Acquired - Booking.com with Jetsetter & Room 77 CEO Drew Patterson

0:00Dude, I think you might be our most prepared guest ever. This is great. Dude has printed out notes and pen and paper here. This is awesome. Yeah, I mean a big fan, you know, I just want to pull my shot here. You shot it started. Welcome back to episode 41 of acquired the podcast about technology acquisitions and IPOs. I'm Ben Gilbert. I'm David Rosenfall.

0:38and we are your hosts. Today we are covering the 2005 booking.com acquisition by the price line group. Now, this acquisition is legendary. And there are tons and tons of interesting nuances to understanding the industry. So we wanted to wait until we had a guest with deep travel experience and really industry domain knowledge to make sure that we did it right. So today, our guest and listener of the show is Drew Patterson, the CEO of JetCetter and Room77.

1:09So yeah, we are lucky to have Drew, who is a, quote, grizzled travel industry veteran, to help us impact this one. So Drew started his career at Starwood Hotels, where he managed distribution and pricing, and then jumped into the world of online travel at Kayak, where he was VP of Marketing from 2004 to 2009. He left to found JetCetter, and thank you for doing that, by the way, because you guys booked Jenny and my honeymoon. So very much appreciated.

1:38And he was CEO there at JetCetter until 2012. When he moved to the West Coast and founded another travel company that was quickly acquired by Room 77 and he served as CEO there at Room 77 until the beginning of this year. So thanks again, Drew, for coming on and sharing your travel industry knowledge. Guys, great to be here. Long time listener for a STEM talker. We can't either. We are ready to dive in. We are. We are.

2:07And listeners, if you listen to last week's episode, you may know this, but if not, we are skipping the bit about asking for reviews and letting you know about our slack this time with an extremely important message. We are launching the annual acquired survey and we'll have it open for about a month. So whether you're a first time listener or a long time fan, we would love to hear your thoughts.

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3:14That's about, about all I have to say about that, except that we are sweetening the deal by saying that we will be raffling off one pair of Apple AirPods. So if you'd like to be eligible to win a pair of AirPods, click the link in the show notes, go to acquired.fm slash survey. It'll take about five to 10 minutes, and we would really, really appreciate it. All right, listeners. Now is a great time to talk about a new partner of ours here on acquired, LaGora.

3:41the agentic operating system that is redefining how the world's best legal teams work. Yup, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. LaGora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry? So the founders did exactly what great founders do, operate with obsessive customer focus.

4:10They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done. And that's how you get features that customers love like tabular review where you...

4:23drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Lugora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work, and this means that the pie can grow even as each individual task takes less time.

4:43And they recently launched LaGora agent offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required. And LaGora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early LaGora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over a hundred thousand lawyers on the platform from 1200 legal teams in 50 countries. And crazily they went from one million to a hundred million in ARR in about 18 months. Truly insane numbers. And that is the real test.

5:35Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in house at a company, you can learn more at legora.com slash acquired and just tell them that Ben and David sent you. So David, are you ready to take us into the history and facts? Let's do it as always.

6:03Many people, at least here in the US, I think, aren't totally aware of... booking.com because it's very big in Europe, but not as big here yet in the States. And they probably also don't know that it's actually owned by price line. And if people in the US think about price line, they often think about William Schattener and the price line negotiator, which is definitely a big part of price line and internet history. But that's a story for another day. But today, we're going to talk about how price line of which booking is by far the majority of it is actually the largest travel company in the world. And after SAP, I think it's actually the second largest tech company that's ever been built in Europe. It has a $91 billion market cap that's billion with a B. So just for some reference, that's equivalent to three Airbnb's and it's bigger than Netflix.

7:03you know, it's not a company that a lot of people know about, but it is definitely top 10 most successful internet startups probably of all time. Yeah, when I was looking at the, you know, when I said legendary earlier, I mean, that stems from when we first started doing the research for this and you just start seeing some of the high level stats of, you know, what an enormous company this is and, you know, what a behemoth in the travel industry, I think to Americans, and even some Americans in tech, it's Pretty, you know, we don't know much about this company. Yep. Well, and that's why we have Drew here today. So I'll start out with the history and facts and Drew, please feel free to hop in at any point along the way. But the company was actually founded in Amsterdam in the Netherlands in late 1996 by Gert Jan Brunzma and

7:58major apologies to all of our all of our Dutch listeners because I'm sure I and Antigirt because I'm sure I just butchered that but he had just graduated from college and he this was late 1996 and he felt you know kind of in his core that the internet was going to be a thing and so he decided rather than going to work for you know a company like most of his classmates he was going to become an internet entrepreneur but there is just one problem he didn't have an idea. So he starts casting about for an idea of what type of company he would start and apparently according to there's this great, great oral history of online travel that the website skipped published that we'll link to in the show notes. But according to an interview with him in this this oral history, he was having dinner with some friends one night and they were talking about problems that they had and they realized that booking travel across Europe was actually

8:53a really hard thing in those days because you had to call up the hotels that you wanted to stay at on the phone and of course in Europe people speak all sorts of different languages so if you didn't speak French and you wanted to book a hotel in Paris you know you were kind of out of luck and he thinks to himself well I bet this is something that the internet can solve so he goes and starts doing some doing some research and he thinks well it must be other folks out there that are already attacking this problem. But it turns out that there were no major online travel companies at that point. There were some of the hotels in the US had...

9:34started having their own online booking system. So he went on the Hilton website. He actually looks at the code for Hilton.com and takes some quote-unquote inspiration according to him from how they manage their online booking system. But he pretty quickly codes up.

9:52an MVP for a multi hotel booking website. And if David, you know, if only there were someone to aggregate these disparate one off hotels that had their own. And he calls his little project bookings.nl and L for the Netherlands. And that is how bookings.com was born. And and in the early days.

10:17Unsurprisingly again, it was actually mostly Americans that used the site Americans who were traveling to Europe and looking for a way to book online Because in those days it was only Americans that really had access to the consumer internet. There was AOL at the time Lots of people in common people in the US were online but in Europe it was much more still of a kind of confined academia type thing And average Europeans didn't have access to the internet in the same way So ironic because booking ends up becoming such a large company on the back of European customers, but the initial customers were Americans. Yeah, it's and it's really easy to forget to sort of the roots of the internet in sort of American university and defense infrastructure. Of course, it's not elsewhere in the world yet. It was brand new and it was invented in the US.

11:07It's kind of shocking to imagine a world where people are playing around with websites in the US, Amazon's being founded in the mid-90s, but it hasn't really made it everywhere else yet. Yeah, it was a different time. Also a different time, venture capital and in particular venture capital in Europe was...

11:30a very, very different kind of proposition, and Gerd had a tough time getting funding, so what he decided to do, and he, again, he talks about this neural history, and I just love this. He needed funding, so he decided that he was going to email everyone who he knew.

11:46who had an email address because he figured if they had an email address, they at least knew something about the internet. That's a direct quote from him. I just love that. So he emails about 50 people and 18 of them end up investing. And he raises about 50,000, 50,000 euros to get going, hire some early employees.

