{audio:0:00:00} Terry, can you walk us through the founding story of KAYAK?

{audio:0:00:06} It’s an interesting story. After I left Travelocity, when it went private, I started to work part-time, at a venture capital firm, in Boston, General Catalyst Partners. They had me looking at various travel opportunities. There was a company that was doing, sort of meta, with a plug-in. So if you searched one site, they would search a couple of others. We liked the concept but we didn’t think it was correctly executed and we didn’t like the idea of plug-ins. I had also been working at Overture, which was really the original paid search company. We eventually had a patent settlement with Google, over that. I knew something about search and we started talking about it and Joel Cutler, who was the partner, got excited about it and he knew Steve Hafner and Paul English and he brought them in, as well as a guy named Greg Slyngstad, who had worked at Expedia, right at the beginning.

{audio:0:01:11} We had a dinner one night and we talked about it. The idea was, we’re converting about 6% of arrivals, into sales, at Travelocity, Orbitz and Expedia – who were all represented at the table – so 94% of our customers are going somewhere else. We knew, from tracking, that most of them were going directly to suppliers, because they felt they got better customer service or they got better points or they just trusted them more, whatever the reason was.

{audio:0:01:43} We said, why don’t we build a search site that does that. It searches everybody and when you click, you buy direct. We took that idea, first of all, to the airlines, and the pitch was, this is a much more effective use of your search dollars than Google, because you will only pay on a click through, but the click through is not to the home page, it’s to the last page. The customer will already have selected you and your flight and your airline and all they have to do is put in their credit card and their name and they’re done. It’s very high converting.

{audio:0:02:19} They all liked it, but they said they wouldn’t pay for it. We decided to start, anyway. A few people paid; most people didn’t. We raised money from General Catalyst; they funded the start-up, they incubated it. That was unusual for them because they didn’t usually incubate start-ups. After several months of traffic, one day, we began, selectively, turning it off. The airlines would call and say, where did all my traffic go? We’d say, same place your money did; nowhere. That was that.

{audio:0:02:55} That’s how we started and then we went into hotels and cars and cruises and tours and the rest.

{audio:0:03:09} In the early days, how did the airlines versus the hotels, approach meta?

{audio:0:03:14} Nobody was quite sure about it, until they saw how well it worked. They liked it much better than a travel agent, because they weren’t paying commission. At the beginning, they only paid click. Later, we went into different arrangements. Some people wanted to pay – or we wanted them to pay – commission. Or they only paid on a sale, not on a click. We had two or three different models, but most of it was a click-through auction, just like Google. They saw that it worked, it was less expensive than paying a travel agent, either an OTA or a physical travel agent, and it was more effective than Google. They liked it. We didn’t really have a lot of pushback. Once they saw the model was working, they thought it was pretty cool.

{audio:0:04:11} The OTAs figured out, right away, that they didn’t like it, because we were closer the customer than they were. In the early days, none of the OTAs accepted traffic from metas; they wanted to kill us, for a long time and they talked us trash in the press. But Hafner was pretty good at talking trash back, so that was okay.

{audio:0:04:35} What was it that they didn’t like? Was it just the fact that you were closer to the customer, closer to the edge, as we said before?

{audio:0:04:41} Yes, because we were closer to the edge and we were stealing customers. They said we were only focused on price, that we were just taking the low-price customers. That was baloney. We had filters and they didn’t. You could filter on price, you could filter on time, you could filter on carrier. You could do all that stuff, which was very hard to do, for the OTAs, at that time. They hadn’t done any of that. It was a brilliant idea from English and Hafner, to do that.

{audio:0:05:08} It was just a false argument, but it was the one they had, so they used it. They didn’t like us and travel agents groused about us. It’s just what happens when a good new idea comes on the market; the old-line companies bellyache, but that’s all right. It took time for us to build traffic and the other thing that was going on, at the time – and Steve was great at this – was Google Arbitrage. In those days, keywords didn’t cost anywhere near what they cost today, in travel. We could buy keywords, around airline and hotel searches and then take that traffic to the carrier and the cost of our search was less than what we obtained, so it was highly profitable, after a while.

{audio:0:06:04} How was KAYAK aggregating traffic, in those early days?

{audio:0:06:09} It was almost all search. As opposed to when we started with Travelocity, we had to get customers with TV and radio and banner ads, because that’s all there was, KAYAK was 100% search, in the beginning. Eventually, we did advertising, after a huge battle. The board wanted to do it and the guys didn’t. We thought it was important when we were going public, to build a bigger brand, against those huge brands of Expedia and Booking and so on. But in the beginning, it was all highly-tracked search. The OTAs were doing search, but not as effectively as KAYAK did. KAYAK was really smart at it.

{audio:0:06:56} How accretive do you think the KAYAK acquisition was, for Booking Holdings?

