Good morning ladies and gentlemen and thank you for standing by. Welcome to the Expedia second quarter 2007 conference call. (Operator Instructions) This conference is being recorded Thursday, August 2nd, 2007. I would now like to turn the conference over to [Stu Hoss], Senior Vice President of Investor Relations and Treasurer. Please go ahead sir. [Stu Hoss]: Good morning, and welcome to Expedia Inc.’s financial results conference call for the second quarter, ended June 30th, 2007. I’m pleased to be joined on the call today by Barry Diller, Expedia’s Chairman and Senior Executive, Dara Khosrowshahi, our CEO and President, and Michael Adler, our CFO. The following discussion, including responses to your questions, reflects management’s views as of today, August 2nd, 2007 only. As always, some of the statements made on today’s call are forward looking, including our comments on financial expectations, operational performance and margins, planned investments and spending, platform improvements, systems upgrades, growth of business lines, [financial] performance, and [dilution]. Actual results may differ materially. We do not undertake any obligation to update or revise this information to reflect future events or circumstances. Please refer to today’s press release and the company’s filings with the SEC, including our Form 10-K for the year ended December 31st, 2006. For additional information about factors that could potentially effect our financial and operational results. During this call we will discuss certain non-GAAP financial measures, including OIBA, operating expenses, excluding stock-based compensation, free cash flow, adjusted net income, and adjusted EPS. In our press release, which is posted on the company’s IR website at www.expediainc.com/IR, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with the most comparable GAAP measures. Finally, unless otherwise stated, all references to gross margin, selling and marketing expense, general and administrative expense, and technology and content expense exclude stock based compensation. And all comparisons in this call will be against our results for the comparable period of 2006. And with that, let me turn the call over to Barry.

Thanks [Stu] and good morning everyone. We’re going to switch the order up today because I wanted to provide some color on the recent reductions in the size of the tender offer. While we certainly would have preferred to bring in more stock, we just weren’t willing to do so at financing terms that we found unacceptable. Specifically, the deterioration in the bank-loan credit market since we announced the tender resulted in rate spreads and restricted covenants which we felt didn’t reflect Expedia’s liquidity, cash-flow generation, and its growth prospects. What hasn’t changed since we announced the tender is the company’s desire to aggressively pursue every means to create value for our shareholders, obviously including share repurchases. You all do know, I think, that since May ’06 we’ve repurchased about 50 million shares. If the maximum of the 25 million shares in the tender offer come through, we’ll have retired 75 million shares in a little over a year, about 20% of our share count. And we’re going to be net buyers of our shares over the long term. And I want to also remind everyone that, in addition to the tender, we’ve got 20 million share purchase authorization that remains outstanding. We continue to believe that additional leverage makes sense for Expedia, and [absent] from extraneous reason, if the credit markets do become more hospitable, you should expect us to raise additional debt, including debt to repurchase shares. Our financial policy, as we’ve clearly demonstrated, is that we’re willing to add leverage which would take us well above our long term goal of net debt to even two or three times. Of course, we’re going to want to reduce leverage consistent with our long term goals as quickly as we could. In addition, we generally expect Expedia to maintain…

Thanks Barry, and thank you to everyone for making the time to join on this call. As you can see from our results release earlier this morning, this was another solid quarter for Expedia. We reported transactions and bookings growth of 14%, our highest rates of growth since the fourth quarter of 2005. Revenue growth was also strong at 15%, as revenue margins expanded modestly for a second straight quarter. And our primary metric operating income before amortization grew 2% to a record $187 million. I’m also pleased to report that the company’s geographic diversification continues, with international bookings reaching 29% of total bookings, up from 24% last Q2. And in Europe, segment bookings growth accelerated to 38%, and we achieved our second straight quarter of 1 billion plus bookings. Our goal as a management team is to optimize cash-flow over the long term, while efficiently managing dilution. And to that end, on a trailing 12 month basis, which controls for the seasonality in our merchant hotel business, Expedia’s free cash-flow was $734 million. And our diluted share count for Q2 was down 11% year-over-year, reflecting our share repurchases and measure granting of equity awards. Our Partner Services Group was a real highlight in Q2, continuing to gain momentum in building the world’s most compelling assortment of travel products and services. On the air side of the house, we are in a much more stable situation today than we were a year ago. Since then, we’ve reached multi-year agreements with nine of the top ten domestic carriers, including all the majors. We’ve increased selection for travelers with the addition of full content from JetBlue, AirTran, Frontier, and ExpressJet. And we now have the ability to flow segments through three GDS providers under long term contracts. In addition to securing long…

