($) Social Media Platforms Are Asking Users for Money. They Probably Don’t Mean You. Charging power users makes sense. It’s impossible in my mind that social media can charge ordinary users while they can only make money when their platforms are accessible to many. The problem is that the current benefits don’t justify a subscription. Even if the benefits are good enough to warrant a recurring payment, the platform operators need to thread the needle carefully. Content creators are sought after. Platforms incentivize creators to generate exclusive content. If charged too high, what would stop creators from uprooting their content and bringing it to another?
JPMorgan Chase buys data platform for startups in push to serve venture capital investors. JPMorgan Chase is showing that it’s serious about becoming a key player in the venture capital game. There is already a matchmaking platform in place for investors and entrepreneurs. The acquisition of aumni brings in a data analytics platform for venture firms. In addition, there is also Global Shares, a startup specialized in managing employee stock grants. The behemoth bank is ready to open its wallet to bring in critical capabilities from the outside. The end game? My GUESS is that JPMorgan Chase wants to be the commercial bank for these startups, to nurture the relationship till they become public names and to house the enormous sum of deposits that can fuel the lending side.
How to hire a CFO and build a finance team. “Seasoned chief financial officers (CFOs) help a business ramp toward IPO, optimize treasury management, and even navigate major external crises, as we’ve seen with recent collapse of Silicon Valley Bank. But it’s not always clear when and how to find the right finance leader. “
($) Uber Eats to Take Down Thousands of Virtual Brands to Declutter the App. As a shareholder, I am happy to see Uber take this action. It’s not cheap for the company to acquire and retain customers. Hence, it’s imperative to make the user experience on the app as smooth and great as possible. Removing bogus listings that erode the consumer trust is a low hanging fruit and a good start.
Charlie Munger in Conversation with Todd Combs. “I think the people who tend to get the best results are these fanatics who just keep searching for the great businesses. And the best of them don’t expect to find 10 or 20 or 30. They find one or two. And that’s the right way to do it — but all you need are one or two.”
This month is my birthday month, so my wife and I went to Washington DC for a little celebration. I’d like to share some tips that we collected and a list of places that may be of interest to you. (Spoiler alert: we are into food!)
What to do for a better experience
Stay close to a Metro station. DC has a very good network of Metro trains and buses that cover a wide area in the city center. To save time, stay close to a metro station. It’s particularly helpful if you have luggage to carry or when it rains.
Stay close to a convenience store. It’s annoying that we paid good money to stay at a Courtyard Marriott hotel and they didn’t give us any drinking water. Luckily, there was a CVS Pharmacy that’s just one block away. So the pain of carrying water back to our hotel was manageable. You don’t want to do that over 3-4 blocks.
Download the SmarTrip app and add a pass. Ride fares in DC fluctuate, depending on the day and time of travel. To avoid the hassle of remembering every detail, we downloaded the SmarTrip app, bought either a 1/3-day unlimited pass and added it to the Wallet app. Our phones became our passes and we didn’t have to remember about the cards or take our wallets every time. If you take 5 or more train/bus rides a day, a 1-day unlimited pass is highly recommended.
Make a reservation. Many official buildings and museums in DC require time-entry passes. Therefore, reserve your spots in advance. You don’t need to be strictly on time, but having a confirmation code on hand definitely helps.
Get the registration card at Library of Congress. The Main Reading Room at Library of Congress is a spectacular place that we believe is worth a visit. It’s accessible only with a registration card. To get a card, a visitor can pre-register online, but must officially register in-person either at the Jefferson or Madison building. While the line in the Jefferson building is long, there was nobody at the Madison building. We took the pain of going through security a couple of times, but we saved a bit of time by getting the card at Madison and going back to Jefferson.
Talk to your Representative or Senator before going to the Capitol Building. The Capitol Building is free to the public and each tour takes about 30 minutes. We enjoyed being there and learning a bit about the building’s history. But access to the Senate or House of Representatives gallery requires a different pass. For international visitors, passes can be issued onsite. For US residents, passes must come from the office of their Representatives or Senators. Thus, if you want to enter either gallery, it’s best to plan and get those passes in advance.