{audio:0:07:03} I think it’s been great for them. They’ve got a nice piece of revenue. Instead of fighting KAYAK, they own it. It’s been very effective and they continue to invest in it and grow it. They were smart, and left Steve in charge and now he’s picked up OpenTable, as well. They were smart, in that they are a house of brands, rather than a brand of house. I guess, you could say that Expedia is a house of brands, as well, since they’ve got Travelocity and Orbitz, but at Expedia, they made what I think is a critical mistake. They first decided to put everybody on the same technology backend; nothing wrong with that. But then they decided to make all the sites look identical, so there’s really no difference between Travelocity, Orbitz and Expedia. To me, that doesn’t make any sense at all. The customer figures out, pretty quickly, it’s three peas in a pod and, therefore, you’ve lost the leverage of investing in the second brand. So all you did was buy their customers.

{audio:0:08:13} Priceline went in the other direction. They do some common things there, as I understand it; certainly, there is common Google purchasing and they have certain economies of scale. But they don’t force the companies to operate in the same way and they really let them run as a conglomerate which, I think, makes a ton of sense.

{audio:0:08:38} Is the traffic materially different then, from KAYAK to the OTA, versus booking directly to Google, for example, in terms user or buy-in or the value, or whatever it may be?

{audio:0:08:55} No, I don’t believe so. I don’t know; I don’t have that data anymore because I’ve been gone a while. But I would doubt it. Obviously, lots of people start with Google, because it’s easy. But KAYAK has built a terrific brand and a lot of loyalty and 60 million plus mobile customers. It owns mobile; it’s done a very, very good job there. It’s fast and it’s easy to use. I think, if I were at all critical of KAYAK, and Steve and I never agreed on this, unlike Trivago, KAYAK did advertise, search one and done, but they never really said, we search everything and you buy direct, which was the concept behind it, but they have never advertised it that way.

{audio:0:09:39} So lots of people just search and then they leave. They don’t really understand that, when they click, they go to the airline. Today, you can also ‘book’ on KAYAK, which is mostly booking with Priceline, or Booking. Mostly, it’s still a search site and I think for the customers who do get it, it works perfectly for them. For the customers who think it’s an OTA, that’s okay too.

{audio:0:10:08} What’s your view of Google, in this travel ecosystem?

{audio:0:10:15} We talked a little bit about it in the last episode. I think they’re, sort of, a two-headed Janus. They don’t know what they want to be. At heart, they are an advertising company and that’s what they ought to be doing, I think; that’s what they’re really good at. But they dabble in the transaction world and, certainly in hotels, they’re a juggernaut. They’re not as big in flights as they are in hotels. But, on the other hand, they’re a big advertising company. We, kind of, did the same thing at KAYAK. There was a time when American or somebody would want to pull their flights out. We had our flights in the center, but we had ads up and down the right rail. We didn’t really care what you clicked on; click on an ad, click on a flight, we were monetizing you. There were also banners on top.

{audio:0:11:08} Google is the same. They have a flight search, surrounded by all kinds of links. But perhaps, as they move to be more transactional, with voice, as they grow shopping, they may change direction, here in travel, and become a much bigger juggernaut. That has anti-trust implications, as well, because they control so much of the search traffic that if they end up monetizing it in the same way, it plays right back to the Microsoft suit and settlement, where Microsoft was banned from building services like that, into their browser, because they had so much browser share. To me, it’s a very similar argument.

{audio:0:11:56} I think they walk a fine line and they continue to push the line and they have a lot of smart people and a lot of money. It’s also weird to compete with yourself.

{audio:0:12:09} That’s the counter for why they shouldn’t move into owning more of the transaction, in voice or in shopping. Regarding the Hotel Ads product, the Flight Search product, they argue that they are just bringing supply and demand closer together, to make it more frictionless.

{audio:0:12:28} Of course they do. They bring supply and demand together and extract money from it. That’s the capitalistic way; I don’t argue with that. But it is hard to be both. No one knows which way commerce is going to go. When I took Travelocity public, and went on the road with my terrific CFO, Ramesh, we played to empty rooms. The analysts didn’t care; they didn’t think travel was going to be big, at all. Of course, travel is the largest part of ecommerce. It’s larger than the next three categories combined. Nobody knew that.

{audio:0:13:10} What’s next, as we move into AI and voice? Will that change? Google has been riding high, for a long time. But I can give you a list of great technical companies, like Digital Equipment, Wang and others, who rode and were huge and then crashed, when they couldn’t make the jump. Google is way better than those were but still, it’s very hard to change your DNA, when technology changes. So we’ll see. You look at the battle between Tesla and the traditional car makers or Uber versus the cab companies, it’s been done over and over again. I would never count Google down and out. They are smart, they are rich. But there could be something that is so antithetical to their model, they have a hard time changing.

{audio:0:14:07} I’ll give you an example. We thought of the KAYAK idea, at Travelocity. We saw this company out there, called SideStep, and we said, gee, we could do that. But we would have had to totally change our business model, fire 80% of our staff and then go tell Wall Street what we did. We realized that was impossible. Our stock would simply crash. Wall Street doesn’t let you do that, because they expect a certain business model. It’s very hard, when you’re public, to make those kind of moves.

