Support Skift’s Independent JournalismMake a Contribution Now
In tapping Barney Harford, a former Expedia executive and the ex-CEO of Orbitz Worldwide, to run operations at Uber during the challenging times ahead, Uber boss Dara Khosrowshahi picked someone whom he’s worked with and competed against for 16 years.
In fact, Harford sold Orbitz Worldwide to Khosrowshahi’s Expedia Inc. for $1.6 billion in 2015. Although Orbitz never challenged Expedia’s dominance in the U.S. market when Harford was Orbitz CEO, he was widely credited for modernizing a struggling online travel agency that had been on the brink of bankruptcy, and boosting its share price from $3.77 on the day he was appointed in 2009 to $12 per share when Expedia bought it.
Over the years, Khosrowshahi’s Expedia and Harford’s Orbitz Worldwide engaged in high-stake battles over the hotel market, which Expedia dominated; airline booking fees; private label client wins, and loyalty programs, to name a few areas.
Here’s the inside story of how Harford got picked as Uber COO, a position that saw dozens of candidates, including several high-profile Silicon Valley executives, vying for. It’s also a look at the relationships and career meanderings that connected Khosrowshahi, who took the reins at Uber in late August, and Harford over the years.
Conversations Began Almost Immediately
Harford starting talking to the new Uber CEO within days after Khosrowshahi relinquished his post as Expedia CEO and signed on to head up Uber. Harford has always been a data geek, and Khosrowshahi showed him some of Uber’s internal numbers to dig into. Meanwhile, conversations continued as Khosrowshahi returned to Seattle on weekends.
Khosrowshahi initially thought his CEO role would entail running operations, as well, but started realizing he would need help on the daily operations side. In early October, Harford came on board for two days per week at Uber as senior advisor to the CEO to help out with input on the core business, although the two initially discussed the possibility of Harford becoming Uber CFO, as opposed to the COO role he eventually took.
Harford busied himself with identifying the most important areas where improvements could be made at Uber. He then joined the Uber executive leadership team at an off-site meeting later in October, and during a break Khosrowshahi raised the idea of Harford joining Uber full-time. The company announced on December 20 the appointment of Harford as COO.
It’s no coincidence that Brad Gerstner, whose Altimeter Capital Management is an Uber investor, backed Harford for his new role at Uber. In 2008, Paul Reeder of PAR Capital Management, and Gerstner, who worked there at the time, helped recruit Harford for the Orbitz Worldwide CEO slot, which he took up in January 2009. Seven years later, in 2016, Gerstner and Reeder successfully pushed to get Harford, among others, appointed to the United Airlines board as part of a proxy fight.
In addition to Gerstner, representatives of Benchmark and TPG Capital, which have Uber board seats, supported Harford’s appointment as Uber COO this month.
First Meeting in 2001
Khosrowshahi and Harford met for the first time at Barry Diller’s home in West Hollywood in early 2001 in a get-together to find a buyer for Microsoft’s controlling stake in already-public Expedia. At the time, Diller was chairman and CEO of USA Networks, Khosrowshahi was USA’s executive vice president of operations and strategic planning, and Harford was leading corporate development and strategic planning for Expedia.
Expedia founder and then-CEO Rich Barton, CFO Greg Stanger, USA Networks vice chairman Victor Kaufman, and National Leisure Group co-CEO Brad Gerstner also attended the meeting. In July 2001, USA Networks announced a deal to buy Microsoft’s shares and thereby acquire Expedia.
READ MORE about the role of USA Networks and Expedia in online travel history in Skift’s Definitive Oral History of Online Travel.
Barton had hired Harford at Expedia in 1999, and in a 2002 speech about “passion,” cited him as “a live example of someone who simply wouldn’t leave my office until we built our merchant hotel business, someone who now runs our WWTE Private Label business … ”
From 2004 to 2006, Harford served as president of Expedia Asia Pacific, where he launched Expedia Japan and Expedia Australia. Near the beginning of his role heading APAC, Expedia took a minority stake in eLong, and then exercised a warrant and took majority control after the Chinese online travel agency went public in 2004. Harford managed that majority stake in eLong for Expedia during his remaining tenure at the company.
Harford left Expedia in 2006 and served as an eLong board member through 2008. But long after Harford left, eLong proved to be a money-losing albatross for Expedia in the hyper-competitive Chinese domestic market, and Expedia sold its eLong stake to Ctrip in 2015.
Harford’s experience in launching international businesses and straightening out problematic global operations is highly relevant for the tasks ahead at Uber.
At Orbitz Worldwide, he was saddled with fixing its highly problematic eBookers business in Europe, which had been acquired before Harford arrived at Orbitz in 2009. In fact, then-parent company Cendant took a $425 million impairment charge in February 2006 related to its acquisition of eBookers two years earlier.
Harford managed a multi-year effort to migrate eBookers onto Orbitz Worldwide’s global technology platform.
