof, while Class A shares are not convertible into Class B shares under any circumstances. Each of our ADSs represents one Class A share.
As of December 31, 2018, Expedia Group owned Class B shares representing 59.5% of our share capital and 66.8% of the voting power in us, and the Founders owned Class B shares representing 28.4% of our share capital and 31.9% of the voting power in us due to the disparate voting powers associated with our dual-class share structure. See “Item 7 A. Major shareholders.” As a result of the dual-class share structure and the concentration of ownership, as well as the terms of the Amended and Restated Shareholders’ Agreement, Expedia Group (through ELPS) and the Founders have considerable influence over matters such as decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, appointment and dismissal of management board members and supervisory board members and other significant corporate actions. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could have the effect of depriving the holders of ADSs (representing Class A shares) of the opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of our Class A shares. This concentrated control limits your ability to influence corporate matters that holders of Class A shares may view as beneficial.
German and European insolvency laws are substantially different from U.S. insolvency laws and may offer our shareholders less protection than they would have under U.S. insolvency laws.
As a company with its registered office in Germany, we are subject to German insolvency laws in the event any insolvency proceedings are initiated against us including, among other things, Regulation (EU) 2015/848 of the European Parliament and of the Council of May 20, 2015 on insolvency proceedings). Should courts in another EU jurisdiction determine that the insolvency laws of that EU jurisdiction apply to us in accordance with and subject to such EU regulations, the courts in that country could have jurisdiction over the insolvency proceedings initiated against us. Insolvency laws in Germany or the relevant other European country, if any, may offer our shareholders less protection than they would have under U.S. insolvency laws and make it more difficult for them to recover the amount they could expect to recover in a liquidation under U.S. insolvency laws.
Dutch law and our articles of association may contain provisions that may discourage a takeover attempt.
Dutch law and provisions of our articles of association may in the future impose various procedural and other requirements that would make it more difficult for shareholders to effect certain corporate actions and would make it more difficult for a third party to acquire control of us or to effect a change in the composition of our management board and supervisory board. For example, such provisions include a dual-class share structure that gives greater voting power to the Class B shares owned by Expedia Group and our Founders, the binding nomination structure for the appointment of our management board members and supervisory board

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members, and the provision in our articles of association which provides that certain shareholder decisions can only be passed if proposed by our management board.
U.S. investors may have difficulty enforcing civil liabilities against us or members of our management board and supervisory board.
We are incorporated in the Netherlands. Most members of our management board and supervisory board are non-residents of the United States. The majority of our assets and the assets of these persons are located outside the United States. As a result, it may not be possible, or may be very difficult, to serve process on such persons or us in the United States or to enforce judgments obtained in U.S. courts against them or us based on civil liability provisions of the securities laws of the United States.
There is no treaty between the United States and the Netherlands for the mutual recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws, would not be enforceable in the Netherlands unless the underlying claim is relitigated before a Dutch court of competent jurisdiction. Under current practice, however, a Dutch court will generally, subject to compliance with certain procedural requirements, grant the same judgment without a review of the merits of the underlying claim if such judgment (i) is a final judgment and has been rendered by a court which has established its jurisdiction vis-à-vis the relevant Dutch Companies or Dutch Company, as the case may be, on the basis of internationally accepted grounds of jurisdiction, (ii) has not been rendered in violation of elementary principles of fair trial, (iii) is not contrary to the public policy of the Netherlands, and (iv) is not incompatible with (a) a prior judgment of a Dutch court rendered in a dispute between the same parties, or (b) a prior judgment of a foreign court rendered in a dispute between the same parties, concerning the same subject matter and based on the same cause of action, provided that such prior judgment is capable of being recognized in the Netherlands. Dutch courts may deny the recognition and enforcement of punitive damages or other awards. Moreover, a Dutch court may reduce the amount of damages granted by a U.S. court and recognize damages only to the extent that they are necessary to compensate actual losses or damages. Enforcement and recognition of judgments of U.S. courts in the Netherlands are solely governed by the provisions of the Dutch Code of Civil Procedure.
Based on the foregoing, there can be no assurance that U.S. investors will be able to enforce any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws, against us or members of our management board and supervisory board, officers or certain experts named herein who are residents of the Netherlands or countries other than the United States. In addition, there is doubt as to whether a Dutch court would impose civil liability on us, the members of our management board and supervisory board, our officers or certain experts named herein in an original action predicated solely upon the U.S. federal securities laws brought in a court of competent jurisdiction in the Netherlands against us or such members, officers or experts, respectively.
We rely on the foreign private issuer and controlled company exemptions from certain corporate governance requirements under Nasdaq rules.
As a foreign private issuer whose ADSs are listed on Nasdaq, we are permitted to follow certain home country corporate governance practices pursuant to exemptions under Nasdaq rules. A foreign private issuer must disclose in its annual reports filed with the SEC each requirement under Nasdaq rules with which it does not comply, followed by a description of its applicable home country practice. Our Dutch home country practices may afford less protection to holders of our ADSs. We follow in certain cases our home country practices and rely on certain exemptions provided by Nasdaq rules to foreign private issuers, including, among others, an exemption from the requirement to hold an annual meeting of shareholders no later than one year after an issuer’s fiscal year end, exemptions from the requirement that a board of directors be comprised of a majority of independent directors, exemptions from the requirements that an issuer’s compensation committee should be comprised solely of independent directors, and exemptions from the requirement that share incentive plans be approved by shareholders. See “Item 16 G. Corporate governance.” for more information on the significant differences between our corporate governance practices and those followed by U.S. companies under Nasdaq rules. As a result of our reliance on the corporate governance exemptions

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available to foreign private issuers, you will not have the same protection afforded to shareholders of companies that are subject to all of Nasdaq’s corporate governance requirements.
In addition to the exemptions we rely on as a foreign private issuer, we also rely on the “controlled company” exemption under Nasdaq corporate governance rules. A “controlled company” under Nasdaq corporate governance rules is a company of which more than 50% of the voting power is held by an individual, group or another company. Our principal shareholder, Expedia Group, controls a majority of the combined voting power of our outstanding shares, making us a “controlled company” within the meaning of Nasdaq corporate governance rules. As a controlled company, we have elected not to comply with certain corporate governance standards, including the requirement that a majority of our supervisory board members are independent and the requirement that our compensation committee consist entirely of independent directors.
Risks related to taxation
We may become taxable in a jurisdiction other than Germany, and this may increase the aggregate tax burden on us.
Since our incorporation, we intend to have, on a continuous basis, our place of effective management in Germany. Therefore, we believe that we are a tax resident of Germany under German national tax laws. By reason of our incorporation under Dutch law, we are also deemed tax resident in the Netherlands under Dutch national tax laws. However, based on our current management structure and current tax laws of the United States, Germany and the Netherlands, as well as applicable income tax treaties, and current interpretations thereof, we believe that we are tax resident solely in Germany for the purposes of the 2012 convention between the Federal Republic of Germany and the Netherlands for the avoidance of double taxation with respect to taxes on income.
The tax laws, tax treaties or interpretations thereof applicable to us may change. Furthermore, whether we have our place of effective management in Germany and are as such wholly tax resident in Germany is largely a question of fact and degree based on all circumstances, rather than a question of law, which facts and degree may also change. Changes to applicable tax laws, tax treaties or interpretations thereof and changes to applicable facts and circumstances (e.g., a change of board members or the place where board meetings take place), may result in us becoming a tax resident of a jurisdiction other than Germany, potentially also triggering an exit tax liability in Germany. As a consequence, our overall effective income tax rate and income tax expense could materially increase, which could have a material adverse effect on our business, results of operations, financial condition and prospects, which could cause our ADS price and trading volume to decline.
Application of existing tax laws, rules or regulations are subject to interpretation by taxing authorities.
The application of various national and international income and non-income tax laws, rules and regulations to our historical and new services is subject to interpretation by the applicable taxing authorities. These taxing authorities have become more aggressive in their interpretation and enforcement of such laws, rules and regulations over time, as governments are increasingly focused on ways to increase revenue. This has contributed to an increase in audit activity and harsher stances taken by tax authorities. As such, additional taxes or other assessments may be in excess of our current tax reserves or may require us to modify our business practices to reduce our exposure to additional taxes going forward, any of which may have a material adverse effect on our business, results of operations, financial condition and prospects.
Significant degrees of judgment and estimation are required in determining our worldwide tax liabilities. In the ordinary course of our business, there are transactions and calculations, including intercompany transactions and cross-jurisdictional transfer pricing for which the ultimate tax determination is uncertain or otherwise subject to interpretation. Tax authorities may disagree with our intercompany charges, including the amount of or basis for such charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. Although we believe our tax estimates are reasonable, the final determination of tax audits could be materially different from our historical income tax provisions and accruals in which case we may be subject to additional tax liabilities, possibly including interest and penalties, which could have a material adverse effect on our business, results of operations, financial condition and prospects.