12:06And they start to get off to the races. And what they evolve into, and this is where we're going to spend the bulk of this episode and want to bring Drew in here, they really become one of the first online travel agencies. So the same general model as Expedia, or price line, or bits or travel osteo here in the US. And they're kind of three pieces to the business that they start. One, they need to acquire the travelers.

12:36two, they need to acquire the hotels, the supplies, the supply and demand. And then three, they need to provide some form of customer service. So for our listeners who aren't as familiar with the OTA world, how did all this evolve? You got the basics of it, right? All these businesses really are marketplaces about how they bring together a supply and demand.

12:59And it's interesting to think back to where this industry was, is Booking.com was starting. You know, we were talking a little bit about who had email addresses. And like, it was all AOL, it was MSN, it was, you know, all these kind of dial-up services. You know, we forget it now, but the real things that made the first generation of OTA businesses in the US were like portal tenancy deals. You do remember these? It was like, travelosity got the deal on Yahoo, and therefore travelosity was by far and away the leader in this category. And actually, Travelosity managed to get a couple of those. I think it was AOL. It was Yahoo. I forget which the other ones were. Yeah. And of course, Expedia, you know, founded by Rich Barton, up in Seattle, was part of Microsoft in the early days. So they had MSN, of course. Exactly. So they had that as a pretty kind of healthy, locked in towards the demand. Yeah. And the other side, as exact as you said, was how do you start to get it then a supply base that fits with that, right? You know, again, early days, the internet, you know,

13:54not that different than a newspaper, right? What are the categories of interest and how do we start to fill them out, travel being one of those? And so what you saw with the first generation of these online travel agencies was they're basically just a front-end to the GDS systems, the global distribution systems which were used by travel agencies to make flight reservations to make hotel reservations and the like. And so you had this kind of big supply base that was already in place, right? You know, travel agents always got commissions.

14:19and these GDSs provide a travel agent with rates and availability, the tools to go ahead and make a reservation on a consumer, expediting a travel policy in the like, where a front end that the average consumer could use. And that's one thing actually, I hadn't focused as much on, but maybe could you talk a little bit more for our listeners about this whole GDS system, because it existed before the internet, right?

14:43Yeah, I mean, it goes back to, I think it was 1973 when the first GDS was built. I mean, these were actually byproducts of the airlines. So American Airlines, Bob Crandall famously realized they needed some computer system to tie all their travel agents together. That was a genesis for Sabre, which was the very first GDS. And of course, that then served as the underpinnings for all of these only travel agencies for a long time.

15:07Well, the parallels to the real estate industry are amazing here, where you look at the MLS systems existed long before you had Zillow, but there's sort of this, David, you mentioned Rich Barton, this, you know, Barton style data to the people way where you can take these systems that, you know, should just be queryable by the general public, but have been locked up by a professionalized industry for a long time. And it really makes you wonder, like, what else is out there that has, you know, private databases that are linking industry together that really have the potential to be brought online. Yeah. And so for booking, and in Europe, obviously there's the GDS in America. Did the GDS extend to European hotels as well? Yeah. So an interesting point that kind of drives at the both the structure of the industry. And I think part of what set booking up for success over time, you know, if you think about like what kind of hotels were on the GDS?

16:01You know, it was a certain kind of hotel. So like, rough and tough, there are, you know, 500,000 hotels in the world of that population of 500 crazy, by the way, like, I think a lot of people in the travel industry don't realize that like 500,000 hotels in the world, that's a lot. It's a huge number. You know, at least that, you know, that's what TripAdvisor would tell you they've got hotel reviews on, right? So, you know, again, that's that's the kind of the biggest sample of hotels. But the GDS only has about 75,000 hotels on it, you know, There's a little bit from GDS to GDS, but the kinds of hotels that are generally on the GDS are, well, going back to our example with Kurt, you know, it's the Hilton's of the world. It's the area out to the world. You know, it's the kind of hotels that get booked by travel agents which tend to be stayed in by business travelers or folks that historically accessed travel agents. And so they were franchised and more sophisticated and had better technology. You know, it wasn't a 20-room pensions outside of Rome, which is much more commonly used by the European traveler.

16:56Yeah, and that really speaks to, you know, what we'll get into this throughout the episode, but the differentiation and the value that booking was able to build, while it was really hard in the beginning, and we'll get to, you know, they end up getting acquired by price line in 2005 for $133 million. I mean, nobody recognized the value here, but because they were able to build this proprietary...

17:21Long-tail marketplace of supply they really had something no one else could access it reminds me in a lot of ways of you know the difference between Google and Yahoo right like on Google You could you could type a query on Google and they had access to the entire long tail of the internet whereas Yahoo with the directory model, you know only had the head And so for people, you know, Drew like you're saying who are looking for something specific in Europe who was booking or nothing 100% I think and it's a great analogy right and you know where that really becomes clear and I guess we're kind of jumping ahead. We always jump ahead here, but you know if you think of like what's the advantage of having the tail it's far greater relevancy yeah right like it's the things that you actually care about you know the consequence of that is conversion rate so again not to get too far ahead of ourselves but the consequence of having all this kind of long tail inventory is far greater relevancy than those people who are relying on just the GDS might have enjoyed.

18:15Yeah, and while we're on this topic of discussing, the OTA is basically a marketplace drew before we get into the future evolution here, could you do some definitions for us of online travel agency versus travel aggregator versus meta search? How do these things interact and how are they different? Sure. The lines are a little blurry between them, but in general terms, online travel agencies take reservations, they make bookings on behalf of consumers. And so they aggregate inventory from lots of different sources, you know, generally directly from hotels, airlines, rental car companies and the like. And again, they will enable a consumer to make a reservation. Whereas, medicine engines or aggregators.

18:59Our layer of abstraction above that, you know, so they expect that. Exactly. Travago, yeah. What what TripAdvisor has increasingly done. Yeah. You know, meta search where their Google is doing today. They're pulling rates and availability from directly from suppliers, also from for OTAs and other media themselves. Yeah, showing you prices and letting consumers to decide what they want and then handing you off to an OTA or a supplier to complete the transaction. Got it. So.

19:28Let's go back, we'll kind of finish out the history in fact, and then there's a bunch more to dive into here. So a couple of years go by, booking starts to sort of slowly grow, you know, its supply base and its demand base in Europe, shifting as Europeans are coming online to actual European customers.

19:49And one thing that's actually another side note that I would just want to put opinion to come back to on the demand side. This is really, we mentioned search engines as search engines start to rise in prominence as kind of the front door to the internet. Travel and in particular, OTAs become one of, if not, I think the biggest category of spend in terms of search engine advertising because the link between searching Google or whatever search engine for, you know, a villa in Rome and an online travel agency is you're so far down the funnel, it's a perfect type of advertising for these companies. Yeah, travel is a really nice use case for search advertising for a couple of reasons.

20:31The two biggies are number one. It has high purchase value, right? So you know, they're relatively large transactions and number two, it's a very close combination between search and transaction, right? So unlike searching for home, unlike searching for a car, you know, all these are completed online. And so as a first case of direct response advertising, travel is a really good use case. Yeah. And so again, you know, you saw the OTAs as the, you know, one of the biggest categories of spenders on Google. Yep.

