In the interview we discuss how the idea for Viator came about, how he financed Viator at the start and his advice for entrepreneurs interested in the travel space.
If you have any additional questions for Rod or feedback on the interview, let me know by leaving a comment below.
Jason: I’d like to start off with a general background question. Do you mind telling me a little bit more about yourself and your background pre-Viator days?
Interviewee: I had worked for a couple of U.S. IT companies. NCR Corporation, headquartered in Dayton, Ohio, formerly National Cash Register. In the ‘70s and ‘80s one of the major providers of mini-computers and mainframe computers – mainframe computers which was the big market those days – and then Digital Equipment Corporation or DEC which was the real, the company that was really behind the mini-computer revolution.
At DEC I had the role of releasing their range of personal computers in Australia. In order to do that I needed to find dealers. In those days, PCs were sold through places like Computer Land and I’m trying to think of another, maybe there was Apple resellers as well. We had a great deal of difficulty finding dealers for the DEC range of computers so I saw that as an opportunity and I started my own computer dealership in the mid-80s and it was instantly successful. I had a couple of partners there and we had a great time; sold a ton of computers to all sorts of different people. IBM PCs, Apple Macintoshes and IIe’s and also the DEC range. It was a lot of fun. We did so well we got bought out after a few years and I decided at that point that being the boss was a lot more fun than being an employee. I had never really been very good at taking instructions anyway. That sort of background is reasonably common in Australia where the sort-of American model of finishing high school, going straight to college, getting a degree, going to work for a large corporation; it’s a fairly consistent model. In Australia, people like me drop out of high school, travel a little bit, get a job doing something and certainly in those times, particularly, whether or not you had a university degree was not a crucial thing. Whether you were available, seemed smart and had an aptitude for the type of work, that was, you could find great employment that way. I built on that.
Jason: Did you drop out of high school then?
Interviewee: I did, right by the end of the year. I just couldn’t be bothered waiting for those exams to come, in my final year of high school. In fact, I think I did a couple of the exams but I didn’t complete all of them because I managed to secure myself a job. In those days you wrote a letter – you saw an ad in the paper, you wrote a letter for a job. I got a job as a computer operator, which was a terrific job. Operating a mainframe computer, changing disks and loading paper in the printer, all that type of stuff. Not a lot of that happens nowadays, that’s a very distributed task and you don’t have so many computers sitting in big back rooms. The mainframe has gone but in those days it was a great employment opportunity and that’s how I got started.
Jason: Did you end up going to college later on?
Interviewee: Only the university of life, was the only one I’ve attended.
Jason: Wow, that’s impressive. Did that hold you back at all, during your NCR and your DEC days?
Interviewee: Not at all. They had their own education programs. DEC in particular were fantastic with education. I spent months in Boston and other parts of the DEC world doing their own in-house education programs. That’s what they cared about most.
Jason: Wow. I wanted also to ask a follow-up on your computer dealership question – did you open a store where individual consumers were coming in to buy computers or were you a B2B reseller, still selling to other businesses?
Interviewee: It was a retail store and we had, our customers were a mix of consumers but mainly they were banks and insurance companies and architectural firms and engineers and people of that nature.
Jason: So, typically still larger orders. Gotcha. Very Interesting. How did those things lead eventually to the web?
Interviewee: After that I wanted to start another business and I had a customer who was playing around with the PostScript language, which is the language for laser printers. And we decided to start a business together developing PostScript solutions for what’s called advanced function printing, which is the type of printing which occurs where you’re printing an invoice or a statement. Sort of like your electricity bill or a statement from your insurance company or something like that. Little boxes and lines and logos and graphics and charts, etc., etc. It’s quite complex. It was even more complex in the early ’90s and we were able build quite a successful business and made sales all over the world of this PostScript based software.
Eventually we sold part of the business to a Japanese concern. Printing is a big issue in Japan for a variety of reasons that would probably take too long to get into here. But they eventually bought out my share of the business in the mid-’90s and I found myself with plenty of time on my hands again.