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Amendments to existing tax laws, rules or regulations or enactment of new unfavorable tax laws, rules or regulations could have an adverse effect on our business and financial performance.
Many of the underlying laws, rules or regulations imposing taxes and other obligations were established before the growth of the Internet and e-commerce. If the tax or other laws, rules or regulations were amended, or if new unfavorable laws, rules or regulations were enacted, the results could increase our tax payments or other obligations, prospectively or retrospectively, subject us to interest and penalties, decrease the demand for our services if we pass on such costs to the user, result in increased costs to update or expand our technical or administrative infrastructure or effectively limit the scope of our business activities if we decided not to conduct business in particular jurisdictions. As a result, these changes may have a material adverse effect on our business, results of operations, financial condition and prospects.
In addition, in the past, Germany and foreign governments have introduced proposals for tax legislation, or have adopted tax laws, that could have a significant adverse effect on our tax rate, or increase our tax liabilities, the carrying value of deferred tax assets, or our deferred tax liabilities. For example, in October 2015, the Organization for Economic Co-Operation and Development (OECD) released a final package of measures to be implemented by member nations in response to a 2013 action plan calling for a coordinated multi-jurisdictional approach to “base erosion and profit shifting” (BEPS) by multinational companies. Multiple member jurisdictions, including the countries in which we operate, have begun implementing recommended changes, such as proposed country-by-country reporting beginning as early as 2016. By February 2019, 87 member jurisdictions, including Germany, have signed the “Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting” (MLI), which allows member jurisdictions to amend existing bilateral double taxation treaties according to results from the OECD BEPS project. Out of these 87 jurisdictions, 20 have also ratified the MLI. As of February 2019, Germany has, however, not ratified the MLI and, as a result, the MLI has not entered into force in Germany. About 35 of Germany's double taxation treaties with other member jurisdictions will be affected after Germany's ratification and the ratification of the respective treaty state. Another measure based upon the OECD’s BEPS initiative is the adoption of the so-called Anti-Tax Avoidance Directive I and II of the European Union. Under these directives, EU member states are to adopt certain anti-abuse measures by January 2019 while certain other anti-abuse measures are to be adopted in subsequent years. In addition, there have also been developments at the national level in several countries as well as initiatives at the level of the OECD and the European Union that aim to target the digital economy through taxes on revenue from digital services or through taxes on income attributed to countries where the respective multinationals have a digital presence, which could result, depending on how such initiatives are ultimately implemented in the source jurisdiction and on how Germany may change its rules as a reaction, in double taxation on certain income.
Any changes to national or international tax laws could impact the tax treatment of our revenues or earnings and adversely affect our profitability. We continue to work with relevant authorities and legislators to clarify our obligations under existing, new and emerging tax laws and regulations.
Our effective tax rate in the future could also be adversely affected by changes to our operating structure, changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or the discontinuation of beneficial tax arrangements in certain jurisdictions.
We may be classified as a passive foreign investment company, or PFIC, which could result in adverse U.S. federal income tax consequences to U.S. Holders of the ADSs.
Based on the market price of our ADSs and the composition of our income, assets and operations, we do not expect to be treated as a PFIC for U.S. federal income tax purposes for the current taxable year or in the foreseeable future. However, the application of the PFIC rules to us is subject to certain ambiguity. In addition, this is a factual determination that must be made annually after the close of each taxable year. Therefore, there can be no assurance that we will not be classified as a PFIC for the current taxable year or for any future taxable year. We would be classified as a PFIC for any taxable year if, after the application of certain look-through rules, either: (1) 75% or more of our gross income for such year is “passive income” (as defined in the relevant provisions of the Internal Revenue Code of 1986, as amended), or (2) 50% or more of the value of our assets (determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income. Certain adverse U.S. federal income

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tax consequences could apply to a U.S. Holder (as defined in “Item 10 E. Taxation—Material U.S. federal income tax considerations”) if we are treated as a PFIC for any taxable year during which such U.S. Holder holds ADSs.
Certain of our ADS holders may be unable to claim tax credits to reduce German withholding tax applicable to the payment of dividends.
We do not anticipate paying dividends on our ADSs for the foreseeable future. As a Dutch-incorporated but German tax resident company, however, if we pay dividends, such dividends will be subject to German (and potentially Dutch) withholding tax. Currently, the applicable German withholding tax rate is 26.375% of the gross dividend. This German tax can be reduced to the applicable double tax treaty rate, which is generally 15%, however, by an application filed by the tax payer containing a specific German tax certificate with the German Federal Central Tax Office (Bundeszentralamt für Steuern). If a tax certificate cannot be delivered to the ADS holder due to applicable settlement mechanics or lack of information regarding the ADS holder, holders of the shares or ADSs of a German tax resident company may be unable to benefit from any available double tax treaty relief and may be unable to file for a credit of such withholding tax in its jurisdiction of residence. Further, the payment made to the ADS holder equal to the net dividend may, under the tax law applicable to the ADS holder, qualify as taxable income that is in turn subject to withholding, which could mean that a dividend is effectively taxed twice. Our ADSs have been issued by a depositary with a direct link to the U.S. Depository Trust Company, or DTC, which should reduce the risk that the applicable German withholding tax certificate cannot be delivered to the ADS holder. However, there can be no guarantee that the information delivery requirement can be satisfied in all cases, which could result in adverse tax consequences for affected ADS holders.
Investors should note that the interpretation circular (Besteuerung von American Depositary Receipts (ADR) auf inländische Aktien) issued by the German Federal Ministry of Finance (Bundesministerium der Finanzen) dated May 24, 2013 (reference number IV C 1-S2204/12/10003), or ADR Tax Circular, is not binding for German courts and it is not clear whether or not a German tax court will follow the ADR Tax Circular in determining the German tax treatment of our specific ADSs. Further concerns regarding the applicability of the ADR Tax Circular may arise due to the fact that the ADR Tax Circular refers only to German stock and not to shares in a Dutch N.V. If the ADSs are determined not to fall within the scope of application of the ADR Tax Circular, and thus profit distributions made with respect to the ADSs are not treated as a dividend for German tax purposes, the ADS holder would not be entitled to a refund of any taxes withheld on the dividends under German tax law. See “Item 10 E. Taxation—German taxation—German taxation of ADS holders”).
If we pay dividends, we may need to withhold tax on such dividends payable to holders of our ADSs in both Germany and the Netherlands.
As an entity incorporated under Dutch law, but with its place of effective management in Germany (and not in the Netherlands), our dividends are generally subject to German dividend withholding tax and not Dutch withholding tax. However, Dutch dividend withholding tax is required to be withheld from dividends if and when paid to Dutch resident holders of our ADSs (and non-Dutch resident holders of our ADSs that have a permanent establishment in the Netherlands to which their shareholding is attributable). As a result, we will be required to identify our shareholders and/or ADS holders in order to assess whether there are Dutch residents (or non-Dutch residents with a permanent establishment to which the shares are attributable) in respect of which Dutch dividend tax has to be withheld. Such identification may not always be possible in practice. If the identity of our shareholders and/or ADS holders cannot be assessed upon a payment of dividend, withholding of both German and Dutch dividend tax from such dividend may occur.


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Item 4: Information on the company
A.
History and development of the company
trivago was conceived by graduate school friends Rolf Schrömgens, Peter Vinnemeier and Stephan Stubner, who initially operated trivago out of a garage in Düsseldorf, Germany. trivago GmbH was incorporated in 2005, and its business eventually developed into a leading global hotel and accommodation search platform. Mr. Stubner left the company in 2006 and another graduate school friend, Malte Siewert, joined the founding team.
Between 2006 and 2008, several investors invested €1.4 million in trivago. In 2010, Insight Venture Partners acquired 27.3% of the equity ownership of trivago for €42.5 million. Expedia Group acquired 63.0% of the equity ownership in trivago in 2013, purchasing all outstanding equity from non-Founders and some outstanding equity from the Founders and subscribing for a certain number of newly issued shares for a total of €477 million. Expedia Group subsequently increased its shareholdings slightly in the second and fourth quarter of 2016 through the purchase of shares held by certain employees who had previously exercised stock options.
We were incorporated on November 7, 2016 as travel B.V., a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) under Dutch law. On December 16, 2016, we completed our IPO on the Nasdaq Stock Exchange. In connection with our IPO, we converted into a public company with limited liability (naamloze vennootschap) under Dutch law pursuant to a deed of amendment and conversion and changed our legal name to trivago N.V. On September 7, 2017, we consummated the cross-border merger of trivago GmbH into and with trivago N.V.
We are registered with the Trade Register of the Chamber of Commerce in the Netherlands (Kamer van Koophandel) under number 67222927. Our corporate seat is in Amsterdam, the Netherlands, and our registered office is at Kesselstraße 5 - 7, 40221 Düsseldorf, Germany (under number HRB 79986). Our telephone number is +49-211-3876840000.
Our agent in the United States is Cogency Global Inc., and its address is 10 East 40th Street, 10th floor, New York, NY 10016.
Principal capital expenditures and divestitures 
Although our growth has primarily been organic, we have made the following small strategic acquisition since January 1, 2016:
In August 2017, we acquired all material assets of tripl, a German online platform for personal travel recommendations, for a total purchase consideration of €0.7 million, consisting of cash and trivago N.V. shares. We acquired tripl to enhance our product with personalization technology that uses big data and a customer-centric approach. tripl's algorithm gives users tailored travel recommendations by identifying trends in users' social media activities and comparing it with in-app data of like-minded users. The alternative intelligence-driven product is designed to imitate the way a travel agent would recommend hotel experiences relevant to the customer, and combines it with the ease of online services.
This acquisition was conducted with no external financing.