{audio:0:14:39} In terms of the shift to voice, for example, which could reshape the whole of ecommerce, it seems pretty difficult to do travel, through voice. There’s so much variety, you need to look, you want to see images?

{audio:0:14:55} Yes, it does. I’ll give you an example of that. At my last company, WayBlazer, we built this AI company, which we may want to talk about, because it’s a fun story. We built a robot concierge, for Hilton, along with IBM. It was a little robot; it was in the lobby and you could ask it questions. Immediately, we had to put a screen next to it. People would say, how do I get from here to Buckingham Palace and they wanted a map. They wanted to see the map and they wanted to print it out and a concierge would normally give you a map. Voice was fine for some transactions and not good for others. I want to see a picture of that attraction.

{audio:0:15:37} I’ve seen some robots, over in Hospitality Lab, in Vegas, and they all have a little screen, that’s showing people things. The Echo Show, for example – and Google has a similar product, as does Facebook – as those get further developed, where I can give a voice command, in a natural language, and ask a complex query, such as, I want to go to an island, in February, with golf and great fishing, and then get a picture and a price, that works pretty well. There’s nothing wrong with that. You then just say, buy it. With Alexa, at least – that’s the one I use – you are starting to get her doing lots of reminders. I’ll ask her, what was delivered today? She’ll say, don’t forget, it’s a month since you ordered dog food, or something like that. They’re getting pretty smart at cross-selling and prodding.

{audio:0:16:32} Just back to the point on Google. Clearly, there is a Catch-22 between the OTAs and Google. Booking and Expedia are Google’s largest customers. Do you see Google as a material risk to Booking and Expedia?

{audio:0:16:48} It’s funny. When I brought out Travelocity, the Wall Street analysts said, AOL and Yahoo will kill you. AOL and Yahoo were the juggernauts, at the time; Google didn’t exist. We kept saying, tightly focused vertical companies will always be horizontal companies, as long as they stick to their playing field. We proved that to be true and so did Expedia. When we brought out KAYAK, they said, Google is way better at search than you are; you’ll never make anything of yourselves and we sold the company for $1.8 billion. It’s hard for horizontal players to do that, but it doesn’t mean they can’t.

{audio:0:17:30} If Google wanted to become the biggest travel company in the world, they could do that, but they’d have to give up a lot, in the meantime. A huge amount of revenue. Because then, it would be all out war and Booking and Expedia would pull their stuff. They’d find another way; they’d build their brands on TV. There would also be huge anti-trust risks. I think they get their hand close to the stove, but they’re not getting burned and they just keep doing that. When it gets up to the most senior team, I think people say, you’ve pushed it far enough. If you move slowly and boil a frog, maybe they can win that way.

{audio:0:18:17} I think the other interesting development was the Hotel Ads product and what that, potentially, adds into the mix in that hotels can now directly bid in Hotel Ads, versus the OTAs or directly, for traffic. There’s one argument out there that says, if the hotels can get their digital infrastructure act together, they can actually bid on that traffic. Clearly, the big chains, the Marriotts, the Hiltons, they have the power, the capital and the know-how, to bid in that box. Do you see a risk of the smaller, independent players shifting away from the OTAs and bidding directly for traffic, to save that commission?

{audio:0:19:04} I doubt it; they’re really not organized to do that. They’ve got very good relationships and they get so much great traffic. Usually, the smaller chains just don’t have the people with the technical ability to do that kind of day-to-day search work. It’s hard enough for them to run their hotels and do the rest of it and they do a great job of that. Generally, as you go into those chains – I did a lot of this with WayBlazer, because we were talking a lot to the smaller, boutique operators – the level of technology is very low. It’s almost always outsourced to somebody else. Their POS is outsourced, their res system is outsourced, their web, their ads. It’s all outsourced; as is their search.

{audio:0:19:56} It’s a huge risk for them because the smaller hotels, in particular, get so much traffic from the OTAs, because the smaller guys are fighting against the brands, so they have to have a place to do that and to show their wares.

{audio:0:20:10} Roughly, how much traffic do they typically get from OTAs?

{audio:0:20:13} I don’t have the numbers anymore; I’m probably a little out of date. But it’s significant. They don’t like it, they all bellyache about the level of commission, but they’re hooked on it. It’s an easy way to get traffic. It’s kind of like the old tourist bureaus in various states, cities or countries, around the world. You used to write them a letter and they would send you a book that had all the wonderful things to do in their place and then you’d decide to come. Suddenly, nobody wanted the book anymore and they really didn’t get digital advertising, for a long time. Now most of them do; but they longed for the easier days of the book.

{audio:0:21:01} I think the OTAs are in a good place there. Never say never; the market is always changing. Somebody could come up with a new idea. These companies have had a 25-year run and they’re doing pretty well.