20:56So booking is growing slowly. They end up merging in the year 2000 with another group also in the Netherlands, also called booking, called bookings online. And that's when they changed the name to booking.com. A couple of years go by and then in 2002, Expedia actually decides that they want to enter Europe from the US and they understand the European markets different they need access to all this supply in Europe and so they come over they look at a bunch of players and they get very very close to acquiring the new booking.com they do six months of diligence and then right at the end right before they're about to close the deal the US Expedia board ends up rejecting the deal vetoing it

21:43And the reason that they do so, and this is the next kind of topic we want to dive into it through, is they're really worried about Booking's model, which is different from the US OTAs. They're business model. Booking uses the, quote, agency model, whereas in the US, you know, Expedia, Priceline, Travelocity and the like, use the merchant model. So, Drew, can you, you know, kind of help our listeners understand what the difference is between the two and why the US guys might have been so spooked by this?

22:13It's funny looking at it today because it seems so obvious, this agency model is great. But at the time, the merchant model was highly desirable and was leading to a lot of success that the big players in the US had.

22:25So the big difference between the two, the merchant model is effectively a wholesale model. In the merchant model, the online travel agency contracts for wholesale rates with a supplier. So Expedia would go to Hilton and say, we'll pay you $100 for this room, and we're going to mark it up 20%, we're going to sell it for $120. So this is the Amazon retail business analogy where Amazon's taking inventory on the items, they're setting the price and selling it.

22:50And the merchant actually holds, in this scenario, the OTA actually holds the inventory risk, right? No, this is why it's such a great, sorry. I don't have to, you know, as an OTA, I don't take any inventory risk. I'm just going to agree to what my net rate will be. If I don't sell the rooms, not my problem, it's your problem. I can mark it up.

23:09at that point in time, as much as I wanted. Again, you had instances where one of the leading practitioners of this at the time was HRN, which went on to become Hotels.com. But there are instances where they would have in New York City on sold out nights, they would contract for a $300 rate at a holiday end.

23:26And they would sell it for $900 because it was the only inventory left in the city. That's like, these guys are bandits. I mean, really an entrepreneur. But so this is like, if you can make this work, this is even better business model that like it has the best of being a retailer in that you get to set the price and essentially control the inventory.

23:43but also the best of a marketplace where you don't take any risk on the inventory. Exactly. And actually one even better than that, which is it has a negative working capital cycle because I collect money from the consumer when I sell this and then I remit funds to the hotel 30 days after you stay and if it's a two month average booking window, I'm holding everyone's cash for 90 days. Okay, so that's the merger model. That's what Expedia and the US guys have. Now booking has the agency model. What's that?

24:09So the agency model was a kind of traditional travel agency model. That meant that they were going to take a commission, that commission was going to be paid not by the consumer. There wasn't any this kind of markup, but the supplier, the hotelier in most cases, would pay them a commission based on what they sold. And they would pay the commission after the booking took place, right? So if you don't show up that there's cancellation, you know, again, I don't get my commission against it. And the commission rates tended to be much lower. You know, they were booking.com started at 5%, typical industry commissions were about 10%.

24:37And as you compare that to the merchant model, which was 25, 30% margins at the time and negative work in capital. So you can see why you're the Expedia board and you say, you know, this doesn't seem like the right model here.

24:51Crazy booking guy started by this college student. You know, they have no idea what they're doing and to have some sympathy for them at the time, right? I mean, they were on top of the world. You know, they travel all city had been the leading player expedient displace them. Yeah. Expedia recognized. And I think one of the, you know, the interesting things about OTA is when you look at their economics, what drives their business, it's really the hotel business that drives their profitability. That's a much more profitable piece of business than flights. Expedia recognized that early.

25:15bought a company called TravelScape, which was one of these kind of early merchant businesses. Then turned around and bought HRM which became Hotels.com, which as it happened was powering the hotel business on travelosity. So this kind of masterstroke, they completely undermined their competitor. They got identified with the most profitable and exciting part of the businesses and they controlled it all. This is like when...

25:38when Google buy overture. Yeah. Exactly. Exactly. And now you want me to turn around and go buy some rinky-duty thing in Europe. So much less attractive. So the Expedia board looks at all this and says we've got the golden goose here. We've got the best business model. People say Google's the best business model of all time. This might be even better. Why would we want to do the agency model? But in the long run, of course, it's the agency model that really wins here. What was it about that In the long run that that ended up being better So the agency model ultimately was superior In part because there's a better consumer proposition You know merchant model wasn't so great for you the consumer because I had to pay you upfront as opposed to the agency model where I could cancel if I wanted to I had a lot more flexibility It also wasn't so great for the supplier, you know from the standpoint of a hotelier

26:30I don't really like this merchant model thing where I'm paying you 30%. You have more control over setting price. You're keeping cash, not me. So that wasn't great. But again, in fairness to the Expedia board, they kind of looked at the world.

26:42you know, we're in a dominant position. Why do we need to move away from this? And I think what they failed to realize was just the size and magnitude of this market. Yeah. And the level, you know, just the power and the potential of how quickly this was going to grow, that in combination with what we were talking earlier, the potential for AdWords, you know, a really kind of cost-effective tool that would allow business and only travel agency to scale pretty quickly. And where those things came together was, again, going back to the point we're making earlier, was the long tail.

27:10because this agency model made it really easy for booking.com to clean up the long tail very cost effectively and very quickly. It was a much lighter way to approach the contracting, got a lot more hotels on board quickly. They didn't have to go out and negotiate for net rates with an individual hotel. You could just fill out Gert's form, send it back in a way you go.

27:30I forgot to put it in our notes, but also in the oral history with Kurt. When he started, the way he onboarded hotels is he sent them postcards, essentially, with a form to fill out on the card if they wanted to be included in the marketplace.

27:46You know, mailed it back to them. It's really a really. E-commerce at its best. Yeah, E-commerce at its best. MVP, bootstrapping. Well, the journey secret behind the, you know, the merchant model was for the longest time. I mean, literally, you know, up until probably five years ago, like a huge shocker reservations were delivered by Fax machine. Right. So, you know, you were, you were making a reservation. It made me was 10 years ago. But yeah, you know, a lot of these hotels, you know, might not have had internet connections.

28:13So it was kind of like the early days of the food market in Grubhub and seamless. Those were all orders delivered by Fax Machine, too. Yeah, totally. Right, right. Internet, let alone having Wi-Fi mark on your booking.com reservation.