Great. Thanks, Dara. Good morning everyone. I’d like to provide you with a review of our results and close with our updated expectations for 2007. Worldwide gross bookings were up 14% during the quarter, fueled by 38% growth in Europe and 8% in North America. This reaccelerated in North America growth, built on the strength that Dara mentioned at Expedia.com. But also reflects broad success across the brand portfolio, specifically at Hotels.com and Hotwire, where despite the continued pressure on merchant care, we grew bookings 27% and Hotwire’s transactions exceeded 1 million for the first time in its history. We still have a lot of work ahead in North America, but we’re encouraged by the improved growth profile at our major brands in Q2. While bookings grow has historically exceeded transaction growth, due to rise in travel prices, this quarter the two metrics move more in tandem, as we saw, airfares actually declined year-on-year, while hotel ADR growth moderated. Should the airfares remain under pressure, we could see these diversions continue in the second half. Revenue increased 15%, lead by 14% growth at our merchant hotel revenue, 97% growth in media and revenue, and nearly 70% growth in stand-alone care rental. This progress more than offset 7% decline in air revenue. We’re obviously not happy with declining air revenue, but we are pleased that the rate of decline has decelerated markedly based on stronger ticket volumes. Hotel revenue was driven by [rumite] growth of 10% fueled by strong growth at Expedia.com and Hotwire, both of which benefited from 5% ADR growth, albeit a slower growth rate than in recent quarters. Package revenue grew only 1% in Q2. As in prior quarters, the growth challenge is North America specific. As European package revenue was up 18% for its second straight quarter.…

Thank you, [Stu]. (Operator instructions) Our first question today comes from Imran Khan from JP Morgan. Please go ahead.

Yes hi, thank you for taking my questions. Two questions. First U.S. revenue growth trend accelerated despite difficult time comp and as we came into the second half of this year and the comps get easier. How should we think about the U.S. gross bookings growth and do you think that you are gaining back some market share both in the U.S. and international market? Thank you.

Sure, Imran on the U.S. gross bookings growth, I think that the easier comps really started in Q2 moving forward through the year. Q1 was a [descent] quarter for us last year as far as gross bookings growth, and then you saw gross bookings growth in the U.S. slow down in Q2 and beyond. It’s hard to tell while you’re in the middle of a year, but we think that it’s a combination of really, really good execution across the board in our various U.S. brands and easier comps have something to do with it. So, for example, I think that Hotel.com in the U.S. on balance will have easier comps in the second half of the year than they had in the first half of the year. In certain European markets, we’ll have more difficult comps because in the second half of the year was when we took down booking fees which helped the European gross bookings and we’re going to be lapping those decreases in booking fees. So, when you put it all together, I would say that on a gross booking basis probably the back half for the year has maybe slightly easier comps on a gross bookings level, and maybe slightly harder comps on profitability level but you know what we’re really focused on is what we’re executing on right now and what we can do to improve our operations today rather than being totally focused on comps. On share, U.S. and international, it’s tough to tell, especially in the U.S., because a number of our competitors have gone private. Orbitz has now gone public, you know, judging from some data that they have in the S1, they certainly suggested that their U.S. growth rates are slowing down very significantly but we don’t know when they’re going to announce their Q2 so it’ll be a wait and see as to how we’re doing on share. So I don’t know if we’re gaining share, but I hear relative share position in the U.S. is certainly improving. And in Europe, Priceline is a tough competitor and every single quarter they seem to come out with better s than we expect and the street expects, so that’s what I’m expecting from them this quarter. I’m really happy with the way that we’re executing in Europe. It feels like we’re taking share, and I’m hoping to be able to increase share going forward, but again, the data is not that dependable, so we’re pretty focused on what we’re doing internally. And what I’m happy about in Europe is that, with that with FX and XFX our growth rates are accelerating, so that’s a pretty good sign.

Okay, thank you for taking my questions. Good quarter!

Thank you. Our next question comes from Doug Anmuth from Lehman Brothers. Please go ahead.