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Public takeover offers
Since January 1, 2018, there have been no public takeover offers by third parties with respect to our shares, and we have not made any public takeover offers in respect of any other company’s shares.
Segment reporting
Beginning in the second quarter of 2016, management identified three reportable segments, which correspond to our three operating segments: the Americas, Developed Europe and the Rest of World. The change from one to three reportable segments was the result of a management reorganization to more effectively manage the business. This reorganization was performed to align the management of the business to our focus on unique market opportunities and competitive dynamics inherent within each of the operating segments. Our Americas segment is comprised of Argentina, Brazil, Canada, Chile, Columbia, Ecuador, Mexico, Peru, the United States and Uruguay. Our Developed Europe segment is comprised of Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. Our Rest of World segment is comprised of all other countries, the most significant by revenue of which are Australia, Japan, India, New Zealand, Russia and Turkey. Segment revenue is comprised entirely of Referral Revenue. Other revenue is included in Corporate and eliminations, along with all corporate functions and expenses except for direct advertising.
We determined our operating segments based on how our chief operating decision makers manage our business, make operating decisions and evaluate operating performance. Our primary operating metric is return on advertising spend, or ROAS, for each of our segments, which compares Referral Revenue to Advertising Spend.
For additional information relating to the development of our company, see “Item 4 B. Business overview.
B.
Business overview
Overview
trivago is a global hotel and accommodation search platform. We are focused on reshaping the way travelers search for and compare different types of accommodations, such as hotels, vacation rentals and private apartments, while enabling our advertisers to grow their businesses by providing them with access to a broad audience of travelers via our websites and apps. Our platform allows travelers to make informed decisions by personalizing their search for accommodation and providing them with access to a deep supply of relevant information and prices. In the year ended December 31, 2018, we had 668.3 million Qualified Referrals and, as of that date, offered access to more than 3.0 million hotels and other types of accommodation, including 1.5 million units of alternative accommodation such as vacation rentals and private apartments, in over 190 countries. See “Item 5. Operating and financial review and prospects” for a further description of Qualified Referrals.
We have positioned our brand as a key part of the process for travelers in finding their "ideal hotel," vacation rental or private apartment. Our fast and intuitive search platform enables travelers to find their ideal hotel or other accommodation by matching individual traveler preferences with detailed accommodation characteristics, such as price, location, availability, amenities and ratings, across a vast global supply.
We believe that the number of travelers accessing our websites and apps makes us an important and scalable marketing channel for our advertisers, which include OTAs, hotel chains, independent hotels and providers of alternative accommodation. Additionally, our ability to refine user intent through our search function allows us to provide advertisers with transaction-ready referrals. We generate revenues primarily on a “cost-per-click,” or CPC, basis, whereby an advertiser is charged when a user clicks on an advertised rate for a hotel or other accommodation and is referred to that advertiser’s website where the user can complete the booking. The CPC bids submitted by our advertisers play an important role in determining the prominence given to offers and their placement in our search results. Our CPC bidding function enables our advertisers to influence their own return on investment and the volume of referral traffic we generate for them. Recognizing that advertisers on our marketplace have varying objectives and varying levels of marketing resources and experience, we provide a range of services to enable advertisers to improve their performance on our marketplace.
Our hotel and accommodation search platform can be accessed globally via 55 localized websites and apps available in 33 languages. Users can search our platform on desktop and mobile devices, and benefit from
a familiar user interface, resulting in a consistent user experience. In the year ended December 31, 2018, our revenue share from mobile websites and apps continued to exceed 60%.
Our revenue has grown significantly since our incorporation in 2005. In the years ended December 31, 2016, 2017 and 2018, we generated revenue of €754.2 million, €1,035.4 million and €914.8 million respectively. During the same periods, we had net losses of €(51.4) million, €(13.0) million and €(21.5) million, respectively. In the years ended December 31, 2016, 2017 and 2018, our adjusted EBITDA was €28.2 million, €6.7 million and €14.6 million, respectively. See "Item 5 A. Operating review—Results of operations—Revenue" for Referral Revenue by segment, representing a breakdown according to principal geographic markets. See “Item 3 A. Selected financial data” for an additional description of adjusted EBITDA and a reconciliation of adjusted EBITDA to net loss.
trivago's search platform
We believe that we are reshaping hotel discovery for our users, while changing the way hotel advertisers identify, engage with and acquire travelers. Our search platform forms the core of our user experience, and can be accessed globally via 55 localized websites and apps available in 33 languages. As we provide a search website, users do not book directly on our platform. When they click on an offer for a hotel room or other accommodation at a certain price, they are referred to our advertisers’ websites where they can complete their booking. We maintain one of the largest searchable databases of hotels in the world. As of December 31, 2018, our database included more than 3.0 million hotels and other types of accommodation, gathered through OTAs, hotel chains, independent hotels and providers of alternative accommodations.
Our users initially search via a text-based search function, which supports searches across a broad range of criteria. This leads through to a listings page that displays search results and allows for further refinement based on more nuanced filters. Our platform organizes a large amount of information from multiple sources and gives each user what we believe to be the optimal basis to make a decision. We help users to convert initial interest into a clear and specific booking intention.
Additionally, we enhance our users’ experience by giving them the choice to display their search results in listings or map formats. Users can search our platform on desktop and mobile devices, and benefit from a familiar user interface, resulting in a consistent user experience.
Initial search bar parameters
Subsequent search filters
Location
(City, Region, Country, Point of Interest)
Hotel stars
(1 star to 5 stars)
 
Popularity/Our recommendations
 
 
Check-in date
trivago ratings
(Below average, Satisfactory, Good, Very Good, Excellent)
 
 
Check-out date
Price range
 
 
Room type
(single, double, family, multiple)
Distance from landmarks
 
 
Hotel name
Top amenities options
(Pets, Beach, Free WiFi, Breakfast, Pool)
 
 
 
Hotel name or address
Performing a search shows a user a hotel listing page. This page contains broad, aggregated information, including:
Hotel information: We display information that we believe is relevant to the user, such as the hotel name, pictures, amenities, star rating and distance to selected location;
trivago ratings index: We aggregate millions of ratings globally. We produce a score for each property, which is updated daily to render relevant and valuable insights for our users while saving them time

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when searching for the ideal hotel or other accommodation. The rating is a single, easy-to-use score out of ten;
Reviews: We provide reviews from third parties in a clear and concise format; and
Price comparison: We prominently display a suggested advertised deal for each hotel or other accommodation, while also listing additional available offers from our advertisers in a list format, including room types, amenities and payment options. To learn more about how we determine the prominence given to offers and their placement in our search results, see "—Marketplace" below.
Our products are accessible anytime and anywhere, online and on mobile devices. We provide our services through mobile websites and apps. m.trivago.com (or its localized versions) is our mobile-optimized website available on mobile device browsers, and our full-featured native mobile app is available on iPhone, iPad, Android Phone and Android Tablet.
Product changes in 2018
Below are some of the more significant developments in our search product during 2018:
We launched a new iOS and Android App with an improved user interface to encourage our users to increase their interaction with our content with the aim of improving our booking performance;
We made improvements to our filtering through increasing opportunities for refining searches and improving our users' experience by redesigning the filter segment of our search engine; and
We also made efforts to make it easier for our users to sign up and log in with trivago, with the aim of increasing how often our users log in to our site
In 2018, we substantially revamped our back-end infrastructure, which subsequently went fully live in early 2019. We also continued to implement measures aimed at optimizing our platforms and products, with the intention of increasing user retention and booking conversion, while reducing the number of click-outs required to ultimately generate a booking. These are relatively small, incremental changes to our products that we believe, when considered together, will result in improvements to our product and platforms. These measures include enhancements to our site that encourage users to spend more time exploring and interacting with our site and its features before being referred to one of our advertisers. Since we make these changes by optimizing for traffic quality instead of volume, these changes will tend to have a negative impact on the number of Qualified Referrals, but we believe advertisers have increased their CPC bids in response to improved traffic quality in terms of booking conversion, which has had a positive impact on Revenue per Qualified Referral (RPQR), particularly in the fourth quarter of 2018.
Alternative accommodation
As of December 31, 2018, we offered access on our search platform to more than 1.5 million units of alternative accommodation, such as vacation rentals and private apartments. We are focused on broadening the value proposition that we offer our users by empowering them to compare across multiple different accommodation types. For more information, see below "—Our Strategy—Broadening our value proposition."
Marketing
Through test-driven marketing operations, we have positioned our brand as a key part of the process for travelers in finding their ideal hotel or other accommodation. We organize our marketing teams and spend allocations to focus on building effective messaging to a broad audience across multiple geographies and languages. We believe that building and maintaining our brand and clearly articulating our role in travelers' hotel or other accommodation discovery journey will continue to drive both travelers and advertisers to our platform to connect in a mutually beneficial way.
Our application of data-led improvement and innovation also informs our marketing strategy, which we believe enables us to become increasingly more effective with our marketing spend. We have built tools that capture data and calculate our return on many elements of our brand and performance marketing.

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Brand marketing
To grow brand awareness and increase the likelihood that users will visit our websites and use our apps, we invest in brand marketing globally across a broad range of media channels, including TV marketing and online video advertising.
The amount and nature of our Advertising Spend varies across our geographic markets, depending on multiple factors including the emphasis we wish to place on profitability versus traffic growth, cost efficiency, marginal effectiveness of our Advertising Spend, local media dynamics, the size of the market and our existing brand presence in that market.
We also generate hotel content as a means of engaging with travelers, which is distributed online including via social media and our online magazine. Mobile app marketing remains important given the high usage of that device type.
Performance marketing
We market our services and directly acquire traffic to our websites by purchasing travel and hotel-related keywords from general search engines and through advertisements on other online marketing channels. These activities include advertisements through search engines, such as Bing, Google, Naver and Yahoo! (commonly referred to as Search Engine Marketing, or SEM), as well as through display advertising campaigns on advertising networks, affiliate websites and social networking sites (commonly referred to as Display, Email and Affiliate Advertising, or DEA).
Allocation of marketing spend
We take a data-driven, testing-based approach to making decisions about allocating marketing spend, where we use tools, processes and algorithms, many of which are proprietary, to measure and optimize performance end-to-end, starting with the pretesting of the creative concept and ending with the optimization of media spend.
After introducing a new model in 2017 for allocating our marketing spend, which we refer to as our attribution model, we continue to develop the methodologies we use to inform decisions about how much we spend on each marketing channel. We continue to focus on whether a user who comes to us from a given marketing channel proceeds to book a hotel in order to estimate how much revenue originated from a given marketing channel (or how revenue is “attributed” to that channel in our internal metrics). In 2018, we observed improved traffic quality in terms of booking conversion that we believe resulted from the implementation of the attribution model and accordingly saw a positive impact on advertisers' CPC bids and Revenue per Qualified Referral, or RPQR. For more information on Qualified Referrals and RPQR, see "Item 5 A. Operating results—Key factors affecting our financial condition and results of operations."
Advertiser relations
Our advertiser relations team seeks to provide tailored advice to each of our existing and prospective OTAs, providers of alternative accommodation, hotel chains and independent hotel advertisers. We have dedicated sales teams that manage the process of onboarding advertisers, maintain ongoing relationships with advertisers, work with advertisers to help them optimize their outcomes from the trivago platform and provide guidance on additional tools and features that could further enhance advertisers’ experience. We aim to remain in close dialogue with OTAs and sophisticated hotel chains to better understand each advertiser’s specific needs and objectives in order to offer optimal solutions through our marketplace.
Relationship building with smaller advertisers, including some independent hotels, differs from those with OTAs and sophisticated hotel chains as they are often less familiar with CPC bidding models and online advertising more broadly. This typically ensures a longer sales cycle where the starting point can be building awareness of the relevance of our marketplace or articulating the opportunities that our platform offers. It often requires onboarding by encouraging the optimization of such advertisers' information and profiles on our site, upselling products to further enhance their profiles, and encouragement to start bidding directly on our marketplace. This often multi-stage process requires our sales team to develop close relationships with each hotel. As of December 31, 2018, over 500,000 hotels engaged through Hotel Manager (described
below) directly with our platform (as of December 31, 2017: 400,000), of which approximately 45,000 subscribed to Hotel Manager Pro (as of December 31, 2017: approximately 45,000).
Marketing tools and services for advertisers
We offer our advertisers a suite of marketing tools to help promote their listings on our platform and drive traffic to their websites. The following tools and services provide tailored solutions for OTAs, hotel chains and independent hotels to help them manage their presence on our marketplace and steer their investments according to their budget and traffic needs. Our tools include:
trivago Hotel Manager, a marketing platform that gives each hotelier control over its hotel profile.
trivago Hotel Manager “Basic,” a free administration tool specifically for hotels, helping them build and manage a unique hotel profile on trivago to enhance their presence. This includes the ability to manage visual and static content, including adjusting contact details, pictures, amenities and service listings, as well as refining descriptions. Using the Hotel Manager tool, each hotel can ensure that our marketplace accurately captures its offerings, helping attract guests.
trivago Hotel Manager “Pro,” which is sold on a one-year subscription basis and allows hotels to enhance their profile with more advanced features and functionalities. With Hotel Manager Pro, hotels can increase promotion with exclusive news about their hotel and prominent contact details, helping them stand out and drive more bookings. Furthermore, we provide hoteliers with additional analytics about who searches for their hotels as well as benchmarking against their competition.
trivago Hotel Manager “Rate Connect,” which enables independent hotels to publish their website rates directly on their profiles, helping them to increase direct bookings and their prominence on our marketplace. Hotels set a monthly budget, and we create an optimized marketing campaign, automatically calculating CPC bids that are competitive with other advertisers and targeted to increase referrals. A dedicated team of marketing experts is available via email or phone to support hotels.
trivago Intelligence, a marketing platform for multi-property management that enables hotel chains and OTAs to manage their inventory and CPCs.
trivago Intelligence provides holistic control for our advertisers that wish to closely manage and analyze their advertising on our marketplace. It allows them to bid on individual hotels with a high degree of granularity and control, provides metrics and feedback on specific advertising campaigns and offers advice to optimize bidding strategies and drive additional referrals.
Automated Bidding allows OTAs, hotel chains and independent hotels to bid efficiently on listings. Advertisers are able to decide the traffic volumes or return on advertising investment they wish to reach and the tool will automatically set and adjust bids according to the target. We believe this is an especially valuable tool for advertisers that are less familiar with online bidding models, although it is our belief that larger, more experienced advertisers will also value the efficiency Automated Bidding provides.
Express Booking helps our advertisers drive bookings by providing the option of an easy booking method within our marketplace. Although the booking information is completed on our site, the advertiser processes payments directly, confirms the booking and provides any booking support. We also prominently feature the brand of the advertiser taking the booking, allowing our advertisers to continue to build their own brand within our marketplace.
Direct Connect for Chains, which enables hotel chains to publish rates from their website directly on their inventory using their existing central reservation system and Internet booking engine. This helps them increase direct bookings and their prominence on our marketplace. Hotel chains that run direct connect campaigns also are provided access to Automated Bidding and Express Booking tools.