28:27One point I want to make here before we move on is that there's an incredible similarity to the ebook market here. I mean, when we talked with Brad Stone, I don't think we discussed this on the show since we were talking about the Uber DD deal, but he talks so much in the everything store about the struggle that Amazon went through with ebook pricing and the wholesale versus the agency model there where Amazon kind of prefers this wholesale model where they can pay a fixed price for something and then they have all the pricing control and can mark it up and down however they want and they have incredibly sophisticated variable pricing to do that. But the sort of, I think it was the European, some kind of EU book consortium that really had a lot of power in this industry and forced them to use the agency model. And it was a big concession they had to make when going to market. And I want to, I mean, that must have been a big piece that ultimately led to the development of marketplace within Amazon. Got to be, which is, you know,

29:24Why Amazon is what it is today. Power of marketplaces. It is. And that's truly one of my favorite things about this show is like seeing the patterns between different industries. They evolve at different speeds. They evolve with different waves of technology. But at the end of the day, there's really only so many business models. And there's really only a finite number of ways that different players in an industry can interact with each other. And we kind of see the same playbook roll out over and over again.

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31:53All this happens, Expedia ends up passing, leaves, booking, and girt at the altar. And then Girt makes a decision, which probably he talks about this, you know, made the right sense for him at the time.

32:07had this deal fall through. He ends up selling booking.com, not to price line, but to an investor group. So a major European investor group, a consortium comes in and acquires a majority stake in booking. This is in 2002, 2003. And then over the next couple of years, There's kind of one guy sort of in the US that starts to see what we were just talking about with the power of the agency model and starts to wonder about the future of how long kind of the music can keep playing with the merchant model. And that guy's name is Glenn Fogel who is now the CEO of the price line group which includes booking of course, but at the time he was price line which was just price line.

32:54the price line group also includes kayak and open table now. Perhaps feature shows, but at the time Glenn was the head of M&A for price line and he comes over to Europe and he starts digging in and realizes this dynamic with the agency model that it really does align interests better and incentives between the travelers and the hotels.

33:17And not only that, but people in Europe also travel a lot more than they do in the US because we're workaholics here. We don't take as much vacation. So you've got kind of a better product model, a more active customer base.

33:31And he starts to argue within price line that they should really start acquiring some of these companies. So the first acquisition that they make, led by Glenn, is actually not booking, but a company in the UK in Cambridge, England called Active Hotels, which was very similar to booking, was larger in the UK than on the continent. They acquire that in 2004 for 165 million. And then later in the summer of 2005, they do finally acquire booking for $133 million, as we mentioned, they merge it with active hotels in the UK, and they keep the booking.com name, so the combined density is booking.com. And when they do that, in total, they now have 18,000 properties across all of Europe, 18,000 hotels on the system, which is way, way more than any other online travel agency in the whole world now. And so price line, this is kind of a master's trope, they build

34:29through acquisition the largest online travel agency in the world with two, you know, sub two hundred million dollar deals. Kind of amazing. Yeah. So question for Drew is do you think that they needed to do the acquisitions to do this to sort of like bring that agency model into the price line group? Or could they have taken their existing supply and demand since they already had had some scale and really reinvent that and kind of copy that model themselves?

34:58I think it's tough to see, and I guess it particularly plays out when you look at sort of subsequent history. I think it's tough to see Priceline doing this on their own. In part, you also, I think have to look at the context for Priceline to make this acquisition and why they're able to do it. Priceline made efforts to go to market in Europe.

35:18Again, remember, this is 2004. This is kind of the depths of the dot-com bust. Price line had been one of the biggest success stories of Web 1.0. We all remember, we were chatting or deltimated a billion dollars, getting warrants in price line, selling them at the top of the market, looked like a genius. And price line had moved into name your own price.

35:40dog food, you know, in the internet bubble in the book eBoys, which is about the early days of benchmark the venture capital for them. They were the venture investors behind price line and.

35:59The initial price line, it was crazy. Drew, like you said, it evolved into travel because that was the only thing that made sense that they did. But originally, it was naming your own price for anything. So these guys didn't look like masters of the universe at the time. They looked like yesterday's news, who were trying to figure out a plan B. Price line, it actually tried to go into Europe. They had hired, I heard the story once, they had hired a former marketer from Burger King to make price line, name your own price, a big deal in Europe, and totally flopped.

36:28Right. So you can imagine, you know, Glenn's sitting in price line, but like, no, no, we need to go back to Europe, but we need to get big and travel. You know, it wasn't like they were coming from a position of strength where they had both the capabilities and position to do this. And I think again, it's, you know, it's absolutely to cleanse credit to recognize what they did. And, you know, get it. Come a position for a lot of the US companies. You know, travelosity tried to go into Europe. Speedy tried to go into Europe. A lot of US companies have tried to go into Europe and really struggled. And I think one of the reasons for that

36:55And again, we can't touch on it briefly earlier. It's a cultural issue for big US companies. The US was this dominant formative experience. Everyone speaks the same language. You have national advertising. You are building a single monolithic brand that serves across the US as a market. Europe doesn't really work that way.

37:15UK is a different market than France, the Germany, then Spain, then Italy, then the Dutch. They all have their own languages. They all have their own domains. They all have their own marketing channels. You have your own country managers. It's a much more complex and nuanced way to start a better market. You can see why some of the US travel companies really struggled as they tried to build this on their own. And why, from the standpoint of somebody like Glenn, the thought of hiring some Dutch to properly speak a bunch of different languages, knowing how to work with all these different cultures, go let them do their thing.

37:44Well, and do their thing they did, another kind of theme that we see on this show a lot is Glenn and the Priceline Group, group let them alone to do their thing. And so they acquired them in 2005. They complete the merger within Priceline of Active Hotels and booking.com.

38:04In 2005, they do collectively 18.7 million room nights booked, or sorry, that was in 2006 after the merger. And that grows from 18.7 then over the next 10 years, such that last year at 2016, they did over half a billion room nights. So that's over 40% growth per year for 10 years. And the financials on that are just pretty staggering.

38:30price line the company the group as a whole did 10.7 billion revenue billion dollars in revenue in 2016 and of that booking.com which again remember they paid a combined you know what is that to two hundred and ninety million dollars for active in booking they did seven point eight billion dollars of that pretty incredible yeah Yeah, amazing they break that out too because I think, you know, while they're separate properties, Drew, do you know if they cross-pollinate the supply between the front-ends for priceline.com and for booking.com? No, they don't. They have their own subitems. I think one of the things that is to find price lines management strategies, the group has let the businesses...

39:14do their thing. So again, today, price line is Kayak, go to booking.com, the core price line brand and open tables. They have a car rental business here. But each of those businesses has been largely left to fend for itself and make decisions that are right for their business. They don't really do a whole lot of corporate level cross-pollination.

39:38especially at this point in time. More recently, they've done a little bit more, but certainly through these incredibly explosive years of growth, each of the businesses are run autonomously. That wraps up the history and facts here, but one just sort of fun side note in doing the research that you wanted to ask your thoughts on.