Thank you. Two questions. You talked about the supply picture materially stabilizing, going forward, and you mentioned the Wyndham deal. Can you give us an update on the other outstanding hotels deals with the MGM Starwood and Hilton? And then secondly, can you also reconcile—you mentioned 50% growth in revenue at Hotwire, but also continued challenges in merchant air and packaging—can you reconcile those two things? Thank you.

On the supply side, the three brands that you mentioned are partners that we’re having discussions with. We don’t comment on specific deals and I don’t necessarily want to comment on specific discussions other than saying—we’re hopeful. We’re having good, constructive dialogues with them. We’re talking with them about how we can partner up with them and how we can add value from a long-term basis, and certainly the momentum that you’ve seen in our business helps. I think that our partners see that we are a better partner in general and we’re investing marketing dollars, we’re investing technology, we’re investing in people, to grow this business from a long-term perspective across broad brands and broad geographies. So that really, really helps when we enter into discussions with them, because they know that we’re going to be the bigger partner for them, three years from now than we are today. All I can say about those discussions are, we’re cautiously optimistic; hopefully they won’t go sideways and hopefully we’ll have good news to tell you, and I think our track record has been pretty good. On the Hotwire side versus the merchant hotel business or—I think it was the package business—you know, Hotwire is just executing really, really well and we’re seeing significant strength for them on the hotel side of the business and especially on the car side of the business. So the air side of the business with Hotwire is more difficult and I think that they are executing uphill quite effectively. The cuts in the bookings fees has helped volume, but in general, the air side of Hotwire is less profitable now than it has been for the past couple of years, and they are making up for, and more with the other sides of the business, with hotel and especially car. So their battling uphill and they’re battling uphill very, very effectively. And what you see on the air side of Hotwire is very consistent with what you see on the air side of our package business, which is less attractive inventory in general.

Okay, thank you.

You bet.

Our next question comes from Robert Peck, from Bear Stearns. Please go ahead.

My first question is for Barry and one for Dara. Barry if you think about allocation of capital with these tighter, dead markets, can we see other uses of this capital. Should we be thinking about acquisitions, strategic moves that should be made? And what are your thoughts on eLong going forward? And then just a quick follow up for Dara.

On the capital, I think we’re always ready for acquisitions. We make and have made small acquisitions in the last period. I can’t say that’ll be true for the future. There may be something that will come on our sites. If so, depending upon (inaudible) you can predict these dead markets, certainly not at this moment. There’s obviously, as you all know, currently a freeze up. Things are getting done, there’s a tremendous amount of supply though—all of those deals that have been announced and not yet completed their funding, so, I think that we should always be ready, and always have powder for first acquisitions to build the business, and other investments to make in the business. And then, as I’ve said, in the best way I can, which is our willingness to borrow a great deal of money to purchase a stock, an aggressive share program. I think Dara would be better to comment on eLong than I would. Dara?

Sure, Robert, you know on eLong we’re very happy about the position that we have. We’re solid number two in China, which is a promising and incredibly fast growing and incredibly fast changing market. We’ve got Henrik Kjellberg, who as you know, came from our PSG group in Europe; running the APAC group in general is now the interim chairman or interim CEO of eLong and he’s very focused on basic operational step at eLong. I think that the good news at eLong is that we have a good core group of managers there. We’re bringing on great challenge over the next couple of months. We’re meeting really, really interesting candidates for the CEO job there, and it’s an operational issue and we’re in a pretty friendly environment and if we get one step in front of the other, I think eLong can be a great success. And we’re pretty confident that Henrik and his management can get us there.

And then just a quick follow up on Apollo, if you don’t mind. Did you say that you’re already currently hitting that $50 million a year fundraising on some of that this quarter? If we start thinking about that 50 million annualized, starting to run through our quarters going forward here. What do you think as far as any sort of differential number here? Could there be any sort of upside surprise from Apollo?

Mike, I’ll let you take that.

Yeah—we are seeing the $50 million on an annualized basis and would expect to see that going forward on a full year basis with respect to upsides on Apollo. We really don’t view it as Apollo anymore. We view it as an engrained attitude in the company in terms of continuous improvement for productivity and cost initiatives. And we have a whole series of things that we are doing and that we’re working on that we expect will continue to roll into the business, in the future some of which will offset investments that we make in other places. We have spent most of our time on the costs of sales line and we will begin looking more carefully at the other kinds of our business as well.

