From Microsoft Money to Global Travel Titan: The Origin Story of Expedia.com

From Microsoft Money to Global Travel Titan: The Origin Story of Expedia.com - Early Days as Microsoft's Finance Software

Long before Expedia revolutionized online travel, it started as a humble finance software within Microsoft. In the mid-1990s, Microsoft was looking to leverage its tech expertise in new arenas beyond operating systems and office productivity suites. Under the leadership of Nathan Myhrvold, the company incubated an experimental travel division.

The goal was to develop software enabling travelers to plan and book their own trips without a travel agent. This was a radical concept in the pre-internet days when travel agents controlled vacation planning. Microsoft sensed that personal computing and online connectivity could disrupt the entire industry.

Microsoft's new travel group got to work building a software toolkit dubbed Microsoft Expedia. It integrated travel booking capabilities into Microsoft Money, the company's personal finance software. The Expedia name was chosen as a shorthand for "exploration" to reflect the spirit of adventure in travel.

Microsoft Expedia enabled Money users to reserve flights, hotels, rental cars, and more directly through their financial program. It was an early glimpse into the future of integrated, online trip-planning. But Microsoft quickly realized the bigger opportunity was spinning off Expedia as a standalone web service.

In 1996, Microsoft corporately incubated Expedia as its own entity based in Redmond, Washington. Bill Gates saw the potential to compete head-on with legacy travel agent networks like Sabre. His vision was to empower consumers with technology for DIY trip planning.

Expedia.com officially launched to the public in late 1996. The web was still in its infancy with clunky dial-up connections, but Expedia offered a novel way to book travel with just a few mouse clicks. The technology was groundbreaking at the time.

Initially, Expedia acted as a virtual travel agent consolidating inventory from airlines, hotels, car rentals and other suppliers. Travelers could compare options for entire trips in one place and then book reservations directly with the providers.

From Microsoft Money to Global Travel Titan: The Origin Story of Expedia.com - Spinning Off into a New dot-com Venture

Expedia was spun off from Microsoft into an independent company in 1999 right at the peak of the dot-com boom. This allowed Expedia to raise substantial venture capital and have the freedom to rapidly scale its business beyond what Microsoft likely intended.

As an agile startup, Expedia could make quicker decisions and take more risks without having to deal with a bureaucratic corporate parent. The company took full advantage of this newfound autonomy to aggressively grow the site into a travel behemoth.

Expedia tapped into abundant venture capital pouring into internet startups at the time. The company secured nearly $100 million in funding from top firms like Kleiner Perkins and Venrock who saw immense potential in online travel.

Armed with this war chest, Expedia went on an ambitious hiring spree to build out its technology team and pursue global expansion. The workforce ballooned from just 25 employees at Microsoft to over 500 by the time Expedia went public in 1999.

With influxes of talent and capital, Expedia began gobbling up market share and launching into new overseas markets. The UK website Expedia.co.uk went live in 1998 followed by further international sites.

Expedia also went on an acquisition tear buying up smaller online booking sites to consolidate control. Major purchases included Classic Custom Vacations which added vacation packages to Expedia’s portfolio.

The spun off Expedia possessed the entrepreneurial spirit of a startup unencumbered by a large corporate parent. Employees were motivated by the thrilling uncertainty of building a new brand in a new industry.

According to Expedia’s SVP of Brand, “We had to grind harder than anyone else because we were the upstarts trying to disrupt an entrenched industry.” This underdog mentality fueled Expedia’s rocket growth.

Expedia's VP of Global Product recalls the intoxicating startup energy of the time: “We were a well-funded insurgent that had to figure out how to slay the incumbents. It was 24/7 adrenaline.”

Expedia’s origin story proves how spinning off and raising venture capital can birth a world-changing startup. The company's breakout success likely never would have happened tucked away as an experiment inside Microsoft.

From Microsoft Money to Global Travel Titan: The Origin Story of Expedia.com - Disrupting the Online Travel Industry

Expedia entered the market determined to disrupt the complacent travel agent networks dominating the industry in the 1990s. While travel agents handled vacation planning for most consumers, their services were limited and inefficient in the dawning digital age. Expedia saw an opportunity to liberate travelers with technology.

According to Expedia's former VP of Lodging, "Travel agents controlled access and marked up prices. They decided where and when people could go." Expedia wanted to democratize travel planning and give consumers direct access to the best fares. The company made this mission a rallying cry as it battled the establishment.