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Marketplace
We design our algorithm to showcase the hotel room and other accommodation rate offers that we believe will be of most interest to our users, emphasizing those offers that are more likely to be clicked and ultimately booked on our advertisers' websites. We prominently display a suggested deal for each hotel, which is determined based on our algorithm as described below, while also listing additional offers made available to us from our advertisers in a list format.
We consider the completion of hotel and other accommodation bookings, which we refer to as conversion, to be a key indicator of user satisfaction on our website. At the core of our ability to match our users’ searches with large numbers of hotel and other accommodation offers is our auction platform, which we call our marketplace. With our marketplace, we provide advertisers a competitive forum to access user traffic by facilitating a vast quantity of auctions on any particular day. Advertisers do this by submitting hotel room and other accommodation rates on our marketplace and CPC bids for each user click on an advertised rate for a hotel or other accommodation. By clicking on a given rate, an individual user is referred to that advertiser’s website where the user can complete the booking. Advertisers can submit and adjust CPC bids on our marketplace frequently - as often as daily - on a property-by-property and market-by-market basis, and provide us with information on hotel room and other accommodation rates and availability on a near-real time basis.
In determining the prominence given to offers and their placement in our search results, including in comparison search results for a given location and on detail pages for a given property, our proprietary algorithm considers a number of factors in a dynamic, self-learning process. These include (but are not limited to) the advertiser’s offered rate for the hotel room or other accommodation, the likelihood the offer will match the user’s accommodation search criteria, data we have collected on likely booking conversion and user experience (as reflected in our relevance assessment) and the CPC bids submitted by our advertisers.
The CPC bids submitted by our advertisers play an important role in determining the prominence given to offers and their placement in our search results. Advertisers can analyze the number of referrals obtained from their advertisements on our marketplace and the consequent value generated from a referral based on the booking value they receive from users referred from our site to determine the amount they are willing to bid. Generally, the higher the potential booking value generated by a Qualified Referral and the more competitive the bidding, the more an advertiser is willing to bid for an advertisement on our marketplace. This means that the levels of advertisers’ CPC bids reflect their view of the likelihood that each click on an offer will result in a booking by a user. We exclude from our marketplace auction offers where the CPC has been set to a de minimis level, as this typically denotes room inventory that the advertiser has for some period of time withdrawn from its active inventory on trivago.
Our relevance assessment focuses on the quality of users' experience after clicking out to an advertiser from our website. The relevance assessment approximates the relative ease or difficulty for users of completing a booking on our advertisers’ websites and advantages that advertisers might derive from non-standard website designs, and then results in an upward or downward adjustment to those advertisers’ CPC bids in our marketplace's auction process based on that evaluation, which in turn can affect the prominence given to the offers in our search results (with offers more likely to lead to a booking given greater prominence). In 2018, we began to implement a rate accuracy score, which is based on a check of the accuracy of hotel and accommodation rates delivered to us compared to those displayed on our advertisers platforms, and also operates as an upward or downward adjustment of advertisers' CPCs.
By managing their CPC bids, relevance assessments and hotel room and other accommodation rates submitted on our marketplace, our advertisers can influence their own returns on investment and the volumes of referral traffic we generate for them. We believe that by providing tools and services, such as our Automated Bidding tool, we can increase competition and create a more level playing field for our advertisers. By doing this, we aim to mitigate competitive disadvantages for smaller advertisers on our marketplace and to deliver more choice for our users.

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Our market opportunity
As the process for discovering, evaluating, and booking accommodations increasingly moves online, travelers and advertisers face distinct challenges.
Challenges for travelers
With the continuing digitalization of the accommodation industry, there is an ever-increasing quantum of information available online about hotels and other types of accommodations including amenities, style, reviews, location and pictures. Additionally, details on pricing and availability are continually updated in or near real-time. This information has empowered travelers, providing a level of insight that was previously unavailable. However, this information is often delivered via multiple fragmented sources, including OTAs, hotel chains, independent hotels, and providers of alternative accommodations. Internet search engines and other review sites. Also, many websites, including those that aggregate disparate information, are often slow, confusing to navigate, and may not display the most relevant accommodation information for travelers. Furthermore, many local OTAs and smaller hotels only display information in their local language, which creates an additional layer of complexity for travelers looking to find accommodations in a foreign destination. These developments can make booking a hotel a frustrating experience for travelers.
Challenges for our advertisers
Hotel and other accommodation advertisers operate in a competitive market with a broad range of participants, each having specific needs. OTAs need to drive high volumes of traffic to their websites to generate revenues, while hotel chains, independent hotels and alternative accommodation providers who operate high fixed cost models focus on ensuring their inventory is filled. These market participants aspire to reach a targeted audience of travelers with their marketing.
Traditional offline advertising media, including TV, radio, print and outdoor, focus on reaching a broad audience and can be an expensive media for reaching the few travelers seeking hotels in a specific location on specific dates.
There are challenges with online advertising as well. Many advertisers spend an increasing amount of their marketing budgets on online advertising where it is possible to economically reach a very broad audience through a website. However, the fragmentation of travelers online makes it difficult for advertisers to scale up their spend effectively in an efficient manner. Furthermore, OTAs, smaller hotel chains and hotels may not have the resources to develop sophisticated websites and as a result, provide a limited user experience in terms of attractiveness, comprehensiveness of information and ease of booking. Such websites often only publish information in local languages, limiting their reach to a local market.
Benefits for our users
Global aggregation of real-time accommodation supply
We aggregate availability of multiple types of accommodations, such as hotels, vacation rentals and private apartments, from a broad range of advertisers globally. This supply is continually updated, so users can view current availability from a broad range of advertisers. We believe travelers use our search platform as their entry point for research on where to stay, confident that they receive comprehensive coverage of their options to book a hotel, vacation rental or private apartment.
Increased price competition and reduced search costs
Enhanced price competition results in the display of rooms with a broad range of pricing options available from our advertisers.

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Tailored search function
Our search function is designed to enable individual users to find their "ideal hotel," vacation rental or private apartment. We personalize results based on a user’s search terms, selected filters and other interactions with trivago’s platform. In addition, we aggregate and analyze multiple sources of information to build a profile for each individual hotel. trivago’s search algorithms, which are refined by millions of searches every day, create matches among the sets of information.
Deep content and easy-to-use information on hotels and other types of accommodation
We obtain accommodation information from many sources, such as travel booking sites, hotel websites, review sites, directly from hotels and internal resources. This information includes pictures, descriptions, reviews, ratings and amenities. We synthesize and enrich this information. For example, our rating score distills review information from multiple sources into a single easy-to-use score for the traveler.
Key benefits for advertisers
Broad traveler reach
We offer advertisers a highly scalable channel of travelers, given our broad presence across multiple geographies and languages. Additionally, for many travelers, we believe we are the entry point to their search, enabling advertisers to engage with potential new customers.
Delivery of transaction-ready referrals
We provide advertisers with motivated travelers who have proactively expressed their specific intent via our search platform. Due to the breadth of accommodation information we provide and our personalized matching algorithms, travelers referred by trivago often already have a comprehensive understanding of their accommodation choice and its value proposition for them, which we believe makes them more likely to complete a booking on the advertiser’s site.
Market-driven, referral-based pricing structure
We believe our advertisers value the flexibility to control the pricing and volume of referrals they generate from our marketplace. Our CPC bidding model makes it easy for advertisers to evaluate the performance of their spend and influence their own return on investment.
Improve advertisers’ competitiveness
Hotel advertisers have varying levels of experience, scale and resources to dedicate to their marketing efforts. We provide our advertisers with advice, actionable data insights and advertiser tools to help them optimize their investment on our marketplace by improving the quality of available content about their hotels.
Our strengths
We believe that our competitive advantages are based on the following key strengths:
Industry-leading product and user experience
We believe that we provide the most effective and intuitive hotel and other accommodation search platform for travelers. We have invested in our product over many years and continue to spend significant time and resources on further refining our websites and apps to provide the best possible user experience. We regularly test and enhance multiple aspects of our websites and apps, believing that incremental advancements over time add up to improvements in overall user experience. This approach benefits both our users and advertisers by enabling more satisfying and effective engagement with our platform.
Significant scale
We have achieved significant scale, with more than 3.0 million hotels and other types of accommodation available on our platform as of December 31, 2018, including over 1.5 million units of alternative accommodation units, such as vacation rentals and private apartments. We are supported by 55 localized versions of our websites and apps available in 33 languages. Additionally, we believe we work with almost