Rob, I understand that Apollo really does go to a mindset which is a philosophy at how we operate and you see it deep down in the business. It’s a belief that when we’re building systems and/or business processes to build them right and build them to scale. So as we grow, the cost per transaction of the company gets better and becomes optimized and sometimes that takes taking longer to build something upfront, but ultimately the long term rewards are there and I think it is a shipman’s philosophy is that how we approach projects and business processes.

Thanks, Dara.

You bet.

Thank you. Our next question comes from Anthony Noto, from Goldman Sachs. Please go ahead.

Thank you very much. Dara, I was wondering if you could give us a sense of—your advertising numbers obviously becoming bigger and accelerating and are for several quarters now. Could you give us a sense what the PayTree growth is at TripAdvisor, the change in sell-through and CPM, just so we can start to better understand how much growth opportunity there is just from selling more of what’s available as opposed to necessarily having to drive from more usage. And then the second question, also related to advertising, but from a cost perspective for Expedia. We’re seeing a trend in the industry of a significant abundance of new inventory available from the likes of these booking media and all these other companies that have very valuable audience and they’re selling at much lower CPMs than what you may need to pay at someplace like a Yahoo! or AOL or MSN. Have you at all been able to leverage that diversification in your marketing makes to drive down your costs for audience reach on the advertising line? And then the last question also related to cost. Paypal was able to sign up two major airlines as a payment functionality for those airlines. Is there an opportunity for you to reduce your credit card fees or payment fees per transaction by using an alternative payment system like Paypal? Thank you.

On TripAdvisor the traffic and in general the page views and the commerce clips are up pretty significantly at very, very strong double digits. The working at a growth for TripAdvisor in general is over 50%, and in really the growth that we’re seeing in TripAdvisor is more on traffic than rate, so to speak. Now, just digging into that a little bit, what’s happening with TripAdvisor on the revenue side is that the kind of cost per click business is growing healthily Anthony and that’s based on traffic increases and actual clicks both domestically and especially growing in the international markets. And what we’re adding onto that is really a CPM business, its really a media business that’s essentially a new business that’s starting from, essentially scratch I’d say middle of last year and what we’re getting to do is layer on that media business, a travel media business on top of its CPC business on TripAdvisor as well. So, that’s why we’re seeing the momentum and the momentum is built on traffic and obviously revenue. The new users on TripAdvisor I think on a year-on-year basis were up 15%, page views were up stronger than that, I don’t know the exact number of the page views. As far as kind of alternate media and the Facebook etc. we’re looking at those. Alternate media is not a significant amount of our spend to date and while it can be a decent branding media we haven’t seen significant click-throughs, etc. from that kind of advertising so I think we’re still in the experimental stage on Facebook and some of the new media but we’re certainly very interested in it. One of the areas that we’re actually focused on, Facebook for example, is as you know they opened up their platform for applications, third party applications and TripAdvisor in about a week built a mapping application onto the Facebook platform and I think it’s the second kind of largest downloaded travel application in the Facebook communities. So we’re pretty active there and we’re experimenting but I can’t come to you with any conclusions right now as to the size or the success of that experimentation right now. And I think that your last question was on PayPal, was that right?

Yes.

Mike, why don’t you talk about that?

We have looked over the most recent periods at our cost of credit card transaction fees and there are areas that we will continue to analyse. We have several points of sale that already are using alternative payment systems, including Bill Me Later at Hotwire and at Hotels.com

I think Hotwire’s also using PayPal right?

I believe Hotwire is using PayPal as well and in Europe we are using debit cards and things of that nature so we definitely view it as an opportunity. It continues to be a cost for us that is larger than we would like it to be and as we continue to centralize some of the operations of the company and bring together our points of sale around the world through E3 and other projects its going to make it easier for us to leverage and get better rates across the company, so, definitely an opportunity for us in the future.

Small right now and hopefully it’ll increase in size.

Thank you and our next question comes from Michael Millman from Soleil. Please go ahead.

I guess a couple of questions thinking the (inaudible) may be in the script talk about in Europe a competitive market in hotels. Does that mean that you’re reducing the commissions or discounts in Merchant in order to compete with Priceline’s agency charges?

