Expedia said net income in the three months to the end of March was $23.3m, or 6 cents per share, down 51 per cent, or 8 cents per share, on the same period a year ago.
Total revenue for the first quarter rose 1.8 per cent to $493.9m, while gross bookings increased 14 per cent.
The company blamed the slump on rising marketing costs, which rose by $21.4m during the quarter.
"While we anticipated negative growth in the first half of 2006, our performance this quarter was far below those expectations," said Expedia chairman and senior executive Barry Diller.
"We increased costs in many sectors - necessarily we believe for our long term growth - but didn't generate the revenues to offset the increased expenses.
"We believe little has changed fundamentally - Expedia remains the largest and most profitable online travel agent in the world, and while 2006 is going to be a challenging year, we don't think long-term shareholder value and returns are in question."
First-quarter domestic revenue fell 4 per cent but international revenue grew 24 per cent.
Expedia, the largest US Internet travel agency, is facing growing competition from hotels and airlines, which use their own websites to sell directly to the consumer.