State of the Art: Uber’s C.E.O. Choice Faces a Question of Ambitions

State of the Art: Uber’s C.E.O. Choice Faces a Question of Ambitions

- in Automotive

But Mr. Khosrowshahi’s past at Expedia sheds some light on his temperament. He has had a largely successful run there, and appears to be a patient operator who can fix an ailing company.

His tenure also suggests a very different outlook from Mr. Kalanick’s. In one of the biggest misses of Expedia’s history, Mr. Khosrowshahi appeared wary of taking a big, potentially lucrative risk on a groundbreaking new idea in his industry — and he came out the loser. To his credit, he helped steer Expedia to adjust from that mistake. But his initial impulse may suggest a more risk-averse mindset than Mr. Kalanick’s — though that, of course, may be just what Uber needs now.

The story of Expedia’s big early miss is well-known in the online travel industry. Expedia was one of the pioneers of online travel bookings. The company was created by a team at Microsoft in 1996 and later merged with properties at the media company IAC, then spun off as an independent public company in 2005, with Mr. Khosrowshahi as C.E.O.

Its hotel booking business grew out of an acquisition that Mr. Khosrowshahi made while he was an executive at IAC in the late 1990s, and for several years, it looked unstoppable and deliciously lucrative.

Expedia then operated according to what’s known as the “merchant model.” Under this system, when you booked a hotel, you would pay up front to Expedia, which would take a profitable cut of the deal and buy the room on your behalf. Expedia’s margins were startling — the company got 25 percent or more of what you paid for the room.

But there was a great disrupter on the horizon. As Dennis Schaal, who covers the online travel industry at the travel-news site Skift, has reported, in the mid-2000s a small Amsterdam-based site called set about turning the merchant model on its head.

Instead of taking a large cut of the room, used what is known as the “agency model.” The site let hotels set their own far smaller commissions — as low as 12 percent. And it also let hotel guests pay when they got to the hotel rather than up front.

Mr. Khosrowshahi and his team considered buying, but as he explained to Mr. Schaal in 2016, Expedia was too fixed in its ways, and could not tolerate Booking’s lower margins.

“I think it was because we were attached to the merchant model and we were attached to high margins at the time,” he told Mr. Schaal. “And I think in hindsight that blinded us.”

It was a costly mistake. Expedia’s biggest competitor, Priceline, swooped in to buy — and turned it into a monster.

Uber had globe-swallowing ambitions under former chief executive Travis Kalanick.

Laetitia Vancon for The New York Times

Under Priceline, quickly became the largest hotel booking site in the world, because its cheaper model created a dynamic that Mr. Khosrowshahi and others at Expedia had not anticipated. It lowered prices and vastly expanded the number of hotels participating on the site — making very popular with hotel-seekers, and making it impossible for hotels to pass up.

Ben Thompson, who writes the tech newsletter Stratechery, argued in his Monday edition that Mr. Khosrowshahi deserves credit for recognizing the mistake and working to repair it. Expedia began delving into the agency model and now runs something of a hybrid approach, and in recent years its growth rate has been catching up to Priceline’s.

This history, Mr. Thompson wrote, might inform how Mr. Khosrowshahi approaches Uber. In the same way that became popular with hotel guests because it had the largest inventory of hotels, Mr. Khosrowshahi might understand Uber’s secret is its popularity with riders.

“In fact, what makes Uber so valuable — and still so attractive, despite all of the recent troubles — is its position with riders,” Mr. Thompson wrote. “The more riders Uber has, the more drivers it will attract, even if the economics are worse relative to other services: driving at a worse rate is better than not driving at a better one.”

This sounds reasonable enough. Yet I still found myself fixated on Mr. Khosrowshahi’s initial dismissal of I suspect that if you told Mr. Kalanick, not to mention Mr. Bezos, that there was a competitor out there that had figured out a way to sell the same product at a vastly lower price, they would have moved instantly to purchase or copy it, regardless of the risks to short-term profits. Sacrificing lots of money today for a potentially huge share of the market in the future — that’s classic Mr. Bezos, and then classic Mr. Kalanick.

In fact, that’s pretty much what Mr. Kalanick did when he created UberX, a cheaper version of his original black-car service, in response to lower-priced entrants like Lyft.

That Mr. Khosrowshahi did not do that suggests he has a very different appetite for risk. It also suggests he may seek to turn Uber into a more normal, slower, less intense, less globe-swallowing company — but perhaps also a better company to work for, and one that may begin making money instead of losing it.

For everyone who’s had enough of Uber’s drama lately, that may be a fine trade.

Correction: August 30, 2017

The State of the Art column on Tuesday, about challenges facing Dara Khosrowshahi, Uber’s pick as its next chief executive, misstated the year Dennis Schaal of the travel news site Skift spoke with Mr. Khosrowshahi. It was 2016, not 2014.

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