Sure, Michael, in Europe we actually think that in Europe that the value that we bring to our hotel supply partners is equal to what they pay us so its not an issue for, or we haven’t been focused on revenue margins as much as we’ve been focused on price. I talked about a couple of quarters ago how we’re very focused with the PSG group on the product that we have on the shelves and that means availability, breadth and price. In looking at Europe, we found out, maybe we shouldn’t have been surprised that our pricing wasn’t as good as it should have been, we took actions on that accord that did affect European revenue margins and improved pricing pretty significantly and you see it in the volumes. So that did affect margins but it’s not a margin to the hotel issue.

When you say price wasn’t as good you mean you lowered the price or raised the price?

We lowered the price.

And that has helped pick up volume.

That has helped increase our competitiveness with booking.com and other providers out there. Our volume has been quite positive whether you can draw a one to one cause or effect between price and volume is not entirely clear but we think that it helped.

On the servicing fee or transaction fee where you’ve dropped it from place to place, how important is that servicing fee to the air revenue ticket and to what extent does that reduction in certain locations and products impacted your 19% decline in air revenue per ticket?

I don’t have, Mike do you know the exact effect that it had on the, 19%, I don’t think that we have that number, that we would disclose it exactly but if you look at the European revenue margin decrease, the two largest drivers of that revenue margin decrease were the booking fee reductions that we mentioned also signing up with Ryan Air which is a new deal so to speak and having gross bookings volume coming in from Ryan Air and not recognizing the revenue in quarter. So it’s definitely a piece of the revenue margin equation.

Can you give us some rough idea as to how much, how important on a macro basis those fees are?

In general, the air revenue is now less than 15% of our overall revenue. It’s decreasing every quarter it seems to decrease and the air booking fee is round about a third, this is on a global basis, of our total air revenue. And then of course what section is U.S. versus Europe, we don’t disclose. You can probably do some math guessing on that.

And regard to improvement in Expedia.com with the marketing expense store, to what extent is that getting more volume and to what extent is that you have improved your conversion rate?

It’s both, Michael, its better volume from direct channels. It’s very, very strong performance from the e-mail channel offset by some weakness on the affiliate channel and some of the indirect channels. And it’s a very solid conversion performance as well. It’s a combination of both.

Thank you.

Our next question comes from Mark Mahaney from Citigroup. Please go ahead.

Thank you very much, two questions please. You mentioned that ECT growth I think in bookings was over 20%. Can you put that in context what was the growth like for that the last couple of quarters? And secondly, just thinking broadly about margins for the business as a whole, if European margins, with that revenue growth, faster but European holds the margins 1000 dips below U.S. levels. What are the implications of that for the overall margins of the business? Do the U.S. and European margins reach converge over the next couple of years or do the European margins rise up to U.S. levels. What would be the factors that would cause that to happen or not cause that to happen? Thank you very much.

On ECT, there’s 20% growth that we had is similar to the growth rate that we had in Q1. It’s slower than what we had last year and really the European markets at ECT remain very strong. In the U.S. we’re seeing a little bit of weakness as far as corporate travel spend with some of our clients. So the new client sign ups goes along quite well over 100 million, we think we can do better but in general we’re getting plenty of new clients in the door so to speak. The client retention is excellent but some of the spending levels in the U.S. on an account by account basis have been a bit weaker than we expected. We think that it’s a combination of some U.S. corporations being conservative on spend and conservative on margins and we’re trying to figure out if it has something to do with wallet share as well. So that’s really what we’re focused on as far as the U.S. goes and hopefully taking the 20% and hopefully improving it from there. I think on European margins, Mike, you can speak to that as well, do you want to talk to that, or do you want me to?

No, go ahead.

Okay, I’d say in Europe in general, you know you look at the European market and the overall European travel market is larger than the U.S. travel market. And when you look at our international revenue, it’s around 29%, I think that’s actually gross bookings, it’s around 29% of our total. And what we see in Europe right now is opportunity. And there is, we still think that there is very, very significant growth potential in Europe, and because of that growth potential, and also frankly, because we’ve got a very tough competitor there, we’re focused on making sure that we maintain our growth share, and that requires investment, and frankly we’re happy to invest in that market. So I see in the near term, we’re more focused on European top-line growth than bottom-line growth, but as the market matures, and I’m hoping that it doesn’t mature any time soon, but as the market matures I would think that margins in Europe do have the opportunity to uptake, and if you look inside the countries in Europe, for example the U.K., which is a more mature market, does have significantly higher margins than let’s say a Germany or a France. So I do expect it to get there, but frankly I don’t want it go get there any time soon.

