To our stockholders
“2006 is going to be a rough year for Expedia, but sometimes you have to take a step backwards in
order to leap forward. And if we are right, the investments we are making begin coming home next year.”
Barry Diller, Expedia, Inc. 2005 Annual Report
As we expected and communicated in last year’s stockholders’ letter, 2006 was to be a year of change,
challenge and investment for Expedia, Inc. A year later we are very pleased to report we finished 2006 on the
upswing, 2007 is well begun and the Expedia venturing forth is far better in nearly every meaningful way
than when you held this report in hand last year.
You can see this progress in every area of our business, whether you cast your glance financially,
geographically or by brand:
• Gross Bookings grew 10%, to $17.2 billion, and we delivered $525 million in Free Cash Flow(1);
• The Expedia brand planted its flag in Denmark, Japan, Norway and Sweden;
• Expedia Corporate Travel» expanded to Germany, surpassed the $1 billion gross bookings mark &
recorded its first operating profit;
• TripAdvisor» launched innovation after innovation, from wiki functionality for travelers to graphical
media for advertisers, and our brand portfolio is now leveraging its award-winning content;
• Hotels.com», the 5th largest online travel agent on the globe, grew worldwide gross bookings 20% to
$2.3 billion and expanded its presence to 35 countries; and
• Hotwire» earned J.D. Power and Associates’ “Highest Customer Satisfaction for Independent Travel
Web Sites”(2) for 2006, while meaningfully diversifying its gross bookings base beyond merchant air.
2006 saw the Company make some very necessary investments. We began in earnest to re-architect the
Company’s technology platform, and launched a number of other critical technology initiatives. We didn’t
earn any headlines for this ‘behind-the-scenes’ work, but to be sure these activities will prove critical to our
long-term success. These initiatives certainly raised the Company’s expense and capital burdens, but they