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all significant international, regional and local OTAs. Our business benefits from our engaged and often long-established relationships with local advertisers globally. In the year ended December 31, 2018, we had 668.3 million Qualified Referrals. Bringing together advertisers and users at this scale creates powerful network effects, improving the quality of the trivago experience for all parties.
High brand recognition
We have continuously invested in our brand over many years and have achieved strong brand recognition globally. Our brand drives traffic to our site by underpinning the connection travelers make between trivago and hotel and accommodation search.
Powerful data and analytics
We capture large amounts of data across our platform, including traveler data, advertiser data, publicly available content and insights on how travelers and advertisers interact with our platform. As our business has grown, the volume of information we can analyze has also correspondingly increased. We take a data-driven, testing-based approach, where we use our proprietary tools and processes to measure and optimize end-to-end performance of our platform. Our ability to analyze and rapidly respond to this data enables us to continuously improve our platform.
Our strategy
We create value to our users and our advertisers through the power of technology. We believe that the strength of our brand and our position as a first source of information for travelers drive customer demand, which when combined with our global scale and broad based accommodation supply gives us a unique position in the ongoing migration of travel from offline to online. Our primary focus are technology and product innovation, measures to increase lifetime value of our customers as well as our continued efforts in building our brand as part of our ongoing global expansion.
Broadening value proposition
Over the last year, we have onboarded multiple additional alternative accommodation providers, and as of December 31, 2018, now offer more than 1.5 million units of that type of accommodation on our search platform. We are focused on broadening the value proposition that we offer our users by empowering them to compare across multiple different accommodation types. We are also developing better tools for our users to tackle this inherently more complex comparison, with the aim of increasing the value that we create for them. As a result, we continued our gradual roll-out of additional readily bookable units of alternative accommodation, such as vacation rentals and private apartments over the course of 2018, while developing improvements to our user interface relating to that specific offering.
Product improvements
Our technology teams drive innovation to help users navigate through a vast number of hotel and other accommodation offerings to find the hotel that is ideal for them. In 2018, we continued to invest in our technology platform, substantially revamping our back-end infrastructure, which subsequently went fully live in early 2019. We believe that this effort will create a foundation for growth and scalability of new technology in the long term.
During the second half of 2018, we also released our new mobile app, both on Android and iOS, highlighting our product philosophy of increasing time spent on trivago before making the booking decision on our advertisers. Furthermore, we have recently taken further steps to integrate alternative accommodation supply from HomeAway and other suppliers into our main search functionality.
We continue to focus our product innovations on increasing value delivered to our users by customizing our hotel search to our users’ interests beyond location and price comparisons.

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Marketplace improvements and tools for advertisers
We continue to focus on giving advertisers the flexibility to test and optimize their landing pages while promoting an experience on our website that we believe is optimal for our users.
We remain focused on maintaining a healthy marketplace that connects our broad and deep supply of hotels and other accommodations with our user base. Apart from the steps we are taking to increase diversity on our marketplace described above, we aim to mitigate competitive disadvantages for smaller advertisers on our marketplace. We believe that by providing tools and services, especially for advertisers with less technical infrastructure and experience, we can increase competition and create a more level playing field for advertisers.
Focus on lifetime value of the customer
We continue to implement various initiatives that are designed to focus more on the end-to-end booking value of our users and less on the revenue generated in each session. We believe that these initiatives will help us increase booking conversion rates, RPQR and, ultimately, our financial performance over the long term. In particular, we continue to implement measures that are designed to focus less on the click-based revenue generated by our users in each session and more on the booking value that our users generate for our advertisers over multiple sessions (or over the "lifetime" of the user). These measures include, on the one hand, changes to how we make decisions about allocating Advertising Spend to our marketing campaigns by tracking how likely a user that comes to us from a channel is to book a hotel with an advertiser. On the other hand, these measures involve enhancements to our site that encourage users to spend more time exploring it and interacting with its features before they are referred to one of our advertisers. These enhancements are relatively small, incremental changes to our product that we believe, when considered together, will increase user retention and booking conversion while reducing the number of click-outs required to ultimately make a booking.
Going forward, we plan to focus on changes to our platform, marketplace and Advertising Spend to optimize for traffic quality instead of volume. We aim to increase the value of our referrals by shortening the process for our users to move from the discovery to the to the booking decision (commonly referred to as the "booking funnel").
Brand building
We continue to focus on building our trivago brand. We still see potential for increasing brand awareness, especially in our Rest of World segment.
We intend to be each traveler’s first source of information for hotels and other accommodations by growing our engagement with travelers through continuous investment in both online and offline marketing to build our brand efficiently and drive strong user acquisition and retention. We plan to continue enhancing our mobile offerings and user engagement on mobile devices, thereby further increasing access for travelers to our services anytime and anywhere. We believe that investing in our brand combined with product innovations will help us further improve customer loyalty and retention.
Our customers
Customers that pay to advertise on trivago include:
•    OTAs, including large international players, as well as smaller, regional and local OTAs;
•    Hotel chains, including large multi-national hotel chains and smaller regional chains;
•    Independent hotels;
•    Providers of alternative accommodation, such as vacation rental or private apartments; and
•    Industry participants, including metasearch and content providers.
We generate the large majority of our revenue from OTAs. Certain brands affiliated as of the date hereof with our majority shareholder, Expedia Group, including Brand Expedia, Hotels.com, Orbitz, Travelocity,

45





Hotwire, Wotif, HomeAway and ebookers, in the aggregate, accounted for 36% of our total revenue for each of the years ended December 31, 2016, 2017 and 2018, respectively. Booking Holdings and its affiliated brands, Booking.com and, through 2015, Agoda, accounted for 43%, 44% and 39% of our total revenue for the years ended December 31, 2016, 2017 and 2018, respectively.
Nearly all of our agreements with advertisers, including our agreements with our three largest advertisers, may be terminated at will or upon three to seven days’ prior notice by either party. For more information on risks related to the concentration of our revenue and our relationship with our largest advertisers, see "Item 3 D. Risk factors."
Competition
We compete with other advertising channels for hotel advertisers’ marketing spend. These include traditional offline media and online marketing channels. In terms of user traffic, we compete on the basis of the quality of referrals, CPC rates and advertisers’ implied return on investment. While we compete with OTAs, hotel chains and independent hotels for user traffic, these parties also represent the key contributors to our revenue and supply of hotels and other accommodation.
Competition for users
We compete to attract users to our websites and apps to help them research and find hotels and other accommodation. Given our position at the top of the online search funnel, many companies we compete with are also our customers.
Our principal competitors for users include:
•    Online metasearch and review websites, such as Kayak, Qunar, TripAdvisor and Google Hotel Ads;
•    Search engines, such as Bing, Google, Naver and Yahoo!;
•    Independent hotels and hotel chains, such as Accor, Hilton and Marriott;
•    OTAs, such as Booking.com, Ctrip and Brand Expedia; and
•    Alternative accommodation providers, such as Airbnb and HomeAway.
Competition for advertisers
We compete with other advertising channels for hotel advertisers’ marketing spend. These include traditional offline media and online marketing channels. In terms of user traffic, we compete on the basis of the quality of referrals, CPC rates and advertisers’ implied return on investment.
Our principal competitors for advertisers’ marketing spend include:
•    Print media, such as local newspapers and magazines;
•    Other traditional media, such as TV and radio;
•    Search engines, such as Bing, Google, Naver and Yahoo!;
•    Online metasearch and review websites, such as Kayak, Qunar, TripAdvisor and Google Hotel Ads;
•    Social networking services, such as Facebook and Twitter;
•    Websites offering display advertising;
•    Email marketing software and tools;
•    Online video channels, such as YouTube; and
•    Mobile app marketing.

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Our employees and culture
We believe that our entrepreneurial corporate culture, flexible working hours and flat organizational structure are key ingredients to our success. These have been designed to reflect the fast-moving technology space in which we operate, as well as our determination to remain pioneers in our field. Our employees operate as entrepreneurs in their areas of responsibility, continuously striving for innovation and improvement. We encourage our employees to take on new challenges within the company regularly to broaden their perspective, accelerate their learning, ensure a high level of motivation and foster communication. Cultural fit is a key part of our recruiting process, as we seek to hire individuals comfortable working in a flat organizational structure that rewards those who take initiative and continuously seek to understand and learn, take risks and innovate. We regard failure as an opportunity to learn and inform improved approaches going forward.
Internally, we distill our values into six core qualities:
Trust: We want to build an environment in which mutual trust can develop to give us the comfort and safety to discuss matters openly and to act freely.
Authenticity: We aim to be authentic by staying true to ourselves and welcoming discussion and controversy as we believe that there is no progress without friction.
Entrepreneurial Passion: We aim to be passionate drivers of change, motivated to question the status quo - for both the organization and ourselves. We believe intrinsic motivation empowers us to take on ownership, to take appropriate risks and to be confident to make decisions.
Power of Proof: We believe empirical data enables us to make sensible decisions. We want to explore and understand the driving forces behind why our projects succeed or fail.
Unwavering Focus: We aim to set our priorities based on the added value we believe is generated for trivago. We believe that multiple small, incremental improvements towards this goal add up to long-term success.
Fanatic Learning: We aim to improve our competitive position by reacting quickly to findings based on our collective experiences, successes and failures. We strongly believe that power comes from sharing knowledge, not from keeping it to ourselves. We are open to continuously changing our beliefs and processes based on changing evidence. We see change as an opportunity to improve.
In 2017, we introduced our leadership framework, which is another step we have taken that is intended to keep our company agile. Under the new framework, we have broken up the traditional reporting lines into three dimensions, allowing each employee to progress on the dimensions he or she is most excited about and suitable for.
We have identified three core leadership roles:
responsibility leads, who are responsible for the development of an operational area at trivago;
talent leads, who are responsible for individuals' professional and personal development at trivago; and
knowledge leads, who are responsible for sharing expertise and developing knowledge within trivago on a specific topic.
We envision that different individuals will often take on different leadership roles and will move into different roles as they learn what interests them and what role is most suitable for them. As our employees move into different roles within trivago, we intend for them to have one constant talent lead, who generally works on a different team.
We believe that moving employees into different leadership roles will help him or her use the expertise they have gained at trivago to challenge our thinking in different areas and to promote innovation. Our new leadership framework is intended to prevent us from forcing employees into pre-determined career development paths, which they did not actively choose to follow, and to create an environment where each