Just a quick clarification, the 29% of bookings was the international figure, and then Europe would be 20% of the total.

Can we have the next question please, operator?

Thank you, our next question comes from Chris Gutek from Morgan Stanley. Please go ahead.

Thanks, two question. So I guess given the nice acceleration in the top-line growth, but partly offset by the higher marketing spending in the quarter, I’m curious if you guys have changed your long-term thinking on how to maximize the value of the firm, given the trade off between growth and profitability. Specifically, you know it’s a long term expectation that any leverage you see elsewhere in the business gets consumed by higher marketing spending, or conversely, the heavy spending you talked about earlier, is that really just for the next couple quarters and beyond that you haven’t necessarily made a decision about optimal strategy?

Um, Chris, I’d say it’s more the latter. You can certainly see that our behavior as far as marketing spending compared to last year has changed pretty significantly. And you know we haven’t undertaken this strategy for a long time, so it’s hard to come to a long term conclusion. We think that at least for this year it’s the right strategy going forward. Now we do, we’ve told you that over the long term we are optimizing for a free cash flow number, we’re not optimizing for margins. And when we look at what is the best path to get there, is it better to get there with very, very strong top-line growth or weaker top-line growth and try to leverage a business, so to speak? One thing that we’ve seen with strong top-line growth is that it gets you scale, and it helps you with revenue margins in the kind of discussions that we have with our supply partners. I do believe that we can secure a long term economic and relationship advantage over our competitors because of that scale. It gets you scale as far as the fixed cost, it lets you amortize the kind of admittedly large investments that we’re making on technology, on fixed infrastructure. It lets you amortize those investments over a wider swath of transactions. And third, and this is new, as we build audience, we build a bigger audience for which to build a media business. And I think that at least for now, we’re the only players, we’re the only travel player, who is building a media business of scale, and again that goes to kind of the amount of revenue that we can get per unique user, per oddball, and scale does get us advantages that we believe, at least at this point, we believe we have a chance of being differentiated so to speak.

Okay, great. And then my second sort of follow-up question to the prior discussion regarding the elimination of booking fees at Hotwire and Priceline for domestic air bookings, do you think this is sort of a shot across (inaudible) that the bookings fees could be eliminated across other products or all products and all geographies. Or is just that the domestic air business has a lower value proposition to the customer, and you don’t the spreading?

Tough to tell at this point. You know, Hotwire and Priceline have a very, very specific audience, and it’s an audience that’s looking for discounts, and it’s an audience that wants price breaks. So I think that, and at the time you have both Hotwire and Priceline experience degradation in the quality of their air inventory. So what Priceline did and they did it first, made a lot of sense, and it’s something that they’ve done very—that’s specific to their business, that’s specific to their audience, and the same goes for Hotwire. So this time, I don’t know, if it’s a shot across the bough. I don’t know if it’s going to spread.

Okay, great. Thanks.

You bet.

Thank you. Our next question comes from Aaron Kessler from Piper, Jaffray, & Co.

Thank you guys. A couple of questions. First, on Europe, I may have misheard you—can you give us an update on the hotel inventory of May for UK and continental Europe? And also your investment in field sales. And then one follow-up question.

Sure, as far as the inventory goes—we decreased inventory, I think at 20% on a year-over-year basis, as far as I know for merchant hotel properties that we have available. I’m frankly hoping to accelerate that growth. To build a field sales force I think we are investing in the field sales force; of course Europe takes a bit of time. It’s a combination of investing in the field sales force and also investing in systems that allow us to hook up to the hotels in a cleaner way, in a faster way. And also allow the hotels to work with us easier. Our internet for example isn’t as good or smooth as it needs to be. So it’s a combination of system investments and field sales force investments. I’d say we’re in the early to middle part of that cycle, but I’m really confident about the way that that group is going to execute.

And did you say there are 12,000 hotels in Europe or is that direct connections?

I think it’s 12,000 merchant hotels, and then we obviously have GDS connections. I don’t know how many hotels in Europe.

One follow-up question. For the Q1 inflation you were talking about, can you give us a little more detail on that—when did that start, and roughly what kind of increase you saw there? Thank you.