40:00What's really crazy to me, this is such a big market. I mean, again, price line group, you know, we said at the top of the show, 90 billion dollar market cap, you know, that's three Airbnb's and more than Netflix. And it's not like Expedia is a small company either or any of these other companies. But the industry is so small. People wise, like, it's, it's a total cabal and like, you know, reading the skift oral history and, you know, all of these folks who are the major players, you know, bounce between company to company. I mean, even you've been a jet set or you've been a room 77. It's all such a small world. Why are there not, you know, why is this not flooded with entrepreneurs? Gosh, I mean, I guess great, great question. In part, I would say there was a moment where it was flooded with a lot of entrepreneurs, right? You know, there's a lot of company formation led to these businesses, you know? So if you look at it, you know,

40:50Take, take Expedia today. You know, Expedia is the sum of Expedia plus travelosity, plus orbits, plus what if travelosity was a combination of pre-V travel and, and, and, and travelosity, and how ours in there, too, and how ours in the mix. So you have a ton of businesses that were built, you know, that ultimately have consolidated to a relatively limited number of platform, two platforms, Expedia and price line. And I guess you go look at C trip, you know, as a third one in Asia, you know, maybe trip advisor.

41:17Yeah, and I think also the number the amount of required connectivity between all these different entities is is kind of a high technical bar to get started and I think that these these businesses you know kind of aggregation theory and play here are scale businesses so that you know in order to provide a lot of people.

41:38have new ideas for how to make the travel booking experience better and the trip planning experience better and I think it's almost become a trope that like if you go to a startup weekend you're going to see somebody pitching a better way to plan trips and do something in that space, but it seems like it's just really hard to execute as the bar has gotten higher and higher with these established businesses. Yeah, for sure.

42:05Certainly seeing number of entrepreneurs want to pitch ideas for better startups. The question is, what does better mean in this category? I think booking has been the illustration that better as booking to find it is higher converting. One confuses consumer satisfaction with business model efficacy.

42:23If you can find a way to get more clicks and more bookings out of a given visitor, you've got a better mouse trap. But that's a less sexy idea than helping people plan better honeymoon. Well, one thing on this front on innovation and entrepreneurship in the entrepreneurialism in the travel industry, I want to come back to maybe in tech themes is of course Airbnb, which is a wholly different approach to this industry, but is nonetheless still the travel industry. All right, listeners.

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44:28So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out servicenow.com slash acquired and tell them that Ben and David sent you. Do you want to jump into acquisition category? Yeah, let's do it. So for me, I have this down as business line for new listeners to the show, we define that as people.

44:51technology, product, business line, asset, or other, because we leave ourselves the right to do whatever the hell we want on the show. So in this one, you know, a lot of times we define a product as like, hey, this is a new product you can sell to your existing customers. Like an Apple would come out with an iPhone after coming out with an iPod.

45:16This, for me, is really something where it's a new marketplace with new supply, new demand, a new business model, and it's completely separately broken out of the balance sheet. They bought a new business here, and they happen to learn a lot from it and really make it the cornerstone of the company and grow from there. But they bought a holy separate line of business and they kept it pretty separate.

45:42I don't know much to argue with there. I mean, literally they reported it as a separate business line and they have been angels. So it's kind of hard to argue with that. I think that's an easy one for me to jump in on. I got nothing here. Yeah. No, no, no argument. If our resident grizzled industry veteran agrees, moving on. What would have happened otherwise? This is interesting. Yeah. I mean, what if Expedia had pulled the trigger?

46:09Yeah, that's sort of the obvious one, right? And I don't know. Drew, what do you think about that? Um, I mean, you're like, I would do a difference to my friends at Expedia. I'm not sure they would have done this good job managing this business as booking debt as price line did, rather. Um, and the good job was just leaving it alone, right? Exactly. I mean, this is effectively a VC play. You know, I guess the better question is, you know, why did why was Glenn Fogel the one who snipped out this deal? You know, where were all the great Silicon Valley? Yeah. Yeah. I don't know. I was just a VC of investor of all time.

46:38Yeah, it does seem, who was the intermediary that they sold it to? Is like a private equity firm? No, I think I could be wrong in this, but I think it actually was just a group of private individuals, private investors in Europe that got new. Yeah, I mean, seems like their opportunity cost for them is the real story here. Why let it go? But I think this might be a good time Drew, when we were preparing for this episode, you mentioned sort of a difference between Expedia's M&A strategy and Price Line's M&A strategy and that Price Line sort of took these risks on early kind of sub-scale businesses that they saw potential and Expedia tends to buy more established things that have a very reasonable growth trajectory from there that they can add to their portfolio. Does it seem like I'm getting that right? Now, I'd love to hear your thoughts on that.

47:33Yeah, I think, you know, I think that definitely characterized a lot of the deals that made price line successful active booking a go to. And again, I think we, you know, you saw the strategy we just talked about from price line of buying these businesses and effectively, you know, being a largely passive investor holding them accountable for growth, giving them capital to continue to grow, but not taking too active a role in the management and integration of those businesses. You know, speedy by contrast has built a single dominant scale platform and we should give expedites to here, right? It's a almost $20 billion business. They do what, 350 million roommates to the 500 that booking.com price line did last year. So it is a real formidable player in the category, but their approach has been different.

48:19they bought travelosity, they bought orbits, they bought what if in Australia, and they bought these players and their strategy has largely been to say we have a tech platform that is incredibly mature, we put huge investments in and we now want to start to get scale out of it. And so they buy effectively these storefronts, replace them with superior economic, superior technology, see some games in terms of productivity, both click the rate and their ability to monetize it.

48:45but have taken a much more active role in the management of the businesses. Yeah. And then another question is, did price line need a capital infusion? I'm sorry, did booking need a capital infusion from price line? Or what if on their own, they just sort of...

49:02continually reinvested their profits into business in sort of this aggressive Amazon style way. Is there any way they could have grown to be the scale that they are today, or would they have sort of lost out in the arms race of competition? It sure seems to me like booking could have done this on its own. Booking didn't need price line to achieve the scale that it did. And I think again, it's testament to...

49:27Glenn's judgment and an acumen in finding the company and seeing the opportunity here. But I think that's an opportunity that was available to any financial investor. Yeah. At the same time, I think this might be a good lead-in to tech themes. We're always just trying to get into tech themes on this show. You rename the show? Yeah, tech themes. I think that would be pretty boring. You know, this is the thing about marketplaces though.

49:54Well, I'll just, I'm just going to have more than one technique. Yeah. I'm just going to dive in. I mean, to me, this is such a wonderful illustration of, of everything that is both incredibly challenging and incredibly, you know, beautiful about marketplaces, which is they're a total slog to get started. I mean, thinking about those early days.

50:13bringing all this very fragmented, very disparate supply all across Europe, supply of hotels onto the booking.com platform and Gert sending out postcards to everybody. You know, you can totally see why Expedia would look at that and say like, you know, that seems hard and the business model doesn't seem as good as ours. But then the thing is, you know, once you get to a certain scale point, And I think this is the value of capital in building marketplaces is accelerating to get to that scale point. Then it tips, right? And then it's just the defensibility we're talking about why you haven't seen more major companies built in travel online. I mean, the defensibility is so great in booking because everybody is on it. On both sides of the marketplace, there's no incentive for either side to go anywhere else because the experience isn't going to be as good.