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employee can naturally come across opportunities to help them learn and grow. By doing this, we plan to give employees the necessary freedom in their work in order for them to shape their own professional journeys while at trivago.
Seasonality
We experience seasonal fluctuations in the demand for our services as a result of seasonal patterns in travel. For example, searches and consequently our revenue are generally the highest in the first three quarters as travelers plan and book their spring, summer and winter holiday travel. Our revenue typically decreases in the fourth quarter. We generally expect to experience higher return on advertising spend in the first and fourth quarter of the year as we typically expect to advertise less in the periods outside of high travel seasons. Seasonal fluctuations affecting our revenue also affect the timing of our cash flows. We typically invoice once per month, with customary payment terms. Therefore, our cash flow varies seasonally with a slight delay to our revenue, and is significantly affected by the timing of our advertising spending. Changes in the relative revenue share of our offerings in countries and areas where seasonal travel patterns vary from those described above may influence the typical trend of our seasonal patterns in the future.
Intellectual property
Our intellectual property, including trademarks, is an important component of our business. We rely on confidentiality procedures and contractual provisions with suppliers to protect our proprietary technology and our brands. In addition, we enter into confidentiality and invention assignment agreements with our employees and consultants.
We have registered domain names for websites that we use in our business, such as www.trivago.com, www.trivago.de and www.trivago.co.uk. Our registered trademarks include: trivago, "Hotel? trivago," Room5, Youzhan and our trivago logo. These trademarks are registered in various jurisdictions.
Government regulation
trivago provides data and information to its users and advertisers and conducts consumer facing marketing activities that are subject to consumer protection laws in jurisdictions in which we operate, regulating unfair and deceptive practices. For example, the United States and the European Union (including at member state level) - but also many other jurisdictions - are increasingly regulating commercial and other activities on the Internet, including the use of information retrieved from or transmitted over the Internet, the display, moderation and use of user-generated content, and are adopting new rules aimed at ensuring user privacy and information security as well as increasingly regulating online marketing, advertising and promotional activities and communications, including rules regarding disclosures in relation to the role of algorithms and price display messages in the display practices of platforms.
There are also new or additional rules regarding the taxation of Internet products and services, the quality of products and services as well as addressing liability for third-party activities. Moreover, the applicability to the Internet of existing laws addressing issues such as intellectual property ownership and infringement is uncertain and evolving.
In particular, we are subject to an evolving set of data privacy laws. A new EU data protection regime (EU’s General Data Protection Regulation 2016/679, or GDPR) has been in effect since May 25, 2018 and provides for a number of changes to the EU data protection regime. The GDPR applies to any company established in the European Union, as well as to those outside the European Union if they collect and use personal data in connection with the offering of goods or services to individuals in the European Union or the monitoring of their behavior (for example, trip booking services).  The GDPR enhances data protection obligations for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification requirements and onerous new obligations on services providers. Non-compliance with the GDPR can trigger steep fines of up to €20 million or 4% of total worldwide annual turnover, whichever is higher. We may incur substantial expense in complying with the new obligations to be imposed by the GDPR and we may be required to make significant changes in our business operations and product and services development, all of which may adversely affect our revenues and our business overall.
In addition, EU laws regulate transfers of EU personal data to third countries, such as the United States, that have not been found to provide adequate protection to such personal data. A number of our service providers and hotels operate in such jurisdictions. There are recent regulatory concerns about certain

48





measures that can be used to validate such data export, as well as litigation challenging some of the mechanisms for adequate data transfer (i.e., the standard contractual clauses). We could be impacted by changes in law as a result of the current challenges to these mechanisms by regulators and in the European courts which may lead to governmental enforcement actions, litigation, fines and penalties or adverse publicity which could have an adverse effect on our reputation and business.
Many governmental authorities in the markets in which we operate are also considering additional and potentially diverging legislative and regulatory proposals that would increase the level and complexity of regulation on Internet display, disclosure and advertising activities. For example, in the European Union there is an ongoing revision of EU consumer directives (A New Deal for Consumers) and the European Union is considering a proposal for a regulation of the European Parliament and of the Council for business users of online intermediary services (the P2B Regulation).
Many governmental authorities in the markets in which we operate are also considering alternative legislative and regulatory proposals that would increase regulation on Internet display, disclosure and advertising activities. For example, the EU legislators are preparing a new ePrivacy Regulation which is supposed to replace the so-called ePrivacy Directive (2002/58/EC), the so-called Cookie Directive (2009/136/EC) and respective EU member state implementation laws. This change in the law on an EU level may have significant impact on the legal requirements for electronic communication including the operation of websites and may require relevant financial effort to implement the new laws.
It is impossible to predict whether further new taxes or regulations will be imposed on our services and whether or how we might be affected. Increased regulation of the Internet could increase the cost of doing business or otherwise materially adversely affect our business, financial condition or results of operations. In addition, the application and interpretation of existing laws and regulations to our business is often uncertain, given the highly dynamic nature of our business and the sector in which trivago operates.
Technology and infrastructure
Data and proprietary algorithms
We process a large amount of information about user traffic and behavior, advertisers and direct connections into the databases of many of our advertisers. We believe it is central to the success of our business that we effectively capture and parse this data. To achieve this, we have developed proprietary algorithms that drive key actions across our platform, including search, listings and bidding tools. We continue to explore new ways to capture relevant data and feed this into our platform to further enhance the experience for both our users and advertisers.
Infrastructure
We host our platform at five different locations in Germany, the United States, Hong Kong and China, while also leveraging cloud-hosted services, which we believe offers us secure and scalable storage and processing power at manageable incremental expense. While much of the data we receive and capture is not sensitive, our data centers are compliant with the highest security standards. It is our policy to store separately the limited amount of sensitive data that we do capture. Where required, our data centers are payment card industry (PCI) compliant. We have designed our websites, apps and infrastructure to be able to support high-volume demand.
Software
We develop our own software through our teams based in Germany, the Netherlands and Spain, employing a rigorous iterative approach. This includes the proprietary algorithm underlying our search function, internal management tools, data analytics and advertiser tools.

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C.
Organizational structure
trivago N.V. historically acted as a holding company of trivago GmbH, the historical operating company of the trivago group. The cross-border merger of trivago GmbH into and with trivago N.V. became effective on September 7, 2017. In this annual report, unless the context otherwise requires, the terms “we,” “us,” “our,” “trivago” and the “company” refer to trivago GmbH, travel B.V. and trivago N.V., and their respective consolidated subsidiaries, as applicable.
The following chart depicts our corporate structure and percentages of economic interest as of the date hereof based on the number of shares outstanding as of December 31, 2018:
 corporg2018ar.jpg
(1) The free float total includes 7,000,000 restricted shares purchased by PAR Investment Partners, L.P. from Mr. Vinnemeier and Mr. Siewert in a private transaction. For more information, see "Item 7 A. Major shareholders—Significant changes in ownership by major shareholders." The total also includes 3,862,000 Class B shares that were converted into Class A shares by Mr. Vinnemeier and Mr. Siewert, which are the subject of ongoing Rule 10b5-1 sales plans. As reported on Schedule 13D/A filed by Mr. Vinnemeier, on November 15, 2018, Mr. Vinnemeier entered into a Rule 10b5-1 sales plan with a broker to sell 2,000,000 ADSs, each representing a Class A share.
(2) The holders of our Class B shares are entitled to ten votes per share, and holders of our Class A shares are entitled to one vote per share. For more information about the voting rights of our Class A and Class B shares, see “Description of share capital and articles of association—Special voting structure and conversion” in our registration on Form F-3 dated April 5, 2018. Each Class B share is convertible into one Class A share at any time by the holder thereof, while Class A shares are not convertible into Class B shares under any circumstances.
trivago N.V. is the direct or indirect holding company of our subsidiaries.  As of December 31, 2018, we do not own, directly or indirectly, any subsidiaries that we consider to be "significant". We used the three-part test set out in Section 1-02 (w) of Regulation S-X under the Exchange Act to determine significance. We do not have any other subsidiaries we believe are material based on other, less quantifiable, factors.

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D.
Property, plant and equipment
In June 2018, we moved into our new headquarters located in Düsseldorf's media harbor. The building comprises 26,107 square meters of office space and has been certified with LEED core & shell Gold - representing a state-of-the-art workplace for trivago. The lease provides for a fixed ten-year term plus two renewal options, each for a term of five years. trivago N.V. is the sole tenant of the building, and it has been built to our specifications.
We have additional 16,444 square meters of leased office space in Germany and 4,419 square meters of leased office space in Spain, the Netherlands and China.

Item 4A: Unresolved staff comments
Not applicable.

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Item 5: Operating and financial review and prospects
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with “Item 3 A. Selected financial data” of this annual report and our consolidated financial statements and related notes appearing elsewhere in this annual report. In addition to historical information, this discussion contains forward-looking statements based on our current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in “Item 3 D. Risk factors” and “Special note regarding forward-looking statements” sections and elsewhere in this annual report.
A.
Operating results
Overview
Our total revenue for the years ended December 31, 2016, 2017 and 2018 was €754.2 million, €1,035.4 million and €914.8 million, respectively, representing an increase of 37% from 2016 to 2017 and a decrease of 12% from 2017 to 2018. Our Referral Revenue for the years ended December 31, 2016, 2017 and 2018 was €745.8 million, €1,020.3 million and €899.8 million, respectively. Referral Revenue decreased by 12% year-over-year from 2017 to 2018. Our Americas and Developed Europe segments exhibited the highest decrease in Referral Revenue, with a year-over-year decrease of 19% and 11%, respectively, from 2017 to 2018, while Referral Revenue in our Rest of World segment grew by 1% year-over-year.
Our net losses for the years ended December 31, 2016, 2017 and 2018 were €51.4 million, €13.0 million and €21.5 million, respectively, decreasing by 75% from 2016 to 2017 and increasing by 65% from 2017 to 2018.
Adjusted EBITDA for the years ended December 31, 2016, 2017 and 2018 was €28.2 million, €6.7 million and €14.6 million respectively. This resulted in an Adjusted EBITDA margin (calculated as Adjusted EBITDA divided by Total Revenue) of 3.7%, 0.6% and 1.6%, respectively.
Key factors affecting our financial condition and results of operations
How we earn and monitor revenue
We earn substantially all of our revenue when users of our websites and apps click on hotel offers or advertisements in our search results and are referred to one of our advertisers. We call this our Referral Revenue. Each advertiser determines the amount that it wants to pay for each referral by bidding for