{audio:0:21:18} Do you see a major shift in the distribution of hotels, over the next five to seven years, away from OTAs, especially for the big chains and more direct distribution?

{audio:0:21:30} Well, I’ve been waiting. Marriott had a head of distribution, for many years, who talked that game but he never convinced anybody to do it. Of course, I told the story, in the last episode, that it was after 9/11 that the airlines cut commissions to zero. If it was ever going to happen in the hotel world, it should happen right now. They have nothing to lose. Their occupancy is 20% or less. They could make that change. They have made some changes, with meeting planners and other changes. The hotel business is tough. We talked about the granularity of the hotel business and how many choices you have and how different hotels are. So they need a place to be compared and to show their wares and they just don’t have that much loyal business.

{audio:0:22:28} Business travel is very different and people are loyal and they sign contracts with Marriott and IHG. In leisure travel, people just stay all over the place, unless they’re point users and then they’re still loyal. But they already have those people. They need another source, to compare and to stand out, so I think it’s going to be tough for them to make that jump. They talk about it but they have never had the courage to do it. If they’re going to do it, a recession like this would be exactly the time.

{audio:0:23:03} It’s interesting to compare that moment that you mentioned, where the airlines cut commissions to the agents, after 9/11. But it’s very difficult for the hotels because the supply is so fragmented and you can’t get all the hotels to do that. As you said, there’s little loyalty and more options for the consumers in hotels, versus airlines, which is more consolidated.

{audio:0:23:26} Right. If you look at car rentals, there are a limited number of companies there, but they are in very tough shape; Hertz filed for bankruptcy. They are probably not going to make that change because it’s so tough. Cruise lines are wholly dependent on travel agents. I don’t see that changing, right now. It’s good news to have a catchy line and story, but I don’t see it.

{audio:0:23:58} What about cars? We’ve seen various OTAs move into transportation and even Airbnb, who were moving into some kind of transportation product. How do you look at the difference in that market, versus hotels and airlines?

{audio:0:24:18} As I said, there are fewer of them so there’s things to be done there. A tremendous amount of it is business travel and, of course, the car rentals have been hurt a lot, by Uber. People now say, I don’t have to rent a car anymore; I’m going to call an Uber. They didn’t jump into that, which they could have done – they owned a lot of cars – but they haven’t. There are new companies around. I’m an advisor to a company, called Kite, based in the Bay Area. Initially, they focused just on car rentals for people who live in the city, didn’t own a car and needed a car for a while. A bit like Zipcar, but much better. They deliver the car to your door; you can drop it anywhere and they’ll pick it up. They’re doing quite well, because the chains don’t do that. If you ever try to rent from one of the big three or four, downtown, it costs you an arm and a leg. Kite make that easy. They’ve got an app. Most car companies don’t have an app that lets you get in the car and drive it without a key and be more like a Tesla. They haven’t really changed their touchpoints. I think the last big innovation was National saying, pick any car you want. It took Hertz five years to do that.

{audio:0:25:45} So they haven’t been very innovative; it’s a tough business. I think there are some people nibbling around the edges. There is  this push, direct to the car, where I rent on Expedia or KAYAK and go right to the car and you can do that if you’re a gold or platinum but you can’t do that if you’re just a one-time traveler and now they’re trying to make that easier. Covid, with touchless, might cause that to happen more quickly, as it’s changing a lot in the hotel business, as well. One of the things that I talked to hotels about, particularly when I had my AI company was, as you go to touchless, if I have an app, I check myself in, whilst I’m in the Uber, getting there. You give me a digital key; I walk by the counter, go right to the room and then, when I leave, I don’t need to see you again, because I just get a digital bill. How would I ever know you have the best restaurant in town? How would I ever know that you have access to theatre tickets that I can’t get? How would I know that, right outside my door, is a terrific walk to a waterfall?

{audio:0:27:03} I was pushing them to do things like, put Alexa in the rooms, use AI, have a concierge app. What we talked about before is, organize around the customer and think about how many things you can sell them, instead of optimizing the process of doing what you’ve always done.

{audio:0:27:21} In that sense, do you think the OTAs are set up to grab some of that share in car transportation? We’ve seen Booking.com invest in Grab ride-hailing, for example. Do you think it’s likely that these OTAs can actually move into these different avenues of travel?

{audio:0:27:43} Maybe. You see Booking owning OpenTable and they have a fairly light integration, so far. When I book with KAYAK, it does prod me, occasionally, to book something. I think they need to focus more on that. If you’re going to do it, then do it. It’s like TripAdvisor with Viator. I think that there is a lot of money on the table with airlines, with hotels, with all the travel players, to focus on the traveler and try to give the traveler more value and get themselves more revenue, by thinking of the other products that can be sold at one time.