51:07Yep. And it really is an argument for consolidation too. I mean, I think we've said this before, but one of the reasons why we set out to do this show is understand when M&A works and when it doesn't so that when we're involved in the earliest stages of companies, like we can try and figure out how do we steer the ship if the goal is to get acquired by one of these bigger companies. Like where can we nicely fit? And it sure seems like marketplace businesses are so well suited. Like whether you combine the business lines or not, you could look at Zilla and Trulia or more recently and here locally Rover and dog vacay. I mean, when you take a lot of supply and a lot of demand and the exact same value proper, a very similar value prop and you can consolidate a lot of things onto a single platform and bring these things together. It seems like there's, you know, you take that flywheel that's already spinning so well and yeah. Do you had a counterpoint though? Oh, I was gonna say, I mean, I think there is certainly pressure

52:03If you talk to hoteliers, suppliers in this world, they're not stoked about this marketplace. There's no hotelier in the world. It's like OTAs were a good thing. And it's good to have some sympathy for them. If you look the stock chart of Hilton versus Priceline over this period of time, you can see why they might not be so excited. Well, I totally get that from Hilton and Marriott's perspective. But what about the 20 room villa in...

52:28Romania who had no way of acquiring customers otherwise. Or the dog sitter who wasn't yet dog sitting, or the Airbnb or who wasn't yet utilizing that spare bedroom. Maybe I'm making an argument for unlocking value that was previously unlocked due to a lack of ability to find customers in the sharing economy. It's certainly not as true if you're commoditizing suppliers who are already running a business. You guys are bringing a great point. Another way of framing this is You know, this discussion we're having around OTAs shows, let's say the challenges of the business model, these kind of legacy hotel brands, right? Because the perspective of Marriott looks really different than the perspective, even of a Marriott franchisee who actually owns their hotel. The Marriott franchisee says, I used to have to pay, and just the slight digression, you know, the way hotel economics work by enlarged at the brands is

53:20You have a brand like Marriott that is a franchiser that sells to somebody who owns real estate, the rights to call their hotel a Marriott, and then generates some demand. They'll take a franchise fee on that roughly between six and 15% based on their business, but they're taking that on all the reservations that happen at that hotel, not just the ones that got generated by Marriott. And over time, those costs have gone up to the point where many hotel owners are saying, wait a minute, it costs as much money to sell through Marriott, my own quote-unquote direct channel, as it does to go to an OTA. Right. And Marriott.com is probably not doing much for me these days. Exactly. Interesting. Well, so what about, I feel like this is still on the marketplaces tech theme, so I'm going to take some more air time. Let's come back to Airbnb now. And then homeway and others.

54:14To my mind, what they and Airbnb far more successfully than anyone else has done is taken this innovation, this marketplace innovation, and unlocked just a huge new amount of supply with it, and brought many of the advantages that we were talking about earlier in the show that were right.

54:40think mostly enjoyed by the demand side by consumers and the OTA model. As you were saying, even with the agency model, a lot of supply is mixed feelings at best about it. Airbnb has brought this innovation to a whole new set of supply as well, where if I own a home that has an extra bedroom, I'm just thrilled that Airbnb gets me an extra $1,000 a month, right?

55:08Totally, you know, I think that's been Airbnb's real innovation in this category, right? There's a ton that we It's just amazing about that business, but to me, the thing that's truly distinguishing about it is the way they created this whole new class supply. And supply, that was really exciting. Like if I go to stay in New York, I'd much rather stay in a cool apartment in these village. You know, the 900 dollar night. Just run, have a kitchen, you know, then getting stuck in Times Square. Yeah. Airbnb made all that possible in a way that wasn't true in the past. Or the 900 dollar night holiday in. That's right. Jesus. Brutal.

55:42I mean, to me, this acquisition and this whole industry really just is such a good example and pure example of the power and dynamics of marketplaces. That's what I got for tech themes. One of the things I was thinking about, as I kind of tried to put this together and we prepared for this, was what would it take to challengebooking.com? If you think buildings marketplaces about gathering enough demand, to make this whole thing work, could you compete with them? Again, today, booking.com is the advantage of having done this for what, 20 years. Today, generate half a billion ruminates. They spend $3.5 billion per year in marketing because somebody else could do that. Could you begin to compete with them to generate that level of demand? I guess the person I was able to identify who looks like they're at least making a run at it is Trevago.

56:36Right, today, Travago is spending 800, I think, 800 million dollars a year. They're expedient owned, right? Expedia's, I think, has a 40% stake in Travago. It's got a public float, and the founders still own part of it. But yeah, it's part of the Expedia portfolio. But taking the same playbook, in the sense of, can we get enough demand here to make this, a platform that gets them lock in? Yep. But the following question. Yeah, if you wanted to go spend $3.5 billion a year on marketing, could you do it? Could you find it up?

57:05Absolutely, it's funny that this works and yeah, this is one tech theme. I was thinking about two after talking to so a former Expedia marketing person This person was mentioning that the Travago is like absolutely exceptional at digital marketing and really understanding exactly when to be bidding, bidding on Google, understanding exactly how high value that traffic is, how high value that keyword is, it's super high fidelity, and instrumenting it all the way from placing the ad all the way through the end of the transaction and continuing to track that lifetime customer value over time. And it seems like the way that you win on this is

57:47better and better digital marketing. There was actually a lot of articles back around the time of the acquisition that booking had sort of been incredibly successful because of their mastery of being able to buy keywords on Google. There's definitely an opportunity to do better than that now as Google's tools get more and more sophisticated for this.

58:12It goes to show that Google really does take a tax on e-commerce broadly, and with this as an enormous category, I'd love to see travel as a revenue driver for Google, and I think one way that Airbnb is disrupting here, and I wonder if somebody else can disrupt in the hotel world rather than just in the specialized Airbnb world is Can you acquire supply? Can you acquire demand, so travelers, and retain them as your customers without them going back to Google and you having to re-acquire them? Google being the central source of where people go to search for travel stuff all the time. I think there's no doubt that Airbnb has played that role so far. To your point, a moment ago, David, the fact that they have this unique access to supply has allowed them to take that kind of position.

59:05There's a question, can you do it in hotels, particularly given the fact that it's relatively commoditized. That hotel inventory now shows up on lots of different channels. But I think one other thing to understand, and it's worth thinking about the consequences for why it worked for Booking.com, is what allows them to spend at that level of scale, same for Travago. What allows them to spend at that level of scale isn't simply the instrumentation where the fact they have $3.5 billion to spend. It's that they get the conversion.

59:32yeah right the reason because all these guys look at what's my ROI you know and and again part of that is spend but but really the biggest driver and also a commission rate what's my take rate around an individual transaction but the thing that has the greatest delta the thing that really drives performance is when somebody came to the site did they buy yep you know booking dot com's innovation wasn't that it looked better I mean frankly you look at it and it's like gosh why are there so many things flashing the things flashing because like that's what gets me to buy yeah well and this is I feel like this is such a powerful concept, Bill Gurley actually has a whole blog post about this, about conversion, especially for marketplace businesses. It is the biggest lever that you have. I mean, we learn this lesson at Rover in that the product that you're building when you're at a marketplace company is essentially the matching of supply and demand.

