David Rosenthal: commitment

Transcript context

…I think there’s no doubt that Airbnb has played that role so far and I think 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. There’s a question of can you do it in the 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 works for Booking.com is what allows them to spend that level of scale. Same for Trivago. What allows them to spend at that level of scale isn’t simply the instrumentation or the fact they have $3.5 billion to spend. It’s that they get the conversion. The reason because all these guys look at “what’s my ROI?” And again, part of that is spend, but really, the biggest driver and also commission rate, what’s my take rate around the individual transaction, but the thing that has the greatest delta, the thing that really drives performance, is when somebody came to the site, do they buy? Booking.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 thing is flashing because that’s what gets me to buy. 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 learned 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 and the consummation 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 not going to be driving your business. I guess going back to 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. I signed a $10 million deal with Yahoo or with AOL saying I'm going to get this spot and it’s going to be true for the next year. And I'm relatively indifferent, not indifferent but have less pressure around what the performance of any individual session was.…

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