{audio:0:28:31} Look at Airbnb with Experiences. We did a lot of cross-selling, at Travelocity. That’s pretty much fallen off. Certainly, if you buy air, they try to sell you hotel and car, but they don’t really try to sell you tours or experiences very much, or an Uber deal. KAYAK has a deal with Uber and I’ve seen that work. I was just talking to a guy yesterday, who has a start-up, and they’re looking at using some very modern tools, to work with the OTAs, to help monetize the rest of the customer journey. We’ll see if it works; I thought it was an innovative idea. I think there is a lot of money on the table and if you’re the first one to touch the customer, how much can you do for them?

{audio:0:29:32} What’s your view on tours and attractions and Viator and GetYourGuide? That’s one area that seems, to me, that it’s relatively early days in that highly fragmented supply base, not fully online yet, or digitized. Therefore, there is an opportunity to upsell to the traveler, when they are in the destination, such as tours, packages and new things to do?

{audio:0:29:58} No question about that. I’ve always felt that. I worked on the board of Smart Destinations and we did some of that. In tours, we were a bundler and we sold to Red Bus. I think there is still a lot of room there, for the younger companies, like GetYourGuide and Viator, who have been around for a long time and did a good job. It’s been reorganized a couple of times, since it’s been inside TripAdvisor. I think there’s a tremendous amount of room there. There are these terrific in-bound agents, in almost every city in the world, and travel agents use them. Today, if I was going to go to Athens, my daughter, who is a travel agent, would get me an amazing guide, from the best in-bound agent, in Athens. Those guys aren’t really online or connected in a network; they’re connected to travel agents, but they aren’t really connected in a consortium or a hub. Some people have tried to do that, and it hasn’t worked yet. I think it makes a lot of sense.

{audio:0:31:12} When I was 21, I spent a year travelling around the world, with a guidebook. As I’m 72, if I go around the world, I get a guide, because I can afford it and I want that experience. It’s worth it, to me, to have the best person explain this inevitable pile of rocks that you see at every historical site. What was that? I think it’s great and there’s a lot of money there. There is a lot of money in experiences. If you talk about the traveler today, there’s still people who just want to go and sit on a beach. But there are a heck of a lot more people that want to go on a zipline or go on a balloon or have a great guide or have an amazing experience.

{audio:0:31:58} I have a good friend, Matthew Upchurch, who runs Virtuoso, which is really a consortium of the top leisure agents in the world. They deal with top-drawer clients. He said, top-drawer clients are like everybody else, when it comes to price. They are willing to pay a higher price, but they don’t want to get taken. What they really want is to come home and say, to their friend, who just went to Greece, while you were on the beach, I had dinner in the archaeological museum, with the head of Grecian archaeology. They want to brag, but they also want a cool experience.

{audio:0:32:38} I think concentrating on experience and thinking about this whole post- arrival tourism, is really important and there is a lot of opportunity there.

{audio:0:32:50} Do you think that’s the key to the future of meta, where it’s really going that extra mile, to add incremental value to the user, rather than just showing them an option. It’s really bundling some services together, whether it’s experiences or something else?

{audio:0:33:09} I don’t know if that’s the future of meta. I would say, it certainly could a part of the future for the OTAs.

{audio:0:33:19} Take Trip, for example. They’ve been struggling for a while.

{audio:0:33:29} I guess my opinion of Trip is that they have lost sight of who they are. To me, Trip was about to read about what other people, initially. It was just reviews; there really weren’t transactions, when it started. They turned into a total transaction engine. Now it’s like I’ve walked into a high street, fancy men’s shop and said hi, and they guy said, give me your credit card, instead of saying, how are you and what do you want. It’s a hard sell. To me, Trip should start by romancing me with reviews, letting me explore what’s best and then they have the perfect opportunity to sell me the thing that they convinced me was best. It doesn’t work that way. They try to be an OTA, with reviews, I think.

{audio:0:34:26} I think that was a mistake. They needed revenue and they’re public and I get it. It’s kind of like the deal where nobody complains that Southwest Airlines doesn’t have food, but they all complain that Delta dropped food, because people expected it. If you go into Nieman Marcus and don’t get service, you’re upset. If you go into Home Depot and don’t get service, that’s just the way it is. But if you try to change who you are and people have already slotted you, it’s hard. I think that’s what happened there.

{audio:0:35:08} I guess, setting expectations to the customer is huge.

{audio:0:35:13} Yes, expectations of who you are. If an OTA becomes a meta, that’s a big change and we couldn’t do that at Travelocity. We said that we didn’t think we could pull it off. I think Trip should think about who they are and what they are really good at and figure out how to take that and monetize it. Bring me in, show me what’s best and convince me to buy it and then I’ll buy it. Not just say that I’m an OTA that happens to have the most reviews of anybody.

{audio:0:35:49} But it seems as if Trip is pushing that experience. They are focusing a lot of capital on growth in that area of the business.

{audio:0:35:59} Yes, they are and I think that’s good. I think that’s a positive outcome. Now they’ve had another large lay-off and they’ve reorganized the whole tourism area. It started with the Viator founders; they all left and then they reorganized a couple of times. It’s been tough. I know I have no visibility inside the company, but externally, it looks as if they’ve had difficulty in monetizing that the way they’d hoped. But Viator is a good success. It’s done well and I think it’s effective and I use it. I think it’s okay, but some of the other guys are doing really well, without being inside a big company.

