This earnings call was going to be different from the outset.
“I haven’t been on one of these analyst calls in I don’t know, [an] endless amount of time, so I’m probably a bit raggy,” Expedia Chairman Barry Diller said on Thursday. “But I won’t ask your indulgence. I’ll just kind of plunge in.”
For the next 56 minutes, Diller took center stage as the media mogul opened up about the future of Expedia.
It didn’t seem to hurt investor perception. Expedia shares were up 10 percent in after-hours trading following its fourth quarter earnings report.
The world needs more Barry Diller conference calls
— Dan Hurley (@ApexHurley) February 13, 2020
Diller and vice chairman Peter Kern took over day-to-day operations at the Seattle-based travel giant after the abrupt resignation of former CEO Mark Okerstrom and CFO Alan Pickerill on Dec. 4.
At the time, Diller cited a strategy disagreement between the top executives and the board over efforts to unify the company’s brands and technology. The shakeup came a little more than two years after Okerstrom was promoted to the CEO role, succeeding Dara Khosrowshahi after he left to become Uber’s top executive.
Diller shed more light on the changes at Expedia, and also talked about the impact of Google, Airbnb, coronavirus, a potential CEO search, and other issues affecting the $16 billion company.
He seemed to genuinely enjoy the discussion. At one point, when the call operator cut off an analyst who was trying to ask a follow-up question, Diller stepped in. “No, you can go ahead, what did you want to add?”
“I appreciate that, Barry,” the analyst said.
Diller was rather blunt throughout the call, describing Expedia’s organization as “bloated” and calling HomeAway a “dumb name.”
Diller, chairman of Expedia for nearly two decades, began with what appeared to be an off-the-cuff opening statement that reflected his optimism for the company in the wake of its recent executive shuffle. He’s spent the past two months “on the ground” with Expedia leadership, learning the ins and outs of the business, and figuring out what needs to change.
The 78-year-old shared something he heard recently that has “rang in my ears.” It was an anecdote that in Seattle, for employees at Amazon the work-life balance mantra was “all work and no life,” whereas at Expedia it was “all life and no work.”
“Now that’s an enormous exaggeration. We’ve got wonderful people in the business and this is not damning our employees,” Diller said. “But for several years we really lost clarity and discipline. So we’re changing a great deal. We’re stopping this too large complexity. We’re simplifying our strategy. We’re stopping doing dumb things and starting to do what we think are good things.”
Added Kern, who was also on the call: “We’ve learned a ton in the last two months. We’ve seen some great people and great things. And we’ve seen a fair bit of wasted energy and calories going into things that may not have promise, and may not get us to the promised land. And certainly we have not learned and been agile enough and willing to say no to things and willing to acknowledge failure when it happens.”
The reorganization effort led by Okerstrom — who joined Expedia in 2006 — aimed to unify the company’s brands and technology, and help Expedia take better advantage of the larger company’s scale.
But Diller on Thursday called the plan a “complicated process that froze us” and misled management.
“We’d somewhat become a kind of consultant-led and wildly complex business,” Diller said.
Expedia stock sank after the company missed earnings expectations in November. Shares have risen since the executive swap in December.
Some of the planned changes include getting all of the company’s data on one platform — Expedia owns several brands such as Orbitz, Trivago, Vrbo, HomeAway, and more — and to aggressively grow its direct-to-consumer business. The company is also targeting $300-500 million of run-rate cost savings across the business.
“We have historically taken a brand-by-brand approach and now we are taking a market-by-market approach,” said Kern.
Here’s a recap of Diller’s other comments:
On Expedia’s next CEO:
“We’re not doing a CEO search. I don’t know that we’ll ever do an actual search. I’m not a big believer in ‘searches.’ I think they usually turn up the usual and obvious suspects. When you only know somebody from interviewing and recommendations, I’d say your failure rate is certainly above 50% from my experience. Anyway, we’re not doing that.
First of all, Peter and I are completely engaged. We are operating the company, we are responsible for the company and it is our responsibility. That is not to say that during the calendar year 2020, a chief executive will emerge from this process. Right now, time will tell.