And at the time, the web was just getting started and I eventually fell into an opportunity with another friend of mine to start a business developing websites. That was in, I think, 1995. And three months after we started we had a dozen or so clients and we realized they were all travel industry clients. Word of mouth had happened really quickly from our first couple of clients who told all their buddies in the industry and travel of course is a natural on the web because you can deliver a product but there’s no physical delivery of goods so there’s no worries about shipping or any of that type of thing. We can deliver a ticket or a voucher very easily over the web so we found a lot of interest and we were pretty immediately profitable on a modest scale just being web developer. So that’s how I got my start on the web and in travel.
Jason: Were you doing any of the technical work in PostScript or your web development house?
Interviewee: No. I always had been sort of the strategist, as it were, but I think that’s probably an overstatement. I don’t think you have to be a strategist in the mid-’90s to say “Hey, this web looks like a good opportunity”. So at that level I was the strategist, and doing the marketing and the sales, and in the early stages administration, fund-raising, etc., etc. Basically everything else except coding.
Jason: Gotcha. That’s impressive. Always impressive when people are able to start big web businesses without that technical background.
Interviewee: Well, believe me, it was no big web business at the start. It was a very little web business.
Jason: That’s fair… So, I understand how you got led to the travel business. What was the then inspiration for the idea of Viator?
Interviewee: I can’t claim the inspiration for ourselves. We had hired a woman in our Sydney office, we were based in Sydney, who used to work at the big U.S. company Sabre, the big reservations company. And through her connections with them, even after she left, she kept very strong connections, she knew they were looking to launch a project which was essentially a GDS or what they called ground activities.
Jason: I’m sorry, what does GDS stand for?
Interviewee: Global Distribution Systems Sabre is a G.D.S. as is Amadeus and Travelport are the major G.D.S’s, or Galileo.
They’re the way that people book airline tickets. They’re the backend systems that allow that to happen.
Massive companies with a universal presence in travel agencies. So every travel agency in the world whether its online or on a high street is linked into one of those G.D.S’s. And Sabre’s bright idea was that seeing that they were already booking flights and hotels through the G.D.S. Why didn’t they now sell them tours and sightseeing which, a high percentage of their customers where going on to book those things. But they weren’t booking them through the G.D.S., they were booking them at the hotel when they arrived. They would go to the concierge’s desk and say, “can I book a tour of the Napa Value” or “can I book tickets for the Empire State Building”Or “the Moulin Rouge Cabaret.” Or whatever it was. So it was a sound idea.
We started building the technology for that. We had a contract with them. So it was an easy decision for us to make, but what happened was they lost interest in the project. Which is very common at large corporations. People more or leave the company, and the impotence for the project leaves with them. So we were left in about ‘98 or ‘99 with a solution with no home. So we decided to take it over ourselves and get into that business on our own. That’s how that happened.
Jason: Did you have to give any compensation back to Sabre?
Interviewee: No, they were very happy for us to continue, in fact, Sabre was at that time one of the owners of Travelocity, and Travelocity immediately became a customer of ours. An affiliate customer. So very happy that we continued with the project.
Jason: Did they give you any sort of technology that they had already built or where there any kind of pieces that you where able to get from them?
Interviewee: I think that the bits that we did specifically for them connecting to the G.D.S. became to a large extent irrelevant as they lost interest. Their idea was to create what was called a super P.N.R. The P.N.R. is the passenger name record. Which is the G.D.S. phrase for all of your itinerary details stored on the mainframe. What they wanted to do was augment that with details of the activity booking. So thus the term super P.N.R. So we did that integration but we ended up never using it because they had lost interest.
Jason: Gotcha. So you ending up developing your own solution then?
Interviewee: Yeah, which consisted of a database, a content management system and an e-commerce system, with a website in front of it. I guess the most substantial part of that was the E-commerce system that allowed us to sell these different types of tours because nobody had done that before. So that was relatively ground breaking.
Jason: How many co-founders where there at the beginning?
Interviewee: There were three. Peter Fox and Simon Fenton Jones, but Simon was only around for a couple of months. He was definitely there at the start. And Peter Fox, I think we bought Peter’s shares out mostly in about ‘98. He went on to do something in the video industry. But he still has a very small stake in the business.
Jason: I see. You mentioned the women coming over from Sabre, she ended up joining the company as well?