{audio:0:36:51} Moving on to maybe look at some principles or key lessons, from your career at large. If I can pull out a couple of concepts that we’ve discussed over the last few hours. Staying close to the edge, as close to the customer as possible, which leads onto the second point, which is, own that relationship and then offer the customer what they want, in various different forms.

{audio:0:37:31} Those are both critical. At Travelocity, one of the things we did early, that Expedia wasn’t doing at the time, is we built a very powerful CRM system. We were the first to track flights and track prices. If you had made three searches to fly to LA, then the next time the price to LA dropped, we were going to write to you and offer you a great price to LA. It worked like crazy. I did something that my team thought was nuts and maybe you wouldn’t do it today, but I got tired of all the people who came to Travelocity to search and then left. It eventually caused us to invent KAYAK. I said, if you come three times, you’ve got to be a member. To be a member, you have to give us your email and some other information, like your zip code. If you do that, we’ll track fares for you and we’ll give you a newsletter and make you part of a club. We did a bunch of things.

{audio:0:38:24} We got 40 million people to give us their data and then we had a huge way to relate to them. We always knew what they were searching for and we helped them with that. We gave them offers and we bought all the demographics. Are you a single working mum? Are you a retired couple? Are you a college kid? And we did lots and lots of targeting. We did that 24 years ago. There isn’t that kind of focus, I think, in the level of emails that go out today. Now, people are doing a lot of work on social and that’s great. KAYAK did a terrific job, under Paul English, with mobile. We created a mobile product that, really, we turned over very quickly. When we started in mobile, we thought it was going to be about next flight out or the meeting ran over and I need a room for tonight. We thought it was going to be an emergency vehicle. This was at the beginning of the smartphone era.

{audio:0:39:24} It turned out, it wasn’t true at all. People were using it just like the desktop. So we had to redesign it and work on it and because we had good feedback loops, we really looked at what people were doing. At KAYAK, almost 20% of the pages that were served, every day, were experiments. We were constantly experimenting and, generally, failing but continuously learning. That’s really important. The wonderful thing about the web is that you can watch customer behavior, in real time. Some people just don’t do it enough.

{audio:0:39:59} That’s of critical importance and you have to watch the edge, as we said. I was asked to speak to the American Limousine Association, about innovation, and I have a book called ON Innovation, that talks about a lot of these stories with Travelocity and others. This was six years ago and, of course, I knew the first question would be, what do we do about Uber? I said, get some bloody software. You have the cars, you have the drivers, you have the relationships; you’re just hard to do business with. I have to call you on the phone, you send me some kind of paper confirmation; I can’t find your guy in the luggage area. Then you give me some paper receipt that I have to get into my expenses. Come on; just get with the program and maybe you can do it together. Or hire some people to do it for your association. They never did it and they lost the war, because the edge was stolen from them.

{audio:0:40:56} We see that over and over. Look at payments and you look at PayPal. How did they get that edge on so many places, with credit cards? Or Square, who just made it easier to swipe, easier to use, for a small business. Or you look at China, where you can’t even use a credit card; everybody uses Alipay. Alibaba stole the edge from everybody else. You have to constantly watch how consumers are adapting and adopting and move quickly with that or you get left behind. That doesn’t mean you are out of business. As I said, my daughter is old-line travel agent. She never gets phone calls; she doesn’t have an office. It’s all done with email. But some people still want the personal touch; most people don’t.

{audio:0:41:50} If you run an organization, how do you design it so you ensure that you are always close to the edge?

{audio:0:41:59} That’s hard. I think you really have to be a listener. Listening is a lot more important than talking and you have to listen to young people. I know a CEO, in Europe, of a company who actually has a second board of directors, he calls them; they are all millennials. He meets with them and he’s 65. He wants to hear what they’re thinking about. It’s a company that sells things to millennials, but of course, everybody in the company is not a millennial.

{audio:0:42:28} It’s important to have experimentation. The biggest thing that large companies do is that they stop taking risks. Every company was founded by a risk taker but, as you get bigger and you’re thinking about quarterly earnings, nobody wants to experiment; nobody wants to fail and be embarrassed and maybe not get a raise, or whatever. I talk about this in my book, Disruption OFF, in this world, it’s all about experimentation. Start-ups are experimenting every day. Every start-up is an experiment. There are tens of thousands of them that are biting at your ankles. They are going to experiment and they are going to find out what works. You have to do the same.

{audio:0:43:12} Particularly now, post-Covid, who is going to win in touchless? Who is going to win in robot delivery? Who is going to use drones? Who is going to reshape their business for contactless? Who is going to win because they have figured out ecommerce, in this new world? They’ve figured out how behavior is changing or they’re going to win in telemedicine or distance learning. You’ve seen companies turn on a dime. GM is making ventilators and the company that published my book is making face shields. Some are turning on a dime. Others are saying, woe is me. As they should; it’s a very difficult, terrible time, but it’s going to change commerce forever.