The Q1 inflation has been fairly consistent. It’s been double-digit inflation on a keyword-by-keyword basis. We’re able to mitigate some of this because in general ADRs, for example on the hotel side of the business, are increasing so we’re able to offset some of that. We’ve going to work on the conversions side as far as what keyword’s to bid for, and how consumers are converting on our site. But it’s a pretty competitive marketplace out there and it has been since the beginning of the year. We certainly haven’t seen any change in behavior there.

Quick clarification—when you say change of pricing in Europe, was that to pricing to your consumer or your commission rate?

Pricing to the consumer in general.

Okay, great. Thank you so much.

You bet.

Thank you. Our next question comes from Justin Post, from Merrill Lynch. Please go ahead.

Thank you. Next quarter, I’d like to first talk about where you’re at in penetration of the US consumer markets and corporate travel. Could you give us an update on where you think you are as far as a percent and where it could go? And then secondly, if Barry is still on the line, could you talk about your philosophy with doing tender offers? It seems to create extra volatility for the stock. Why not just do buybacks? You know, in kind of an opportunistic way—the way I see has approached it so far?

As far as penetration in the corporate market, it’s tiny, Justin. So we’re at the runway at 300 million a quarter, as far as our corporate travel business goes. The corporate travel, the size of the corporate travel market in the US, I’m guessing is an excess of 80 billion or so, [Stu]? [Stu] is nodding his head. So the penetration is tiny. The big, big players are obviously the AMEXs and the Carlsons of the world. And where we have the largest challenge right now is to break into kind of the top tier, the very big accounts where AMEX and Carlson are very strong. We’re doing great on the small up to medium accounts. The challenge is to step up the ladder, so to speak, and it’s something that we’re very much focused on. But [ETT] is going to be a gross story for a very, very long time to come for this company. And then I will let Barry answer the last question.

I have no guiding philosophy on how to purchase stock. Again, it really is best done opportunistically. And we felt that the tender offers, while yes, they may produce more volatility because there’s such a point of sales, or such a point of buy. But we thought it was most efficient when we were thinking of particularly large numbers in terms of our desire at a moment in time to buy stock tender offer or other mechanisms. One stop only, so to speak, or more efficient. But we debate this all the time as to whether or not we’re just better with a plan, or better going in every day, or every other day, or every 40th day. Depending on what we think, again, our approach to all of this relative to stock repurchases is opportunistic, and we really only talk about it after the fact. Other then our, I think now, I hope, clearly understood and accepted position that, number one, our intent, as shown, is to buy stock. And, secondly, we think a certain amount of leverage is healthy for this business at this point in time. I think those, as the two guiding principles, those are the ones we’re going to follow in the future, and I think that’s going to be very good for the people who are current holders of the stock.

Thank you, Barry. If I could follow up Dara, could you give penetration of the U.S. market? And then, the last thing, Amazon kind of surprised people with Amazon Prime, driving some growth there. How do you feel about the loyalty program, and can you give any metrics on that?

Justin, what do you mean by the U.S. market? I thought that I’d given the penetration—

The leisure market.

Okay, the leisure market is close to 50% according to focus (inaudible), so those aren’t numbers that we make available.

Okay great, thank you. And then on the loyalty program, how do you feel about that, and are there any metrics you can share as far as driving additional purchase activity?

The metrics we can share is we’re happy with the sign ups. We’ve got over 750 thousand Thank You members now on board. The Thank You program is definitely driving increased frequency as far as visits and shopping, and also transactions, especially on the hotel side of the equation, which is obviously our most profitable line of business. But it’s still too early for us to give you other metrics as far as what is truly incremental or what’s not. But we’re certainly happy with what we see from the Thank You program, and we’re very happy with the partnership that we’ve got with [City].

Thank you.

You bet. Well thank you very much for joining us today. Barry, myself, and Mike get to tell you about everything that we’ve done in the quarter, but it’s really the seven thousand employees of Expedia are the ones who are doing it and executing on a daily basis, so I didn’t want to sign off before giving a special thank you to them. So we’re hoping to tell you all about our accomplishments in Q3, and we’ll see you then. [Stu], anything else? [Stu Hoss]: No that’s it. A replay of the call will be available on the investor relations website subsequent to this call and thank you for listening in.

Thank you ladies and gentlemen, that does conclude Expedia Inc.’s second quarter 2007 conference call. If you’d like to listen to a replay you may also dial 1-800-405-2236 or 303-590-3000, and use pass code 11094031# to access the conference. Thank you again for your presentation today and you may now disconnect.