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Yesterday we launched our largest project yet, The Definitive Oral History of Online Travel.
In nearly 40,000 words founders, executives, insiders, and CEOs tell a story in their own words about the creation of Internet giants such as Expedia, Priceline, TripAdvisor, and more. We definitely don’t want you to miss some of the newsy disclosures threaded throughout this extensive narrative. So for those of you who don’t have a long plane ride ahead of you or an office door to help shut out distractions, we’ve pulled out some of the bigger revelations:
- In the mid-1990s, American Airlines/Sabre and Microsoft considered a joint venture instead of separately launching Travelocity and Expedia but both American/Sabre and Microsoft wanted to be in charge and thus couldn’t come to any agreement.
- Microsoft’s Rich Barton walked into a boardroom in 1994 to meet with Microsoft co-founder Bill Gates and told Gates that his travel idea to build an Encarta-style travel guide was too small an opportunity. Five years later, Barton asked Microsoft’s Steve Ballmer to commit to a $100 million brand-advertising campaign for Expedia and Barton got kicked, or laughed, out of Ballmer’s office.
- When Priceline.com was looking for a celebrity spokesperson in 1997 actor Bill Cosby was the company’s first choice but his monetary demands were too steep. Priceline.com marketing team member Jord Poster’s wife had been college roommate’s with William Shatner’s then-wife so that was an informal tie that got the conversation started with Captain Kirk.
- In the run-up to Priceline.com’s debut in 1997, founder Jay Walker flew to Dallas to meet with American Airlines’ Bob Crandall to discuss the airline’s participation in Priceline.com’s Name Your Own Price feature. Crandall at the time hated the idea of the Internet and ecommerce, and Walker quotes Crandall as saying: “Jay let me just be perfectly clear: We would be better off if you were hit by a truck.” Although airlines are barred from discussing operations among themselves, Walker believes Crandall dissuaded the airlines that had been considering participation in Priceline.com pre-launch from being launch partners. Only TWA was on board when Priceline.com debuted.
- In 1998, global distribution system Amadeus took a 20 percent stake in up-and-coming flight-search engine ITA Software in return for a 10-year licensing deal but Amadeus began to sabotage the deal only days later. The reason behind the Amadeus buyer’s remorse allegedly was because Amadeus’ head of development in Nice, France feared for the substantial number of Amadeus jobs that the skeleton and more efficient ITA crew and technology would make superfluous. The head of development at the time, Jacques Lignieres, who is long retired, emailed us a very colorful rejoinder to the effect that ITA screwed Amadeus in the deal. For the precise quote, read the oral history (but not aloud if you’re at work or with children).
- The founding airlines of Orbitz, namely United, Delta, Northwest and Continental, never intended to actually launch Orbitz but instead wanted to pressure Expedia into giving them a huge stake in the company so they could control the online distribution of flight tickets and therefore counter the power of then-top dog Travelocity. In fact, during Expedia’s IPO roadshow in November 1999, several dozen airline executives and their lawyers summoned Barton to a meeting where they demanded he sign a contract to give them a mega stake in the company or they would issue a press release the next day announcing their intent to launch Orbitz. The airlines issued the press release the next day and were shocked that Expedia refused to negotiate and went its own way.
- The people working on the founding of Orbitz nicknamed the project T2. The urban legend is that it meant Travelocity Terminator but it actually — in the beginning, at least — just stood for building a second Travelocity and could have been dubbed E2, standing for a second Expedia. Ellen Lee, who worked on the Orbitz project while still at Delta, says “there was no ill intent to the name. But I loved it when it took that on.”
- Orbitz’s four airline founders — Delta, United, Northwest and Continental — fought vehemently against bringing in American Airlines as a founder on an equal footing after American Airlines spun off Sabre/Travelocity in 2000 but reluctantly agreed to do so.
- Steve Hafner, who was a Boston Consulting Group consultant in 1999 working on the creation of Orbitz when Orbitz was not much more than a PowerPoint presentation, and had no CEO or full-time employees, hosted a meeting with Brad Gerstner of National Leisure Group in Chicago. Hafner told Gerstner if NLG wanted a multi-year deal to be the exclusive cruise and vacation-package provider for a then-cash-strapped Orbitz, Gerstner would have to give Hafner a $1 million payment that day. Gerstner got in touch with Joel Cutler, who was one of the NLG owners, and they gave Hafner the $1 million payment that day.
- Alex Zoghlin, who had earlier done consulting work at Travelocity and then became the first employee of Orbitz in 1999, and Boston Consulting Group partner Carl Rutstein called Travelocity CEO Terry Jones and tried to recruit him to become the founding CEO of Orbitz. Zoghlin said Jones, who had earlier complained about parent company Sabre’s inflexibility, rejected the idea of becoming the CEO of Orbitz because Jones thought handling the competing interests of the airline owners of Orbitz would be next to impossible. Former Swissair CEO Jeff Katz became the first CEO of Orbitz and effectively managed the airline owners.
- USA Networks, which later became IAC, had a signed letter of intent in 1999 to acquire Travelscape for $120 million but Travelscape founder Tim Poster received a phone call from USA Networks’ Dara Khosrowshahi a day before Poster and his team were to fly from Las Vegas to New York to sign for the actual acquisition. Poster says Khosrowshahi told him USA Networks had decided it would only do the deal for $90 million, or $30 million less than the initial agreement. Poster says he told Khosrowshahi and whomever else was listening on the speaker phone in a follow-up phone call to “fuck off” if they were unwilling to go ahead with the acquisition at $120 million. Expedia, which was not yet part of IAC, acquired Travelscape for around $105 million a few weeks later in 2000, Poster says. Khosrowshahi confirms USA Networks considered acquiring Travelscape but walked away from the deal.
- In late 2000 or early 2001 both Expedia and USA Interactive, which were still separate companies, were negotiating to acquire National Leisure Group. But USA Interactive won out and announced a deal to acquire both Expedia and NLG in July 2001. However, while USAI acquired Expedia in 2002, it decided not to close on the NLG acquisition after the September 11 attacks played havoc with the travel economy.
- In 2003 or 2004, IAC’s Expedia unit separately considered acquiring Bookings.nl, which became Booking.com, as well as TripAdvisor. The Expedia team did extensive due diligence on acquiring Bookings.nl and decided not to make an offer. Expedia also declined to pursue acquiring TripAdvisor because officials thought TripAdvisor was too dependent on Google.
- In late 2003 or early 2004, Yahoo engaged in exclusive talks to acquire TripAdvisor. IAC’s Dara Khosrowshahi called a banker who was involved in the talks and informed the banker that IAC was interested in acquiring TripAdvisor and could close the deal quickly if the Yahoo-TripAdvisor talks dragged on without resolution. The banker eventually phoned back Khosrowshahi and IAC acquired TripAdvisor in 2004. IAC spun off IAC Travel, including TripAdvisor, forming Expedia Inc. a year-and-a-half later in late 2005.