{audio:0:43:56} How are we thinking about that? Many of the airlines are doing a great job, in terms of the best they can, cleaning the airplanes and changing the boarding process. United did a deal with Clorox; I thought that was brilliant. But they have to be out there, really, advertising that and convincing people they are safe. I think it’s about listening and experimenting and convincing people it is safe to experiment. And also that, as a leader, you are okay with failure, as long as we learn from it and move on. Obviously, somebody who continuously fails every time they have an outing, that’s a problem. But you want to kill projects, not people by saying, this is Sally’s project and it failed but guess what, we’re giving her another chance, another job, another promotion. When people start seeing that it’s okay for a project that they are on to fail, and that they’re not stigmatized, then you’ll get more experimentation.

{audio:0:45:01} The best ideas in any corporation come from the bottom. Our idea of sending emails to people when the fare went down, came from a programmer. At Travelocity, we were the first people to page people when their flight was late. It was pagers, in those days; it wasn’t SMS. That idea came from a customer service agent who said, look, people are calling me every day, asking the same question. Why don’t we just tell them. But you have to have a conduit to listen to that. A lot of those ideas get stuck in the bozone layer, which is the impenetrable layer of middle management that says, just be quiet.

{audio:0:45:43} As a founder and CEO and leader, how do you balance that idea of encouraging experimentation and listening and humility, with confidence and independence of thought and strong-mindedness, in a way?

{audio:0:46:01} I think those are all the same. Independence and confidence lead you to experiment. I think the problem is a different problem. I think it’s running marathons and sprints. Making the company focus on your delivery muscle, all the time, you’ve got to do that. You’ve got to deliver, you’ve got to make earnings, you’ve got to make people happy, you’ve got to run a great organization. You’ve got to do all those things. One the other hand, you have to have a discovery muscle. Right after this, I have a virtual workout, on Skype, with my trainer. I’m not going to just workout one arm. I’m going to workout both arms. That’s what you have to do. You have to say, as a leader, I’m going to spend a certain percentage of my time on the future and on where we’re going, not where we’ve been. I have to optimize where we are, no question. But how much of my time is about the future and about getting to think about the future?

{audio:0:46:57} I was with the former chairman of American Express, when he was still chairman, about three years ago, out at Silicon Valley, at a dinner. He was out with a whole bunch of start-ups. He did that twice a year. He would go out to the valley and take his team and say, we’re going to do a deep soak on what’s going on in financial services. He said, American Express started as a freight company; they were an ‘express’ company, express freight. Now we’re a financial powerhouse and I don’t know what we’re going to be next, but it’s not going to be the same as we are now. That’s a wonderful attitude and more CEOs need to have that attitude. The last thing you want is a historical marker; here lies the Jones’ company. They employed 1,000 people in this town, until they got stupid and went out of business. You want to be around and it’s hard.

{audio:0:47:48} I made a speech to a company, the Hartford Steam Boiler Insurance Company. They insure boilers and they’ve been doing it since 1866. I asked them, what are you doing today? They said, we’ve just bought an internet of things company, because we think that internet of things devices are like boilers; they control industrial processes, they’re going to break, they need to be inspected and they need insurance. Wow. That company will 200 years old. They also got into cyber insurance. They understand their strengths and they look to the future and say, here’s how we apply those strengths, in the future world. That’s really where you have to go.

{audio:0:48:30} What was your biggest challenge, in your entrepreneurial career, with both Travelocity and KAYAK?

{audio:0:48:38} I think, at Travelocity, everything was so new. It was quite disappointing that we were the leader and then Expedia beat us. I give a lot of credit to Rich Barton; he’s a great manager and he’s built Zillow and Glassdoor since. He made better choices, in that they controlled their own hotel inventory and they moved into tour consolidation before we did. That was difficult. Obviously, creating Travelocity, inside of American Airlines, wasn’t easy. Luckily, I’d been in a big company and, by that time, I’d been in two start-ups, so I had some background in that. That was hard. It was very difficult have it go private and then have it, basically, destroyed, when it came back; that was sad.

{audio:0:49:32} At KAYAK, obviously, we had big difficulties in getting customers to pay us, in the beginning. I was chairman of the board but I didn’t run the company; Steve and Paul ran the company and they did a wonderful job. There were things that the board disagreed with. I think KAYAK stumbled in its international strategy; it could have done better. They had an idea that we didn’t agree with, but that happens. Eventually, the board forced them into doing advertising and, in the end, that worked. They did some pretty creative stuff. That was important.