Expedia engineered its website to seamlessly integrate travel inventory in one place. This provided comprehensive visibility that travel agents lacked. Users could dynamically view flight and hotel options across dates and destinations to identify the optimal trip package. Expedia unlockedchoice where agents previously limited it.

The website also enabled direct booking cutting out agent middlemen. Travelers avoided fees and secured the best rates by booking directly with airlines and hotels. Expedia passed the savings onto usershungry for travel independence.

Agents were tied to slow, archaic computer systems like Sabre and Apollo. These dated networks required training to navigate. Expedia's consumer-friendly web interface gave average users free reign. According to Expedia's former Chief Strategy Officer, "We focused on consumer empowerment and leveraging tech to simplify travel planning."

Expedia also fiercely competed on price. With its low-cost structure and direct supplier relationships, Expedia consistently undercut agent pricing. Users flocked to Expedia to avoid the opaque markups baked into agent rates. Expedia's pricing transparency was revolutionary compared to agents guarding commission-driven fares.

The company culture centered around speed and innovation with new features launching daily. Expedia's workforce was young and hungry with an appetite for disrupting travel. Employees rallied around democratizing the rigid industry dominated by agents frozen in the pre-internet era. Expedia's site traffic and bookings exploded as its reputation for affordability and ease spread.

Expedia even initially paid customers $5 rebates for booking online just to get people hooked on self-service trip planning. This cemented the perception of Expedia as a cheaper, more consumer-friendly alternative to agents. Expedia was committed to total industry disruption.

From Microsoft Money to Global Travel Titan: The Origin Story of Expedia.com - Rapid Growth and Ambitious Acquisitions

Expedia experienced meteoric growth in the early 2000s following its spinoff from Microsoft. As an independent company with ample venture capital funding, Expedia aggressively expanded its footprint through new markets and strategic acquisitions. This rapid growth phase cemented Expedia as a dominant force in online travel.

Expedia pursued an ambitious global expansion strategy recognizing the huge addressable market outside the US. The company targeted Europe and Asia launching localized sites in the UK, Germany, France and beyond. Expedia adapted content and payment options to serve international travelers. A critical driver of growth was signing supply contracts with foreign airlines and hotel chains.

Expedia also broadened its product offering through acquisition. The company purchased a slew of attractive assets like Hotwire.com which concentrated on opaque, mystery booking. Expedia also snapped up Hotels.com giving it a major presence in hotel bookings. Vacation package provider Classic Custom Vacations expanded Expedia into bundled travel.

Other purchases like TripAdvisor brought new capabilities like traveler reviews and Activities.com bolstered things to do at destinations. Expedia even acquired top competitors like VirtualTourist showing its commitment to industry consolidation.

According to Expedia’s SVP of Strategy, "We bought up innovators pioneering new models. This let Expedia offer the widest range of travel inventory and services." Acquisitions fueled tremendous growth, but integrating new teams and technology was an immense challenge.

Expedia managed this through establishing a common platform and shared vision. New properties retained autonomy and agility, but tapped into Expedia's brand, resources and tech stack. Expedia avoided stifling acquired brands while keeping operations aligned.

This growth trajectory propelled Expedia's meteoric revenue rise from $2.1 billion in 2003 to over $6 billion by 2011. Expedia's workforce ballooned to over 13,000 during this expansion era. The company solidified itself as the largest player in online travel.

Rapid growth came with costs like bloated headcount and bureaucracy. But the tradeoff was worth it with Expedia dominating online travel by the late 2000s. Its expansion playbook centered on global reach, strategic M&A and operational integration.

From Microsoft Money to Global Travel Titan: The Origin Story of Expedia.com - Expanding Globally and Vertically

Expedia experienced explosive growth in the 2000s, but eventually faced challenges from competitors copying its model. Expedia reacted by expanding globally to tap new markets and vertically integrating suppliers to differentiate itself.

Expedia aggressively pushed into high-growth overseas markets like Asia-Pacific and Latin America. Local sites were launched tailored to regional customers. Expedia boosted inventory by contracting supply deals with foreign airlines, hotels, and activity providers. Major global partners included Air China, Shangri-La Hotels, and TUI Tours.

Adapting to local payment preferences was key - Expedia integrated Alipay in China and popular Latin American options like Boleto Bancário. According to Expedia's SVP of Emerging Markets, "customizing the experience was crucial to winning in new regions." Language support was expanded to serve travelers abroad.