Interviewee: Yes, she was onboard when she made that connection with Sabre and stayed for a couple more years, then went on to do something different. We’ve had a lot of luck with staff retention. We’ve still got people on staff today that joined us in ‘96, ‘97 when we were employing our first people. But she wasn’t one of them, she moved on to do something else.
Jason: Gotcha. How did you fund the company initially?
Interviewee: We funded it internally. We were lucky that we had paying customer pretty much from the get go. And then in ‘97, an Australian investment company, Technology Venture Partners, invested $700,000 dollars, I think it was, their first round of investment, and that allowed us to build out the e-commerce solution. And they are still shareholders today and a great supporter of the company.
Jason: That’s a long time. That’s impressive.
Interviewee: Yeah, I would say they’re a great supporter. Their patience has been sorely tested.
Jason: So, you were saying you had the web development consulting arm, I guess you could say, was the initial founder of the business. How long did you continue the web development side?
Interviewee: Once we had the funding, we were able to scale that back. We continued to support two customers that we’d begun doing some sizable projects for, multi-million dollar projects, and they were British Airways and Qantas, the airline here in Australia. Those projects were so substantial that we didn’t want to give them up. They also came with terrific flight benefits as well. So there was sort of a personal preference for keeping those customers on board. It’s nice flying business class and not having to pay for it.
Jason: Yeah, that’s a nice benefit. Certainly. What motivated you to ask for, or to go after, the outside funding?
Interviewee: Well, I think it was clear that it was going to be possible to reasonably big businesses on the web… that it was a wave that was worth trying to catch. So you could either just stay small or you could try to grow. Growing meant hiring people, doing more marketing, expanding your footprint, and internal growth is difficult. You got to add more customers than you can service. You sort of never get the fly wheel spinning fast enough. Getting that external funding meant we were able to establish an office or a presence in London, establish a presence in San Francisco, and recruit more content into our database, put people in the road so they could get all the European suppliers that we wanted to have, etc., etc. So we were able to do that really quickly once we had that flow of funding.
Jason: Gotcha. Let’s shift into what you were bringing up with the suppliers. I guess you solved the chicken and egg problem with needing tour operators on the site and then needing to find travelers as well. How did you find the tours at the beginning?
Interviewee: We hired people into our product group who had an understanding of the markets anyway and you know, frankly, if you go to a location, lets say, Paris, it’s not hard to figure out the iconic activities are in that location and then to figure out who the supplies of tours are in that location.
At the time, you just have to go into the lobby of your hotel and look at all the brochures on the rack. There are also big industry conferences like Pow-Wow in the United States and ITB where all these suppliers come and they would talk to travel agents so we started turning up at those conferences and signing contracts. And this is a really interesting area of our history. Initially, suppliers were skeptical. They were skeptical of the web. And if they weren’t skeptical, if they were excited about the web, they were often excited about doing it themselves. They didn’t see the need for an intermediary. In the first year or so, we did okay, but we didn’t get all the suppliers we wanted into our database. Within a couple of years, what we found was A.) The suppliers that we did bring on were getting so many bookings from us, they were telling their friends and they were becoming great supporters of us and B.) Those who thought they could do something on the web themselves realized how very hard it is to build a good website and to get people to come to it. And then to process bookings through it is actually a challenging thing. Us doing it for them became quite attractive.
There was also one other or a couple of other fundamental things that we did. One of them was we always paid our bills on time. So we established a day of the month and we told the suppliers in Europe “You’re going to get paid on this day” and we told the suppliers in America “You’re going to get paid on this day” and other parts of the world, etc. And we insisted on paying directly into their bank account and not cutting checks.
And we followed that to the letter. Now that, at the time, I’m not going to comment about what it’s like today, but at the time that was unusual to say the least in the travel industry, where most travel companies would have somebody whose job was 100% of the time just following up on people who had owed them money. So, in comes this new company Viator that’s on the web (which is sort of brand new in itself) and for some unknown reason we actually pay our bills, in full every month without question. That turned out to be a sort of stroke of genius for the company because it gave us a reputation that stood out in the industry. And it was a simple thing that has really been one of the foundations upon which the business has been built.