{audio:0:50:11} It took us a long time to go public and that was because the last investor came in with a valuation of a billion and then the market changed and we didn’t think we could get a billion. There were all these headlines like, KAYAK stuck on the runway and KAYAK engine failure and all that kind of stuff. But eventually, we had a great result. We went public and then Priceline came in, soon after. It was challenging and fun, as all start-ups are. I’ve been on 17 boards; I think the KAYAK was the best I’ve ever been on. We had Michael Moritz, from Sequoia, one of the great gurus in Silicon Valley, and Joel Cutler and Harry Nelis, from Accel, in London. We had some really great people who gave a lot of encouragement and a long runway. That’s important, because start-ups take a long time. You’re not an overnight success. I think it was eight years, at KAYAK.

{audio:0:51:12} What advice would you have for leaders, to organize themselves or their teams, to make sure they stay close to the edge?

{audio:0:51:20} I’ve written a whole book about this, called Disruption OFF, available on Amazon. Disruption OFF talks about 10 new technologies, from AI and big data, to drones and robotics, blockchain and things like that. I think leaders have to understand those technologies because I think they are incredibly disruptive to business. They need to be adopted. You have all these start-ups who are doings and, particularly now, post-Covid. You have a little respite, because start-ups aren’t going to get funded so much, right now, so you have some time to experiment. Learn about those technologies. Firstly, you need to understand them and you need to have people around you that understand them.

{audio:0:52:03} Then it’s about taking risk, with those technologies. Experimenting, allowing failure and making faster decisions. I have a video, in my speech, about a pinball machine. A pinball machine is how decisions are made, at a corporation. Marketing says no, then IT says no, sales says no, service says no. If you manage to get through all those people, then finance and legal say no. it’s about saying yes. In the 21st century, everybody in the corporation has to say yes to new ideas. It’s really easy to say no. No is no risk. Yes is hard. If I say yes, I’ve got to get involved, instead of going back and doing my emails. You have to create a culture of faster decision making.

{audio:0:52:49} One company I work with found that it was purchasing that was the barrier. They would always say no, we can’t make those changes. So they convinced purchasing that they were critical to the future of the company and got them to be yes people, instead of no people. I think that’s really important. I think the team you have and the mixing of people who want change and making sure that those people come to the fore, rather than people who don’t want to change. You have to change at speed.

{audio:0:53:19} Then understanding those two muscles; the discovery muscle versus the delivery muscle. Make sure that you workout the discovery muscle, too and have a real process for doing that. This world is changing faster than ever before. It took 75 years for the telephone to reach 100 million people. Pokémon Go did it in 15 days. Speed of change is different now, because we’re a connected society. That means ideas move around like rockets and you have to be listening.

{audio:0:53:53} Read widely; be curious. You like to hear what books leaders read, or what magazines or blogs or what podcasts they listen to, like this one. That’s very important, to keep yourself up to date. You can get stuck in meetings and emails and forget to change.

{audio:0:54:18} Terry, is there anything else that you’d like to share, in terms of your experience or anything you would want to pass on to young leaders or entrepreneurs today?

{audio:0:54:27} I’ve had several careers. I was a travel agent, I sold software, I ran product marketing, then I was at American. Again, I was in marketing and product marketing, then that got shoved over to IT and I ran operations and programming. Then I was a CIO and then an entrepreneur, with Travelocity and then KAYAK. Then I became a speaker and an author and a consultant and a venture capitalist. So I’ve had, like seven careers. I think most people today are going to have many more. It’s about loving learning and continuously learning.

{audio:0:55:06} I made a graduation speech to a whole bunch of medical students and I said, it’s wonderful, everything you’ve learnt and it’s all going to be outdated in about seven years. The professors all looked at me and they were all angry. I said, the technology is going to change much faster than it has before, in medicine. I’d just finished a book called A History of Surgery and the exponential change in surgery, since World War II, is unbelievable. If we’re leaders, we have to be learners and continuously, voraciously learning what’s changing. The best way to manage or the best way to organize an office or the best way to run a meeting or the best way to roll out a product. That’s all changed in my career and I’m still learning, every day.

{audio:0:55:56} I’ve spent the last 10 days becoming a video producer and now I’m doing virtual speeches. I built a whole studio here and I learned about how to be a technician and all kinds of things about sound and video that I never knew before, because I have to. I don’t have to work, but I want to work. So be a learner, is the most important tip I can give you, because what you’re doing now won’t exist by the time you’re my age, that’s for sure.

KAYAK: History and Future of Travel Search

Founding story and value proposition of KAYAK

How both airlines and hotels approached using metasearch in the early days

How Booking Holdings is organized differently versus Expedia

The potential risk a shift to voice-based search could pose on Google's position in Travel

KAYAK: History and Future of Travel Search

Founder of Travelocity, Former Chairman at Kayak.com and Former CIO at Sabre

inpractise.com/articles/kayak-meta-travel-value-chain

Why is this interview interesting?

Executive Bio

Terry Jones

Founder of Travelocity, Former Chairman at Kayak.com and Former CIO at Sabre

Interview Transcript

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KAYAK: History and Future of Travel Search(May 8, 2020)

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