1:00:24consummation of that match. And so your job is to maximize the rate of consummation of that match. And if you don't realize that, you can start investing in all sorts of things that are, you know, not going to be driving your business. And I guess going back to the expeditions, why did Expedia miss this? In 2002, it wasn't obvious that this was a marketplace. In 2002, you had big portal tendency deals that drove a lot of traffic. And I signed You know 10 million dollar deal with Yahoo with a well saying I'm gonna get you know this spot And it's gonna be true for the next year and I'm relatively indifferent not indifferent, but but had less pressure around what the performance of any individual session was right because you were just getting that stream of clicks no matter what And you weren't paying on a variable basis for that interesting interesting so so one thing Actually been with any other tech themes you want to cover?

1:01:19Yeah, I got one quick one before we move into grading. Selfishly, like one of the things we do at Pioneer Square Labs is look around at other business models and try and figure out like can this be done in a new space? And something that I think that I've been paying a lot of attention to recently is as this generation shifts toward a more on-demand, less committed life.

1:01:42this agency model makes a ton of sense. The idea that, yeah, I'll book that stuff, but if I don't want to go, I get a refund. My credit card doesn't get charged until I stay in that hotel. There's policies of 24 hours, 48 hours, whatever it's going to be, but you're afforded a bunch of flexibility and you can plan ahead, and then if you don't want to do it, you don't want to do it. I think a super interesting lens to think about new company creation is...

1:02:08What else can you take that people are like hamstrung into committing to right now and allow them much more flexibility and change the business model dynamics within the industry to allow them that because you know as as we talked about before the best consumer experience will continue to win Yep, so that's all I got for tech things well if if we had some answers we should I don't think the best consumer experience best consumer experience is what one here the very least we need to think broadly about what best consumer experience is Because it wasn't like the booking.com had the most attractive best designed website in the sense of UX Lots of people would say it's not that attractive. Yep

1:02:51But it was best in the sense that it delivered the most conversions. Yeah. And the reason it delivered the most conversions was it had the most best inventory. You know, and so, which, which I, at least to me, that's, that's the consumer experience, right? Like you're, you're able to get what you want. And I think maybe a secondary thing here is probably the, the, the lack of commitment to it. But to me, being able, being matched with the correct supply is just a, you know, a facet of the consumer experience. Sure.

1:03:20Point take so so you know many levers to have it play here to Well, I think it's the it's the same You know, it's the same thing. It's a We're quibbling over the definition of consumer experience, but it's you know in the same way like I don't think anybody You know apologies to our friends at Facebook, but especially linked in but nobody would argue that those are like the best most beautifully designed sites, right, but you get as it consumer of them, you get your experience fulfilled best of what you're looking for, which is, you know, I'm looking for professional networking on LinkedIn and social networking on Facebook. Um, it kind of, you know, what they look like is almost secondary, um, but it's what I get out of them. Yeah. So, so Drew, I'll, uh, I, uh,

1:04:06In thinking through this a little bit more, if consumer experience is the umbrella of things that enable you to win, I think you're right that being matched with the correct supply is far more important than your requirement to commit. One last one, sort of sidebar, I wanted to cover before we grade it, and it might inform grading. I'm super curious. One thing we haven't really talked about.

1:04:32on the episode thus far. We've talked about OTAs, we've talked about the various flavors of them. We've talked about Airbnb. What role does meta-search play in this world? I mean, you were at Kayak for a long time, and meta-search sort of takes a wholly different approach. It's a layer on top. It's not a marketplace itself. What is that role in the ecosystem here? Well, I think it comes down to actually the point that we're just talking about with Ben, which is, how do I make a decision?

1:05:01I don't find what I want. And what's the separation between that decision-making process, IE, I want to stay at this hotel or take this flight on these dates, and the transaction process. I'm going to complete this booking. And, you know, meta search, vertical search, you know, was an abstraction of, again, that decision-making process. One of the things that was really powerful about it, I think, is allowed it to grow very quickly, is it limited its scope.

1:05:26Right, Akaya goes like, we have the most amazing website. It's two pages long, right? It's a front door. You ask a question and then it's a bunch of answers that you can find them when you want and you're out. You know, like, you know, things moving through a goose was the metaphor that we were talking about.

1:05:40Uh, you know, I think you talk about, uh, we're probably friendly, friendly show here. You know, I know you have advertisers. Yeah. Appreciate that. Uh, no, you know, Travago did it one better, right? You look at Travago, it's like, it's a one page website. You know, it's all JavaScript. You start typing in, you know, results start to render, you know, there's, there's so few things that you have to interact with. And again, the benefit of that for them is, wow, how quickly can I move from a visitor to a revenue event?

1:06:06Yeah. All that leads to really effective monetization, really clear visibility too, right? I mean, the point you're making, Ben, on how well Trevago does it tracking both initial monetization and the repeat visit rate. All that is possible because all those events happen within the same session. I don't know if I answered your question. No, no, no, that's great. So I guess for the minister's layer, It does greatly improve the customer experience and what the meta search folks have said is we're not going to monetize at the transaction level, at the marketplace level, we're going to take essentially an advertising, a customer acquisition fee from the marketplaces themselves. Yeah, so the mental model, if you will, for meta, was Google.

1:06:55Yeah, we're going to be a vertical sort of change, and we're going to get paid on a CPC basis. And we're going to get paid by the various marketplaces or by the bookings and the orbits and the expedience themselves. Yeah. Now, those lines have gotten blurry over time. And the big driver that, or one of the big drivers that created that was mobile. So on the browser.

1:07:17where desktop and browser you had a bunch of windows are open. You could do a search. You could then spawn separate windows to complete a transaction. Most websites said we're pretty well designed from an e-commerce standpoint. You could look at what the conversions were from leads out of a meta search into an OTA.

1:07:33That broke down, especially early on in mobile, where folks had poorly designed mobile booking pages. In an app, that process was going from one app to the next was when we were convoluted. The consequence was meta search engines started to build what they described as instant book. They would allow you to complete a transaction. They would use a book API.

1:07:54So they were calling into the OTA or the marketplace to complete the transaction, but it happened within their environment within the amount. And now they're actually getting paid on the transaction fee then rather than just sort of for the ad placement. Yeah, the reality of those transaction fees is that they've always been a little bit blurry. Like, you know, a lot of the CPC deals had some kind of performance guarantee or, you know, you would get paid on a CPA and normalize that back to CPC. So, you know, it wasn't all that different to go from the meta search type agreements to the instant book type agreements. The thing that was harder about it, I think instant book has had a relatively mixed track record. If you look at TripAdvisor's stock performance, the financials, you can see the challenges that instant book has had. It has had a huge impact on TripAdvisor's monetization. We played around with it at room 77. Kayak has done some of it, but it has not.

1:08:47not taking that much root among medicine agencies. It has not become that dominant. And I think one of the big reasons is, it's actually pretty hard to complete these transactions. You think of all the edge cases that happen when you're going to complete a booking, the credit card fails, the room's no longer available, all those kinds of issues. The packet gets lost. For whatever reason, the transaction doesn't complete. And if you're doing that in your environment. You're purchase for the consumer too. You're spending hundreds of dollars here.