Jason: That’s great. It’s always cool when you hear good customer service is such an important part and one of the keys to growth. That’s great. I wanted to go back just slightly. How did you convince these initial tour suppliers to sign on with you guys?
Interviewee: We had a good story, our product, people would go in with a great presentation. But often, it was simply the fact that the people themselves, not the company, but the people themselves were known. So our product team was not just a bunch of guys that we found out on the street looking for jobs. They were travel industry people who had worked VA Holidays or Qantas Holidays or somebody like that who knew the key suppliers anyway, and who weren’t meeting them for the first time, who already had a great reputation out there in the industry.
Jason: Good old fashioned networking.
Interviewer: Yeah, completely.
Jason: So then you also mentioned how happy your suppliers were at how many tours that they were getting through you guys. How did you find those initial customers?
Interviewee: Well, it was a mix at the start of our affiliate business. So we had partners like Expedia, Travelocity, and Priceline. And right now we probably have a thousand or twelve hundred affiliate partners. I’m not sure what the numbers were in the early years, obviously a lot smaller than that. It was a mix of that business plus our own site Viator.com. Because we’ve been out there in the search engines for ten or twelve years now and because at start there was very little competitions for those keywords, we’ve always done quite well in terms of a Google search for “things to do in Paris” has probably always brought up a Viator result pretty high. So, whilst we weren’t very good at it back then, we actually didn’t have to be very good at SEO back then and you would still find stuff on the Viator site.
Jason: You were saying you had Expedia and Priceline, these big partners, at the beginning?
Interviewee: We did. Priceline is still a great partner of ours, a great supporter. And we have literally some of the best names in the industry. Expedia took it in-house because it became an important part of their business. Travelocity took it in-house. We’ve worked with Orbitz over the years. We’ve worked with many of the OTAs around the world, hotel groups, car rental firms, offline travel agencies. But that is not the most substantial part of our business. It turns out that customers like to do, it seems, a separate search for their tours and activities. And they do it at a separate occasion as well.
The travel planning process tends to be “Let’s decide on a destination, let’s see if we can find a great fare, now let’s see if we can find a terrific place to stay, and if we can book all that let’s take a breather” and then few weeks out from travel (that is, a few weeks in advance from travel) a person will sit down and say “Jeez, we’re going to Paris… or Barcelona, or wherever it is… we better book that thing that we really want to do there, otherwise it might be booked when we get there and we won’t get to do it.” So they start doing that research and when you do the research as a separate Google search, you’re pretty likely to find Viator.
Jason: So even at the beginning your first 100, your first 1000 customers they were mostly finding you guys direct?
Interviewee: I’d say the first 1000 or so were through partners like Expedia, but after about a year it began to switch
Jason: Expedia is obviously a really large company now, I cant say how big they were then but they seem like they would be a very large company. How did a small upstart like Viator convince them to become a partner?
Interviewee: Well they had a vision of wanting to be a one stop shop in every sense of the word and I think that’s a pretty reasonable vision, but as they were building their own business they were very focused on flights and hotels and packages and that consumed all of their time thinking about those things I mean just the hotels part which is such a substantial revenue driver for a OTA. You need an awful lot of people to make that happen on a global scale, so partnering with Viator gave them a way to offer thousands of tours and activities around the world instantly with a single connection, now they didn’t make quite as much commission or revenue from the sale by doing it through us but they got to do it rather than not at all so it was a pretty easy decision.
Jason: Impressive. Switching gears then just a little, what was the biggest assumption you made that turned out to be wrong?
Interviewee: Well I think the biggest assumption was around that, it was that buying travel and buying activities was sort of a burger and fries type analogy in other words people would buy the core components of their travel and then we would be the fries they would say I’ll have a tour with that as well you know if I’m going to San Francisco I probably should go and see Alcatraz so I’ll buy that tour now as well.
It turns out that the flight is the burger, the hotel is the fries and we are the sundae and as you know probably from your own fast food experience you don’t always have a sundae and if you do you may in fact choose to buy it from Baskin Robbins who are a specialist just down the road and so we ended up the reality was that we’re a Baskin Robbins with you know we just specialize in dessert and the OTA’s yeah they offer a sundae but it’s sort of an afterthought and that turns out to be a pretty good analogy for our place in the industry.
