UPDATE 3-Competition, discount website drag on Expedia; shares tank
* 2nd-qtr adj earnings $0.64 vs est. $0.79
* Revenue $1.21 bln vs est. $1.26 bln
* Selling and marketing costs jump 33 pct
* Shares slide 25 percent in post-market trading (Adds analyst comment; updates shares)
July 25 (Reuters) - Online travel agency Expedia Inc reported a quarterly profit far short of market estimates due to higher competition and poor performance in its discount website Hotwire.com, sending its shares crashing 25 percent in extended trade.
Expedia is finding it difficult to retain its dominant market share in the United States after rivals such as Priceline Com Inc started aggressively advertising their brands.
Expedia - a heavy advertiser on TV and in print - has ramped up spending on selling and marketing in a bid to woo back customers to its websites.
"What's sort of been different with Expedia recently is that you've really seen a renewed focus on online marketing," Macquarie Equities Research analyst Tom White said.
Selling and marketing expenses jumped 33 percent to $590.5 million in the second quarter ended June.
Expedia said a third of the increase in these costs came from trivago, a German travel site in which it acquired a majority stake earlier this year.
The company reduced its forecast for full-year adjusted earnings before interest, taxes, depreciation and ammortization (EBITDA) to mid-to-high single digits from low-double digits.
Expedia said on Thursday that net profit attributable to the company fell to $71.5 million, or 51 cents per share, in the second quarter, from $105.2 million, or 76 cents per share, a year earlier. (r.reuters.com/dur89t)
Excluding items, Expedia earned 64 cents per share.
Revenue rose 16 percent to $1.21 billion.
Analysts on average had expected earnings of 79 cents per share on revenue of $1.26 billion, according to Thomson Reuters I/B/E/S.
Recent consolidation in the car rental market has driven up rental rates, making it difficult for Expedia's Hotwire to offer its cars at cheaper rentals.
The U.S. car rental industry is at least two companies smaller compared with a year earlier. No.2 rental company Hertz Global Holdings Inc reached a deal last year to buy smaller rival Dollar Thrifty. Avis Budget Group Inc said in January it was buying Zipcar, the leader in car sharing.
"Hotwire's performance in the quarter was worse than we expected," Chief Executive Dara Khosrowshahi said on a post-earnings conference call.
Hotwire's troubles began with Superstorm Sandy in late 2012. Expedia expected this to abate once the effects of the hurricane had passed, but car rental companies took the opportunity to tighten capacity and push up rates.
Hertz and Avis both reported a 4 percent increase in North American rental rates for their first quarters ended March.
Expedia does not break out how much Hotwire contributes to total revenue.
Shares of the company, whose other brands include Hotels.com, were down 25 percent at $48.40 in after-hours trading. They closed at $65.00 on the Nasdaq on Thursday. (Editing by Sriraj Kalluvila, Ted Kerr and Anthony Kurian)
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