Online travel seller and multilevel marketer YTB reported a loss in the first quarter of this year.
Scott Tomer, YTB CEO, said in a statement that the loss was primarily related to expenses connected with promoting the brand, retention of top performers and expansion into three new countries.
A review of the company's SEC filings for the last two years indicated that the company in the last two quarters attracted fewer new referring travel agents, known as RTAs, than in the third quarter of 2007, when the number peaked. Also, its rate of RTA retention dropped dramatically in the last two quarters.
Over the two-year period that ended March 31, YTB said it sold 219,182 websites, an indication of new RTAs because new RTAs are required to buy a website. But the total number of active RTAs at the end of that period stood at 138,814, representing a net gain of 111,255 during the two-year period, suggesting that many recruits didn't remain active for long.
During that two-year period, YTB's reports show, there were some calendar quarters that produced a net gain in new RTAs that was as high as two-thirds or three-quarters of the number of sites sold. The last two quarters, however, produced the lowest retention rates of the past eight.
In the final quarter of 2007, YTB sold nearly 33,500 sites but only made a net gain in RTAs of 10,117, or the equivalent of 30% of the new RTAs.
In the first quarter of 2008, new site sales came to 31,000, but the quarter's net gain of active RTAs was only 7,749, or the equivalent of 25% of new recruits. There was also a slight decrease, 7.5%, in the number of websites sold in the first quarter of this year compared with first-quarter 2007.
Although growth seems to be slowing, YTB's numbers remain big. Overall, the number of RTAs rose 67% during the 12 months ended March 31.
Growth has a direct impact on revenue, because YTB collects $449.95 for each website sold to a new RTA plus a monthly fee of $49.95 for ongoing Web hosting.
As to the specifics of its most recent quarter, YTB reported a $3.5 million loss, or 8.2% of revenue. The result was roughly comparable to the same quarter last year, when the loss was $2.2 million, or 9% of revenue.
The company's net revenue soared 76.7%, to $42.7 million, but its operating expenses also soared, by 74.9%, to $46.2 million.
YTB solicits individuals to join as RTAs, who refer prospective travelers to their websites to book travel. YTB pays its affiliates a commission for bringing in additional RTAs as well as a cut of the commissions from the travel sales the additional RTAs generate.
YTB continues to earn considerably more by signing on RTAs and supplying their technology, just as RTAs are earning considerably more by bringing in additional affiliates.
In the first quarter this year, sales of the sites and monthly fees accounted for 79.5% of YTB's net revenue, and sales of education programs and marketing materials to RTAs amounted to another 7%. Travel commissions and services accounted for 12.5% of revenue.
Calculated differently, RTAs on average generated quarterly revenue for YTB of $244.64 for site sales and monthly fees plus $21.68 for educational materials and $38.37 in travel commissions.
The payouts revealed a similar relationship, with 58.7% of revenues paid in marketing commissions to RTAs and 9% of revenues paid in travel commissions.
Again, in dollars per RTA, that came to payouts of $180.59 in marketing commissions and $27.75 in travel commissions.
In percentage terms, these results are consistent with the last couple of years. Site sales and monthly fees accounted for 72.4% of net revenues in 2006 and 73.4% in 2007, and sales of educational and marketing materials were 11.3% of revenues in 2006 and 9.9% in 2007.
To contact the reporter who wrote this article, send e-mail to Nadine Godwin at [email protected].