Jason: It was a good analogy. What advice would you give a new entrepreneur interested in travel?
Interviewee: Well this is something that actually came up at PhoCusWright innovation summit in November. One of the things we see at the innovation summit where there’s twenty or thirty in fact I think about thirty companies get up and talk about their new businesses is that you’ll often hear an entrepreneur say that the genesis of their business was they were planning a trip and they discovered that “such and such was difficult to do” or “there was nobody doing this” and they said “oh I should do that” and they decided to start a company. I think that’s probably in fact I’m pretty sure that’s probably not a good reason to start a company. A good reason to start a company is that there is broad consumer demand for the service that you identified but I think often enough the research to determine whether or not something that you thought was a need in the marketplace is actually a view that’s shared by hundreds of thousands of people. Often that research doesn’t occur and people simply say oh somebody should do this, I have those skills I should do this. So we’ve seen at the innovation summit over the years and quite a few companies that had that basis and they don’t last very long because they don’t go through that sort of devil’s advocate role for themselves and there’s nobody externally doing it for them. That make sense?
Jason: That makes complete sense. I’m probably in that boat. How do you recommend doing the research?
Interviewee: Well, you know, you start by talking with your friends and family. If you say, look I’ve got this great idea for a company, I’ve got to do this, this and that. You know, people don’t want to reign on your parade.
You’ve got to start by asking the question, you know, why, ask them a question about a business in a way that gives them a complete license to say “Jason that is the dumbest idea I’ve ever heard. Why on earth would you spend your time planning on doing that?”
And the harsh reality is people won’t be that honest with you. If you phrase the question in a certain way, you have to give them the out to do that. And then you have to expand that out to broader consumer market research and there are many tools on the web, that allow you to do surveys of web users and ask them about a business that you are thinking of setting up. But then again, it is really crucial to pose the question, to put the survey together in a way that the survey respondance is honest and unbiased in a response to you. You have to open yourself up to the reality that your idea may be a load of rubbish and get people a change to tell you that. And that’s hard for entrepreneurs to do.
Jason: I completely agree. It’s definitely hard. I want to be respectful of your time, it is almost half past hour, last question to talk about your current project. Qewz, am I pronouncing that right?
Interviewee: Yes, as in news except with a “Q”.
Jason: Gotcha. So tell me a little bit Qewz and what is coming next for that project?
Interviewee: Well, it’s a technology heavy project. We use natural language processing, to look at the meaning of news articles or more specifically to look at the perspective that an article is written from. So, for example right now, there is an awful lot being written about the events in Tucson and an opinion article on that will come from a particular perspective.
What we are looking to do is to present news to consumers in stereo rather than in mono, which is if you read New York Times you are going read a liberal view of a story, if you go Wall street journal you are going to read a consumed view of a story, and the way people use the web today, is they tend to program their input style, people just do go to certain sites to read the news.
We are going to aggregate perspectives around a single story in such a way, when you read via Qewz, you’ll be reading multiple perspectives, so you’ll see coverage of the news article that you are interested in from a variety of different sources that the system has selected based on the perspectives. So you are seeing one liberal, one conservative, one very radical, libertarian view, etc. etc. It’s hard, believe me.
Jason: I took a look at the beta, I totally understood what you were trying to do, and to be honest I really loved the idea. I may have looked at the North Korea story and just seeing the different perspectives on that, it was very interesting.
Interviewee: All of the perspectives are obvious out there, but in all course of reading a new story you wouldn’t think to say I wonder what the conservatives are saying about this or I wonder what the press in South Korea are saying about this. Yet when you do that, when you force yourself to do that, you’ll instantly be thinking about the story in a different way.
Jason: Yes, definitely. I am a type of person who goes to one web site for the news and I get to see only their point of view which is typically the point of view that I like the best.
Interviewee: Right, we all do that. What is the web site that you go to?
Interviewee: Good choice.
Jason: It tells me most of the stuff I need to know but they got a lot of crap on there too. So thank you very much.