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advertisements on our marketplace. We also earn subscription fees for certain services we provide to advertisers, such as Hotel Manager Pro, although such subscription fees do not represent a significant portion of our revenue.
Key metrics we use to monitor our revenue include the number of Qualified Referrals we make, the revenue we earn for each Qualified Referral, or RPQR, and our Return on Advertising Spend, or ROAS.
Qualified Referrals
We use the term “referral” to describe each time a visitor to one of our websites or apps clicks on a hotel offer in our search results and is referred to one of our advertisers. We charge our advertisers for each referral on a cost-per-click, or CPC, basis.
Since a visitor may generate several referrals on the same day, but typically intends to only make one booking on a given day, we track and monitor the number of Qualified Referrals from our platform. We define a "Qualified Referral" as a unique visitor per day that generates at least one referral. For example, if a single visitor clicks on multiple hotel offers in our search results in a given day, they count as multiple referrals, but as only one Qualified Referral. While we charge advertisers for every referral, we believe that the Qualified Referral metric is a helpful proxy for the number of unique visitors to our site with booking intent, which is the type of visitor our advertisers are interested in and which we believe supports bidding levels in our marketplace.
We had 535.3 million, 727.1 million and 668.3 million Qualified Referrals for the years ended December 31, 2016, 2017 and 2018, respectively, representing annual growth rates of 35.8% and (8.1)% in 2017 and 2018, respectively.
We believe the primary factors that drive changes in our Qualified Referral levels are the number of visits to our websites and apps, the booking intent of our visitors, the number of available accommodations on our search platform, content (the quality and availability of general information, reviews and pictures about the hotels), hotel room prices (the price of accommodation as well as the number of price sources for each accommodation), hotel ratings, the user friendliness of our websites and apps and the degree of customization of our search results for each visitor. In the short term, our Qualified Referral levels are also heavily impacted by changes in our investment in Advertising Spend, as we rely on advertisements to attract users to our platform. Ultimately, we aim to increase the number and booking conversion of Qualified Referrals we generate by focusing on making incremental improvements to each of these parameters. In addition to continuously seeking to expand our network in hotel advertisers and alternative accommodations, we partner with such hotels or service providers to improve content, and we constantly test and improve the features of our websites and apps to improve the user experience, including our interface, site usability and personalization for each visitor.
The following table sets forth the number of Qualified Referrals for our reportable segments for the periods indicated:  
 
Year ended December 31, 
 
% Change
(in millions) (unaudited)
2016

 
2017

 
2018

 
2017 vs 2016

 
2018 vs 2017

Americas
149.1

 
203.4

 
182.3

 
36.4
%
 
(10.4
)%
Developed Europe
255.4

 
295.5

 
246.7

 
15.7
%
 
(16.5
)%
Rest of World
130.8

 
228.3

 
239.3

 
74.5
%
 
4.8
 %
Total
535.3

 
727.1

 
668.3

 
35.8
%
 
(8.1
)%
Note: Some figures may not add due to rounding.
Revenue per Qualified Referral (RPQR)
We use average Revenue per Qualified Referral, or RPQR, to measure how effectively we convert Qualified Referrals to revenue. RPQR is calculated as Referral Revenue divided by the total number of Qualified

53





Referrals in a given period. Alternatively, RPQR can be separated into its price and volume components and calculated as follows:
RPQR = RPR x click-out rate
where
RPR = revenue per referral
click-out rate = referrals / Qualified Referrals
RPQR is determined by the CPC bids our advertisers submit on our marketplace as the CPC bids submitted by our advertisers play an important role in determining the prominence given to offers and their placement in our search results. Advertisers can analyze the number of referrals obtained from their advertisements on our marketplace and the consequent value generated from a referral based on the booking value they receive from users referred from our site to determine the amount they are willing to bid. Accordingly, the bidding behavior of our advertisers is influenced by the rate at which our Qualified Referrals result in bookings on their websites, or booking conversion, and the amount our advertisers obtain from Qualified Referrals as a result of hotels and other accommodation booked on their sites, or booking value. We refer to the degree to which we are able to capture our share in the overall estimated booking revenues generated by our advertisers from our referrals as "commercialization." The quality of the traffic we generate for our advertisers increases when aggregate booking conversion and/or aggregate booking value increases. We estimate overall booking conversion and booking value from data voluntarily provided to us by certain advertisers to better understand the drivers in our marketplace and, in particular, to gain insight into how our advertisers manage their advertising campaigns. While we believe that the quality of the traffic we referred to our advertisers improved in the second half of 2018, the information we used as the basis for this analysis is subject to a number of uncertainties, including those related to the accuracy of the information we receive from certain of our advertisers and the methodologies we and our advertisers use to track and analyze whether a user ultimately completes a booking. Assuming unchanged dynamics in the market beyond our marketplace, we would expect that the higher the potential booking value or conversion generated by a Qualified Referral and the more competitive the bidding, the more an advertiser is willing to bid for a hotel advertisement on our marketplace. This means that the levels of advertisers' CPC bids generally reflect their view of the likelihood that each click on an offer will result in a booking by a user. We believe our attribution model and product optimization measures have contributed to continuous improvement in our referred traffic quality, which have had a positive effect on our RPQR notably in the fourth quarter of 2018. However, the dynamics in the market beyond our marketplace are not static, and we believe that our advertisers continuously review their Advertising Spend on our platform and on other advertising channels, and continuously seek to optimize their allocation of their spending among us and our competitors.
RPQR is a key financial metric that describes the quality of our referrals, the efficiency of our marketplace and, as a consequence, how effectively we monetize the referrals we provide our advertisers. Furthermore, we use RPQR to help us detect and analyze changes in market dynamics. For the years ended December 31, 2016, 2017 and 2018, RPQR was €1.39, €1.40 and €1.35, respectively.
The following table sets forth the RPQR for our reportable segments for the periods indicated (based on Referral Revenue):  
 
Year ended December 31, 
 
% Change
RPQR in € (unaudited)
2016
 
2017
 
2018
 
2017 vs 2016
 
2018 vs 2017
Americas
 
1.92
 
 
1.93
 
 
1.73
 
0.5%
 
(10.4)%
Developed Europe
 
1.37
 
 
1.44
 
 
1.54
 
5.1%
 
6.9%
Rest of World
 
0.85
 
 
0.89
 
 
0.86
 
4.7%
 
(3.4)%
Total
 
1.39
 
 
1.40
 
 
1.35
 
0.7%
 
(3.6)%

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The following tables set forth the percentage change year-over-year in each of the components of RPQR for our reportable segments for the years indicated. Percentages calculated below are based on the unrounded amounts and therefore may not recalculate on a rounded basis. 
 
 
Year ended December 31,
% increase in RPR (unaudited)
 
2017 vs 2016

 
2018 vs 2017

Americas
 
8.6
%
 
2.6
%
Developed Europe
 
19.1
%
 
19.6
%
Rest of World
 
10.3
%
 
6.3
%
Total
 
10.2
%
 
5.6
%
 


 
 
Year ended December 31,
% increase (decrease) in number of referrals (unaudited)
 
2017 vs 2016

 
2018 vs 2017

Americas
 
25.9
%
 
(21.2
)%
Developed Europe
 
2.8
%
 
(24.7
)%
Rest of World
 
64.5
%
 
(5.2
)%
Total
 
24.4
%
 
(17.3
)%

 
 
Year ended December 31,
% increase (decrease) in Qualified Referrals (unaudited)
 
2017 vs 2016

 
2018 vs 2017

Americas
 
36.4
%
 
(10.4
)%
Developed Europe
 
15.7
%
 
(16.5
)%
Rest of World
 
74.6
%
 
4.8
 %
Total
 
35.8
%
 
(8.1
)%
 
 
Year ended December 31,
% increase (decrease) in click-out rate referrals (unaudited)
 
2017 vs 2016

 
2018 vs 2017

Americas
 
(7.7
)%
 
(12.1
)%
Developed Europe
 
(11.1
)%
 
(9.8
)%
Rest of World
 
(5.8
)%
 
(9.6
)%
Total
 
(8.4
)%
 
(10.0
)%
Return on advertising spend (ROAS)
We track the ratio of our Referral Revenue to our advertising expenses, or ROAS. We believe that ROAS is an indicator of the effectiveness of our advertising, and it is our primary operating metric. Our ROAS was 120%, 115% and 123% for the years ended December 31, 2016, 2017 and 2018, respectively. Our ROAS in the Americas, Developed Europe and the Rest of World was 118%, 136% and 90% for the year ended December 31, 2016, respectively, as compared to 116%, 131% and 92% for the year ended December 31, 2017, respectively, and 121%, 143% and 100% for the year ended December 31, 2018, respectively. We believe the development of our ROAS among the reportable segments is primarily related to the different stages of development of our markets. For example, in Developed Europe, where we have operated the longest on average, we have historically experienced the highest average ROAS. Our ROAS in the Rest of

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World segment, where we have the lowest average ROAS, is also impacted significantly by the number of markets in the segment, including markets that we have recently entered and thus require significant Advertising Spend to reach scale. Over time, as our markets continue to develop, we believe that we will experience further increases in the efficiency of our Advertising Spend and thus improvements in our average ROAS. Given that Advertising Spend accounts for the significant majority of our total expenses, we believe this will have a direct impact on our operating margins and Adjusted EBITDA.
Historically, we believe that our advertising has been successful in generating additional revenue. We invest in many kinds of marketing channels, such as TV, out-of-home advertising, radio, search engine marketing, display and affiliate marketing, email marketing, social media, online video, mobile app marketing and content marketing.
Our ROAS by reportable segment for the years ended December 31, 2016, 2017 and 2018 was as follows:
 
Year ended December 31, 
(unaudited)
2016

 
2017

 
2018

Americas
118
%
 
116
%
 
121
%
Developed Europe
136
%
 
131
%
 
143
%
Rest of World
90
%
 
92
%
 
100
%
Total
120
%
 
115
%
 
123
%

In 2018, our ROAS improved to 123% as there was a substantial improvement in our ROAS in the second half of 2018, reflecting the positive effect from optimization and recalibration of Advertising Spend since the second quarter of 2018. The improvement was partly offset by lower ROAS in the first half of 2018 when we lowered profitability targets on our Advertising Spend to support revenue levels.
Marketplace dynamics
Our advertisers regularly adjust the CPC bids they submit on our marketplace to reflect the levels of referrals, customers, bookings or revenue and profit they intend to achieve with their marketing spend on our platform. In recent years, we have observed a number of factors can influence their bidding behavior on our marketplace, including:
The fees advertisers are willing to pay based on how they manage their advertising costs and their targeted return on investment;
Our advertisers' testing of their bidding strategies and the extent to which they make their inventories available on our marketplace;
Responses of advertisers to elevated levels of volatility on our marketplace;
Advertiser competition for the placement of their offers; and
Our advertisers’ response to changes made to our marketplace, such as the relevance assessment.
Recent trends in our business
The following recent trends have contributed to the results of our consolidated operations, and we anticipate that they will continue to impact our future results.
Changing dynamics on our marketplace
After a period of increased marketplace volatility and testing activities by our largest advertisers in late 2017, the volatility on our marketplace was relatively muted in 2018. At the same time, we believe that, in 2018, our largest advertisers increased their return on investment targets for their spend on our marketplace compared to the same period in 2017. This in turn had a negative effect on our share of the overall booking revenues generated from referrals on our platform (commercialization), and was evidenced in our RPQR, which declined on a consolidated basis in 2018, even as the optimizations we have been making to our

