05-26-2015, 03:57 AM
Here is the spending part:
"Success is increasingly a function of the ability to spend on marketing and invest in technology, whether that be in mobile or simply ongoing site optimization," he wrote. Adding to mobile users' desirability is the sense that they are "stickier," say analysts, meaning they are likelier to spend more time on an app they like and come back to it time and again.
Ctrip May Tighten Grip On China Boom After Taking Stake In Rival Site eLong - Yahoo Finance
And all the spending is having results:
The results of Ctrip's and Qunar's efforts are apparent. Ctrip's mobile app downloads in Q1 soared more than 550% from a year earlier to hit 800 million, and about 70% of all of the company's online transactions in Q1 were mobile. "Ctrip has definitely created the biggest footprint in the (mobile) space," Piper Jaffray analyst Mike Olson told IBD. "Given that mobile will be the majority of online travel transactions in China going forward, it's going to be a huge advantage.
Ctrip May Tighten Grip On China Boom After Taking Stake In Rival Site eLong - Yahoo Finance
However, margins have been severely compressed as a result:
Ctrip's operating margin, which was 45% in 2010, plunged to -14% in Q4 2014. Olson said margins have been hit hard due to heavy discounting, but also because of mobile development. Whether Ctrip can return to an operating margin north of 20% in the next 3-4 years is difficult to say, he added. Operating expenses grew almost 69% in Q1. At least on the mobile front, the company is probably dialing it down, said Olson, noting that its operating margin bounced back to -1% in Q1.
Ctrip May Tighten Grip On China Boom After Taking Stake In Rival Site eLong - Yahoo Finance