1:09:15Exactly. Exactly. And it's much harder to deal with those edge cases if it's somebody else's book API than if it's happening in your own environment. Interesting. Okay. I feel like we have the full picture now of the online travel industry. Should we grade it? Or at least as much as you can get in an hour. Yeah. Online travel industry in one hour or less. Yeah. Well.

1:09:41I mean, I don't think we need to spend a lot of time on grading early. I certainly don't. I'm not sure that there was something that was more successful that we've done other than next. Like this was a company that was going higher than Instagram. I think so. Wow. I know. I mean, to the, because I look at it this way, like Instagram wasn't really company saving for Facebook. Like Instagram has become an incredible boon.

1:10:10but would Facebook be completely irrelevant for it weren't for Instagram? Instagram helped them inform the mobile strategy and lots more young people interact more per day on Instagram. But in the way that I think that Apple would have been totally host without buying next, I think that price line.

1:10:31may have been totally hosed without buying booking and booking has turned into a gigantic business. Like, if you look at, I mean, just comparing price line and Expedia, price line's market cap is 92 billion. Expedia is about 22.6. Over two thirds of that 92 billion comes from booking.com, going from $130 million acquisition to, you know, a responsible for a market cap of 60 billion plus, a plus. Well, you heard it here first.

1:11:01booking.com bigger than Instagram. I love it. Wow. I hadn't thought about that. We'll let you have the last word here. But do I think that this is better than Instagram?

1:11:22Yeah, I mean, you made a pretty compelling case there. And I haven't checked the latest Instagram financials. I mean, I guess, so here's my knee jerk reaction to that. But I think is the wrong one is I would say, well, yeah, that's true. But like think about market size like Instagram is everybody in the world. But then I'm like, Wait a minute, travel is everybody in the world, too. Well, you know, there's at least a huge portion of it, and it is monetizable at a vastly higher rate than, you know, social networking apps. So yeah, wow. I don't know that I'm willing to go.

1:12:02better than Instagram, but I'll go at least as good as Instagram. I think trying to think back through all of our episodes, we have so many at this point, but in the ones that are popping to mind, I think I stack rank next. I mean, as we said on that show, it literally was a trillion dollars in revenue that was created by that acquisition. And then I think Instagram and booking are both of a scale that that are pretty incredible. Not a trillion dollars yet, but maybe someday. What was the purchase price on Instagram? It was a billion. One billion dollars. Wait, what did you guys put as the current value of Instagram? Well, when we did the episode, which was about two years ago at this point, right, Pen? Yeah. I think there was an analyst report from City Bank. Yeah, from City Bank, the value to what around 35 billion dollars.

1:12:58Somewhere in there. I don't know why I remember the number 19 or 20, but it's you know That big that yeah, so sort of on the order of that big in a time frame of call it three years post acquisition And so here we have $60 billion after 10 years So all right, do school is all well. No, I mean, I'm you know, I'm with Ben on this one You know, I guess it's a little bit of you know home team pride, right? You call the travel industry guy. Of course. I gotta tell you this is the best deal ever better than next. Okay, and I hopefully rational as well. Yeah, I think like it's just phenomenal, right? You know, to think that Jeff Boyd had a, you know, a hundred X increase in the value of price line stock as the CEO, like that is just breathtaking. You know, going through numbers and looking at the level of growth that these guys have been able to achieve over that duration, staggering. And yeah, I guess one of the things that to me, you know, just is a little bit humbling. I remember talking to Jeff Boyd at one point in time.

1:13:56I don't remember when it was, but yeah. And Jeff was the CEO of price line group. Well, there was a long history, but CEO or chairman of price line group until Glent took over in the beginning of 2017. And they remember talking to him. What are you guys going to do next year? Talk about your plans. Focus right in the industry, big industry kind of confound. And he's like, yeah, we're going to do what we did last year and a little bit more. That's what we're going to go to. But things are going to grow 40%. That's pretty good. Just like last year. Yeah. You keep doing that.

1:14:26Wow. Well, there we have it. The history of either the second or third best acquisition of all time on the internet. Thanks for joining us Drew. This has been awesome. Guys, thanks for having me. It was a lot of fun. Yeah. Okay. Real quick. Carlos. Sweet. So one thing I watched last week that was linked on Daring Fireball and was really awesome to kind of leave on in the background and and do some stuff around the around the apartment was a Scott forest all appearing publicly for the first time to talk about anything related to his old gig at Apple running the iPhone project when he was live at the computer history museum a few weeks ago and there's a Facebook video that we'll link to here but it is it starts with an hour of a super interesting panel with some of the folks that worked under Scott on the original iPhone project. This is all sort of commemorating the 10-year anniversary and Scott just telling amazing stories of

1:15:29How the iPhone came to be a lot of sort of never never been revealed stuff personal interactions with Steve a time when Steve jobs in his words saved his life quite literally from from he was incredibly ill and and Steve and some incredible acupuncture sort of saved his life and It's it's really cool like if you're into if you're into this podcast or you're into Internet history podcast Brian McCullough is show you will really, really like this interview. It's been on my to watch list and it just sounds amazing. I mean, I think this is Scott's first public appearance. Regarding technology, yeah, he I think spoke extremely briefly when I think they won a Tony. That's right. That's right. Yeah. But never about about any of this.

1:16:23since, since the, you know, Apple keynote stage. And the funniest thing is it looks like he's wearing the same shirt. They like make that dude has a style. Love it. Hey, you gotta, you gotta have a calling card. Mine is, so Jenny and Jenny's dad, my father and my Gary and Also shout out to Gary, fan of the show. Went to see the big sick in movie theaters last weekend and it was great. If you haven't seen this movie yet, it was both the funniest and the most well done and most touching movie. I think I've seen in many, many years. Best movie I've seen since The Force Awakens, for sure.

1:17:11Hi, praise. It deserves it. I think it's got like a 98 on Rotten Tomatoes or something like that. And it's great. And it's and it's Camille. Not not Gianni. Apologies if I butchered that too. But who who plays the national and Silicon Valley. And it's it's the, you know, mostly true story of him and his wife and how they met and their their lives together. And it's just it's wonderful. Wow. Cool.

1:17:40Do you do you want to join in the fun sure yeah, so I've been I've been into like email newsletters, you know jets that are like But I've been loving money stuff from Matt Levine. It's a little more kind of markets oriented than pure tech. But he's just an incredibly funny writer and super insightful on what's going on in the markets. A lot of blockchain commentary, what's moving on with it going on in the VIX. People are worried about not being worried enough. He's at these great segments. So definitely we're checking out. Cool. Awesome. We'll do.

1:18:17I mean, I think that's it. Drew, where can our listeners find you on the internet? My Twitter handle is Drew Pats, D-R-E-W-P-A-T-S. That's probably the best way to track me down. Great, great. Well, thank you so much. We appreciate you coming on the show. It's a pleasure and I know our listeners will appreciate some actual domain expertise and insight for a change too. Rather than been in me speculating wildly. Well, thanks for having me, guys. Yeah, yeah.

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1:20:06you every single one of you, but it can only be one of you will win a pair of AirPods. So thanks so much guys and have a great day. Thanks everyone.