“There were big learnings related to the importance of consistency and standardization across geographies,” Harford said, adding that China is “tough” and there were many takeaways there, too.. “If you don’t focus on this, unnecessary variation can become a real drag on innovation. This is a significant opportunity for Uber, given its decentralized approach to early growth.”
Harford was dealt a really tough hand when taking over the stewardship of Orbitz Worldwide in 2009. The company teetered on the edge of bankruptcy around the time he took up his post. The company’s private equity owners saddled it with massive debt, which Harford managed to pay down over the years. The company was also overly flight- and U.S.-focused.
By the time Harford sold Orbitz to Khosrowshahi’s Expedia in 2015, Orbitz’s hotel business had grown substantially. And international operations as a percentage of total revenue had increased from around 21 percent to some 26 percent, a modest increase.
Khosrowshahi and Harford Battle over Booking fees
If Khosrowshahi and Harford are now allies at Uber — and they obviously are — they also were ardent competitors in the years both headed major online travel agencies.
In one pitched battle, Expedia shocked the online travel world in 2009 by eliminating most consumer booking fees for purchasing flights. Flight-heavy Orbitz was dependent on this business model, and some observers thought Khosrowshahi’s Expedia took the action in part to drive Harford’s Orbitz out of business.
Orbitz retaliated by reducing its consumer booking fees for hotels, and that disproportionately hurt Expedia.
Khosrowshahi was said to be really impressed with Harford when Orbitz not only survived the booking fee skirmish, but managed to turn the tables, and grow the business.
In another example of the competitive dynamic between the two companies, Orbitz debuted a loyalty program in 2013 as a means for increasing customers and competing against Expedia, and Orbitz put a lot of marketing into it over the years.
When Skift had a chance to ask Khosrowshahi about his rival’s rewards program in September 2014, he said: “When we look at the Orbitz program, I wouldn’t call it as much a loyalty program because a loyalty program rewards you for being loyal. I think we see the Orbitz program as being more of a cross-sell program. If you buy an air ticket then you have some Orbucks to spend immediately. So it doesn’t necessarily reward loyalty; it rewards cross-sell.
“What we are seeing at Expedia is that we’re able to drive cross-sell through product innovation quite successfully. The Expedia Rewards program is much more about loyalty. We don’t think there is one formula for loyalty, but we are quite satisfied with our various programs and we continue to invest in them pretty aggressively.”
Khosrowshahi, though, had a much more positive take on the Orbitz Rewards program — calling it “innovative” — after announcing the agreement to buy the company in February 2015.
“Listen, we have been at the loyalty game for a long time,” Khosrowshahi said in February 2015 call with analysts to discuss the acquisition. “Hotels.com has had their Welcome Rewards program for a number of years and has over 15 million members as part of that program. Expedia has Expedia Rewards program, which is growing very nicely. So we are very much believers in driving and growing loyalty programs.
“We think the Orbucks program is quite innovative and that is a part of the business that we are quite interested in. The Orbitz team has built, we think, a pretty interesting platform there both in loyalty, in the private-label business, as well, where they are powering some bank points programs, which again is on the loyalty theme. We will bring those businesses in and we will invest in them and grow them. And we think they can absolutely be value-additive over the long term.”
Uber obviously has numerous vexing challenges ahead.
The European Union just made a landmark decision that calls for Uber to be treated as a transportation service, subject to the same rules as other taxi services, and not as a mere marketplace. Khosrowshahi has pushed back with the idea that Uber has already transformed its operations in Europe to reflect that reality, although that is clearly a work in progress.
Would it have been smarter for Uber to have selected a woman as COO given its legacy of sexist malfeasance? Given that Uber already picked a guy as its new CEO and now has tapped another male to run its operations, this s a very legitimate question, and the company has a ton of work to do to transform its internal culture and practices.
There are women, though, such as Rachel Holt, who heads Uber’s North America business and is a direct-report to Harford, who wield considerable influence and power at the company. Uber is reportedly searching for a chairman. Should it be chairwoman of the board perhaps?
One of the issues that Khosrowshahi has to tackle is the deep divisions on the Uber board. One reason investors recruited Khosrowshahi to take the helm at Uber was because of his experience and ability to be a bridge-builder. “He’s not someone who hits you over the head with hammer,” said one executive who knows Khosrowshahi well. He wins you over through thoughtful arguments.”
Harford, too, is known as a skilled board room tactician, having maneuvered through toxic board conditions when private equity firm Blackstone controlled Orbitz Worldwide. “Barney was a superstar and stood on principle when there were difficult board issues,” the source said.
Meanwhile, data-geek Harford, who is said by one person who worked with him at Orbitz Worldwide to be obsessively detail-oriented, will be charged with making Uber’s operations, including its non-U.S. presence, more efficient and — shall we utter the word — profitable on the road to a 2019 initial public offering.
Khosrowshahi, too, is an Excel wizard and extremely numbers-oriented, as any former CFO and current CEO would be, and will be tasked with stemming Uber’s losses and upending the business model.
Together, though, the reunited duo will have to get more than the numbers right to transform Uber into a viable and sustainable business.