56





platform and product and our attribution model appeared to continue to improve the traffic quality we generated for our advertisers. The decline in commercialization was particularly pronounced in the first half of 2018 compared to a strong first half of 2017, which had benefited from positive revenue effects from the introduction of the relevance assessment.
Focus on profitability
Starting late in the second quarter of 2018, we made improved profitability our focus. To do this, we began to optimize and recalibrate our Advertising Spend to adapt to the changing dynamics on our marketplace. We began to make these changes at the end of the second quarter of 2018 across all of our segments, and they were reflected in reduced brand marketing expenditure and increased return on investment targets for our performance marketing campaigns. While these measures improved our profitability, they also led to a reduction in traffic to our platform attributable to all marketing channels and accordingly resulted in a reduction in the number of Qualified Referrals, which was particularly evident in the second half of 2018.
Measures designed to maximize the lifetime value of the user
We continued to implement measures designed to focus less on the click-based revenue generated by our users in each session and more on the booking value that our user generate for our advertisers over multiple sessions (or over the "lifetime" of the user). These measures include, on the one hand, changes to how we make decisions about allocating Advertising Spend to our performance marketing campaigns by tracking how likely a user that comes to us from a channel is to book a hotel with an advertiser (or how we "attribute" spending to marketing channels). On the other hand, these measures involve enhancements to our site that encourage users to spend more time exploring and interacting with our site and its features before being referred to one of our advertisers. We believe these relatively small, incremental changes to our product have resulted, when considered together, in improvements to our product and platforms that continue to positively impact our advertisers' CPC bids on our marketplace.
As we optimized our Advertising Spend (as described above) and continued to implement measures aimed at optimizing our platforms and product, we were able to improve the quality of the traffic that we referred to our advertisers notably in the second half of 2018 in Developed Europe and slightly in Rest of World (or "RoW"), which was evident in the development of RPQR in these segments in the fourth quarter of 2018. Reflecting this, we saw positive signs, particularly in the fourth quarter of 2018, that our largest advertisers reacted positively to the improved quality of traffic that we referred to them by increasing their average CPC bids on our platform.
Referral Revenue split among our segments
Our Referral Revenue from the Americas, Developed Europe and the Rest of World were 37.8%, 41.0% and 19.7% of our total revenue, respectively, for the year ended December 31, 2017 and were 34.5%, 41.4% and 22.4% of our total revenue, respectively, for the year ended December 31, 2018. We believe the different trends in Referral Revenue growth across our reportable segments is primarily related to the different stages of development of our markets. We generate the most Referral Revenue in Developed Europe, our segment that includes the markets where we have operated the longest and where we have the highest level of brand awareness. Our revenue levels are relatively more resilient in our newest markets, and as a result, our Referral Revenue in RoW increased slightly in 2018 compared to the same period in 2017.
Mobile products
Travelers increasingly access the Internet from multiple devices, including desktop computers, smartphones and tablets. We continue to develop our websites and apps to further enhance our hotel search experience across all devices. We offer responsive mobile websites and several apps that allow travelers to use our services from smartphones and tablets running on Android and iOS. In the year ended December 31, 2018, our revenue share from mobile websites and apps continued to exceed 60%.
Visitors to our search platform via mobile phone and tablet generally result in bookings for our advertisers at a lower rate than visitors to our platform via desktop. We believe this is due to a general difference in the usage patterns of mobile phones and tablets. We believe many visitors use mobile phones and tablets as part of their search process, but prefer finalizing hotel selections and completing their bookings on desktop

57





websites. This may be due in part to users generally finding the booking completion processes, including entering payment information, somewhat easier or more secure on a desktop than on a mobile device. We believe that over time and as more travelers become accustomed to mobile transactions, this sentiment may shift.
We have historically had, and currently have, a single bidding price structure for referrals from both desktop and mobile. We may choose to adopt a differentiated pricing model between mobile and desktop applications, which would likely lead to an increase in desktop revenue share, as the pricing for desktop applications would increase due to higher conversion rates, while the pricing for apps on mobile and tablets would likely decrease. We do not expect this to have a material impact on revenue, as long as there are sufficient active participants on both desktop and mobile to ensure our marketplace functions effectively, as we believe that the current bids advertisers place on our CPC-based bidding system reflect the overall efficacy of the combined desktop and mobile prices they receive.
In the third quarter of 2018, we launched a new iOS and Android app, which have an improved user interface intended to encourage our users to increase their interaction with our content with the aim of improving our booking performance.
Advertiser structure
We generate most of our revenue from a limited number of OTAs. Certain brands affiliated as of the date hereof with our majority shareholder, Expedia Group, including Brand Expedia, Hotels.com, Orbitz, Travelocity, Hotwire, Wotif, HomeAway and ebookers, in the aggregate, accounted for 36% of our total revenue for each of the years ended December 31, 2016, 2017 and 2018, respectively. Booking Holdings and its affiliated brands, Booking.com and Agoda, accounted for 43%, 44% and 39% of our total revenue for the years ended December 31, 2016, 2017 and 2018, respectively. Although we believe we will ultimately receive a portion of the additional booking value we generate for our advertisers, the fact that a significant portion of our Referral Revenue is generated from brands affiliated with Booking Holdings and Expedia Group can permit them to obtain the same or increased levels of referrals, customers, bookings or revenue and profit at lower cost. We believe that our business success in the long term will be enhanced by diversification among our advertisers, in particular by means of expanding our relationships with independent hotels, hotel chains and providers of alternative accommodation and continuing to act as a platform that enables travelers to compare hotel rooms that are offered by smaller and local OTAs or independent hotels or by the leading international brands.
We continued to take steps to increase advertiser diversity on our marketplace, including integrating vacation rental inventory onto our search platform, with the aim of integrating additional inventory of alternative accommodation going forward. Advertiser diversification allows us to improve the user experience by expanding the depth of our hotel and other accommodation offerings to facilitate price transparency as well as to improve the content quality, availability and usability of our advertisers’ offers, thereby increasing the value our users derive from our websites and apps. For example, some independent hotels and smaller hotel chains rely exclusively on their own websites and/or an OTA to distribute their offerings. Our engagement with such advertisers permits us to display an offer on behalf of that advertiser directly, making the offer accessible to our users, or increasing the number of offers if an accommodation was previously only available through an OTA. Direct engagement also permits an advertiser to have more control of the content and placement of its offer, since we are able to offer tools and assistance to optimize content and offer strategy on our marketplace.
We believe advertiser diversification could mitigate some of the risks we face with respect to consolidation within the travel content marketplace, as consolidation could over time reduce the number of offers we have available on our platform for each hotel, which could cause our services to become less valuable to users. Correspondingly, with fewer bids for offers from a consolidated group of advertisers, RPQR could decrease. We believe that as a result of the number of marketplace participants and the competition among various brands within consolidated OTAs, there has historically been sufficient liquidity on our marketplace to sustain competitive bid levels in our most relevant markets, such that if the top bidder leaves the platform, the next highest bidder moves into position to partially sustain our revenue. In 2017, we observed this to some extent as some of our largest advertisers withdrew from our marketplace for periods of time in certain geographic

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markets, although this testing activity had a significant negative impact on our financial results in 2017. In less liquid geographic markets, our initiative to connect hotels directly to our platform may mitigate, at least in small part, a potential decrease in OTA marketplace participants. As of December 31, 2018, we had direct relationships with over 500,000 hotels, representing over 15% of the total number of hotels advertised on trivago.

Results of Operations
Comparison of the years ended December 31, 2016, 2017 and 2018:
 
Year ended December 31,
 
% Change
(in thousands)
2016

 
2017

 
2018

 
2017 vs 2016

 
2018 vs 2017

Consolidated statement of operations:
 
 
 
 
 
 
 
 
 
Revenue
485,942

 
667,802

 
583,395

 
37.4
 %
 
(12.6
)%
Revenue from related party
268,227

 
367,581

 
331,421

 
37.0
 %
 
(9.8
)%
Total revenue
754,169

 
1,035,383

 
914,816

 
37.3
 %
 
(11.6
)%
 
 
 
 
 
 
 
 
 
 
Costs and expenses:
 
 
 
 
 
 
 
 
 
Costs of revenue, excluding amortization
4,273

 
5,930

 
5,435

 
38.8
 %
 
(8.3
)%
Selling and marketing (1)
673,224

 
946,925

 
805,633

 
40.7
 %
 
(14.9
)%
Technology and content
51,658

 
52,232

 
66,904

 
1.1
 %
 
28.1
 %
General and administrative
55,602

 
47,444

 
54,326

 
(14.7
)%
 
14.5
 %
Amortization of intangible assets
13,857

 
3,220

 
1,684

 
(76.8
)%
 
(47.7
)%
Operating loss
(44,445
)
 
(20,368
)
 
(19,166
)
 
54.2
 %
 
5.9
 %
Other income (expense):
 
 
 
 
 
 
 
 
 
Interest expense
(137
)
 
(44
)
 
(1,839
)
 
67.9
 %
 
(4,079.5
)%
Gain on deconsolidation of entity

 
2,007

 

 
n.m.

 
(100.0
)%
Other, net
(139
)
 
592

 
539

 
525.9
 %
 
(9.0
)%
Total other income (expense), net
(276
)
 
2,555

 
(1,300
)
 
1,025.7
 %
 
(150.9
)%
Income/(loss) before income taxes
(44,721
)
 
(17,813
)
 
(20,466
)
 
60.2
 %
 
(14.9
)%
Expense (benefit) for income taxes
6,670

 
(4,764
)
 
1,086

 
(171.4
)%
 
122.8
 %
Loss before equity method investment
(51,391
)
 
(13,049
)
 
(21,552
)
 
74.6
 %
 
(65.2
)%
Net income/(loss) from equity method investment

 

 
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