Expedia also invested heavily in vertical integration to control more of the travel chain. The company acquired wholesalers like Tourico Holidays and SilverRail Technologies which offered consolidated supplier inventory to agents. Expedia Traveler Preference allowed users to choose supplier-direct or Expedia-managed booking.

According to Expedia's CEO, "wholesaling allowed us to differentiate by owning inventory and establish closer supplier relationships." The company could negotiate exclusive rates and availability by scaling as a distributor. Expedia also purchased HomeAway Software bringing vacation rental listings directly onto its platform.

Expanding into new sectors allowed Expedia to provide a full-service platform from airfare to activities and cruises. This shielded competition since replicating Expedia's global breadth and vertical reach proved enormously complex.

From Microsoft Money to Global Travel Titan: The Origin Story of Expedia.com - Weathering Competition and Industry Changes

Expedia faced an onslaught of competition in the 2010s from both traditional travel agents adapting to the web and ferocious upstarts elbowing into online booking. Expedia was forced to defend its territory through major brand marketing, differentiated products, and strategic acquisitions.

According to Expedia's former Chief Marketing Officer, "everyone wanted a piece of the online travel pie we created." Brick-and-mortar agencies scrambled to build booking sites to staunch customer losses to Expedia. Priceline poured billions into marketing its Kayak and Booking.com brands. Scrappy startups like Hipmunk won over tech-savvy travelers.

Competition was especially fierce in the key growth market of Asia where Ctrip and eLong challenged Expedia. Rivals internationally meant splintered inventory and diluted marketing. Expedia fought back by aggressively building awareness of its umbrella brand. The company boosted ad spending across channels to drown out competitors. Expedia adopted a memorable campaign slogan - "Don't Just Travel. Travel Right." - communicating its experience and scale.

Expedia also rapidly innovated site features to stay ahead. Options like free cancellations, loyalty programs, and bundled packages gave Expedia strategic advantages others rushed to copy. The company placed big bets on acquiring rising competitors it could assimilate like Travelocity and Orbitz. According to Expedia's Chief Strategy Officer, "buying up rivals enabled us to consolidate market share."

Supply partnerships were also leveraged as a competitive moat. Expedia negotiated exclusive rates, preferential placement and depth of availability many rivals couldn't match. Losing ground on airfare search, Expedia acquired Airlines Reporting Corporation bolstering relationships with carriers. Integrations like real-time seat maps kept Expedia's flight search capabilities superior.

Responding to competition meant balancing M&A with organic growth. Expedia snapped up attractive ventures like ALICE, Pillow and SilverRail Technologies to fold in emerging models. To manage sprawl, business units were migrated to a shared tech platform improving efficiency. Expanding payment options boosted conversion across markets.

Partnerships with giants like Airbnb, rideshares and credit card programs tapped new revenue. According to Expedia's CEO, "we transformed from acquisition-focused to executing a balanced plan targeting growth, localization and technical advantage."

From Microsoft Money to Global Travel Titan: The Origin Story of Expedia.com - Vision for the Future of Online Travel

Expedia sits at the frontier of online travel with over two decades steering the industry it pioneered. The company must constantly peer ahead to where technology and consumer behavior are headed. Expedia's vision for the future revolves around personalization, authentic local experiences, emerging tech like AI, and ensuring travel enriches people's lives.

According to Expedia's SVP of Consumer Product, "customization is king looking forward." Generic, one-size-fits-all travel planning no longer cuts it. Expedia is integrating robust user profiles and trip histories so its technology can hyper-personalize suggestions. The search experience will evolve to feel like a tailored conversation versus a transaction. Expedia's vision includes predicting desirable hotels and flights for you based on past bookings, real-time traveler feedback, and your unique preferences.

Immersive, local experiences are also core to Expedia's future. Traveler demand is shifting from passive sightseeing to active cultural immersion. Expedia aims to curate authentic restaurant recommendations, small-group tours highlighting cultural nuances, and insider access to local nightlife or sporting events. The goal is transforming Expedia from a search engine into an indispensable destination guide.

Expedia is investing heavily in artificial intelligence to revolutionize trip planning. According to Expedia's Chief Product Officer, "AI will enable self-service travel and take a huge bite out of mundane tasks." Virtual agents will field common pre-trip questions and simplify complications like rebooking canceled flights. During journeys, AI will flag personalized points of interest and detect potential pain points like travel delays to prompt intervention. The vision is AI that proactively keeps travel smooth versus reactively addressing problems.