We had to make this unfortunate management change. I’ve said before, it was not to demean Mark Okerstrom or the CFO, but it really was a real difference in what we actually thought. And that happens. There’s no damning here.
But from that moment, I got incredibly energized about this because I actually began — other than superficially, as chairman — to really understand the levers of this business and what the opportunities were and what the condition of the company was that I thought relatively quickly we could turn. So we’re at it and it’s not going to last beyond 2020. But that’s where we are for now.”
On the future of online travel — and Google’s impact:
“There’s no indication that it is going to do anything but continue to gain adoption. It will continue to grow. There’s nothing in its path.
There are existential issues that have been raised, of course. One is Google. … I’ve been quite vocal about this. Google has certainly a monopoly share all over the world and it does what monopoly shares get you to do, which is extend its business in every direction they can.
Now, so long as they don’t use unfair practices, I’ve got no problem with that. But when they compete against their advertisers — and we are one of their largest advertisers — they’re using their tactics to squeeze these entities that are delivering real service. It’s, among many things, antisocial. I think it’s bad practice.
… I told the senior management of Google exactly what we feel about this and have implored upon them to basically stop actually taking away the profits from businesses that are probably one of their main contributors to their advertising revenue. I don’t know whether that’ll have much effect, but I’ve been very straight forward about it.
When businesses get to this size, they absolutely have to have regulation — sensible regulation. I’m not talking about break-ups, I’m not talking about any crazy stuff. But I do believe that will happen.
But we are making our own efforts. We’re driving direct relationships with consumers. Our download apps, we have about 400 million of them. Their growth is actually up 40% this year. We’re going to drive more downloads, we’re going to do everything we can to diversify our traffic to more direct arenas. We also have [Expedia Partner Solutions], our business to business business, which does not depend upon Google and that’s growing terrifically and we’re going to push that, too.
Sorry, I went on a bit, but as I said I haven’t done this in a while.”
“SEO is not going to kill us. And SEO is not the future of our business. These trends began seven or eight years ago. We should have been more alert, obviously, to the continued consequences. As I said, I don’t think we’re going to be saved by some government bell. I absolutely believe there will be regulation. But we are doing all the things that we intend to do to de-emphasize it. It’s still a part — not a huge part — but it is a part of our business. But it ain’t the future.”
“I’m very impressed with what Airbnb has done over time. I wouldn’t call it a revolution. But not only has it opened up inventory that didn’t exist, it’s also brought people in to traveling that couldn’t afford it before or didn’t want to mess with big stiff hotels and also people who wanted a different experience. It’s done a great job.
If you put their inventory against the hotel inventory, they have kind of different audiences. I’m not a big believer that they’re going to merge. So I think there’s a very healthy standard hotel business and there’s going to be this business, and we’re participants in it.”
On coronavirus and its impact on Expedia:
“I’m just going to spout out something here on the virus thing. I think it’s going much beyond [Asia]. I think people are worried. In New York City, people are in buses and subways with masks on. I think there’s been one case reported in New York. So I think this is a damper. How far this goes? I mean, a week ago it was supposed to kind of be lessening and yesterday it shot up in terms of the infected cases.
I mean, do we have a pandemic? I don’t know. I have to believe that now the activism of every country in the world on this is going to contain it quickly. Now, by the way, that’s a statement with no facts and no knowledge so you can all toss it. But, we don’t truly know the extent of it. It is going beyond Asia. And it will go beyond Asia.
(Later in the call) Listen, it truly is an unknown. I know everybody’s asking about it. Look, you’ve got to believe it’s going to be contained. If it’s not contained, the entire world’s going to shut down. So all you can do is every day you read the news and react to it. I think anybody as an investor, unless you think this is going to be the end of life as we know it, who cares? Believe me — I don’t mean who cares. A lot of people are going to get sick. But really, this is an exogenous event. It will end. And frankly, no one should count it. All we’re trying to do is separate what we absolutely believe is the effect of the virus from our ongoing business, so we can prepare ourselves and make that ongoing business as strong as possible when this thing’s over.”