Travel light. It’s mandatory to go through security inside official buildings. It’s more convenient to have no belts and wear shoes that can be taken off and put on easily. Remember that a trip to DC likely involves a lot of standing and walking. Therefore, make sure you carry as little as possible. Your back, shoulders and legs will appreciate you.
Wear walking shoes, if possible. These shoes will aid your legs and back in absorbing shocks. My wife wore better walking shoes than I did. There were a couple of days when I complained about my back while she was still ok.
Be early. Same-day tickets to the Washington Monument are distributed at 8:45AM every day. If you are there at 8:45AM, you will be at the end of a long line and risk not having the tickets. Also, the African American History Museum is pretty cool. However, if you are not there early, there will be also a line to the most popular part of the place.
Places to eat
Address: 1017 7th St NW, Washington, DC 20001. Opening time: 8AM – 2PM
Address: 1787 Columbia Rd NW, Washington, DC 20009. Opening time: 7AM – 3PM
The pastries are absolutely delicious
Address: 1310 L St NW #100, Washington, DC 20005. Opening time: 8AM – 12:30PM
The passion fruit, black sesame and pistachio croissants are phenomenal.
Bodegon Spanish Tapas
Address: 515 8th St SE, Washington, DC 20003
We only tried the paella and were blown away
Address: 1207 9th St NW, Washington, DC 20001
One of a few great places that open by 10AM, as far as I know. We went there 15′ after it opened and the place was already crowded. Without a reservation, guests will be seated at the bar on a first-come-first-serve basis. My wife had the Dirty Caesar Salad and I had the Lebanese Fried Rice. Both were excellent and didn’t take long to make.
Un je ne sais Quoi
Address: 1361 Connecticut Ave NW, Washington, DC 20036
The pastries here are more expensive than at other places. What we tried was good, but we probably won’t go there every day
Address: 425 I St NW, Washington, DC 20001
The Mixed Curry and Flying Fish Green Mango Salad were outstanding, but because we didn’t particularly like pickles, the “Khao Soi” dish was a bit of a letdown. You should reserve in advance as this place is very popular.
Chercher Ethiopian Restaurant
Address: 1334 9th St NW, Washington, DC 20001
If you haven’t tried Ethiopian food before, a visit to this Michelin restaurant is worthwhile. The food is colorful and good, especially the beef.
Andrew Hollingworth – Ryanair: Low Cost Obsessed. “Why did he buy 10% of the whole industry in 2017? The reason he did is because the industry is consolidated, and he could see that the industry was then having and is still enjoying a level of permanent pricing power. Now that pricing power, it isn’t permanent in the sense that it bucks recessions or it bucks pandemics, but it is permanent in the sense if your market shares roughly stays the same and if participants of that market broadly behaves themselves. And I think that’s the conclusion that Buffett reached in 2017.”
Panera Bread tests Amazon’s palm-scanning technology in St. Louis. First Starbucks, now Panera. This technology has a lot of growth potential and I expect it to be adopted by more retailers in the future. However, to foster this growth, Amazon needs to have its brand associated with privacy and security, rather than scandals and data leaks.
Arm seeks to raise prices ahead of hotly anticipated IPO. “Arm charges royalties of about 1 to 2 per cent of the value of each chip sold based on its designs, according to Sravan Kundojjala, an analyst at TechInsights. According to the new business model being presented by Arm, royalties would be set according to the average selling price (ASP) of mobile devices rather than that of the chips. Some of Arm’s customers, including Apple, are both chipmakers and device makers, and have special licensing and royalty agreements with Arm. The iPhone maker is not involved in discussions about the change to Arm’s business model, said executives with knowledge of the company’s recent discussions.“
Hindenburg Research’s short report on Block/Square. An explosive report from the famed short seller on Square/Block. The report accuses the company of inflated operating metrics and widespread fraud on its platform. If what was said by Hindenburg is true, Block would surely be in serious legal trouble and could see their valuation tank because the company’s health isn’t as good as what it made out it be. There are two things worth noting. One is that Hindenburg has a great track record on their research. So far, I haven’t heard any of the targets of their reports successfully refute the findings. Plus, I don’t think Hindenburg risked lawsuits if they weren’t confident of what they found. The second issue is how Block chose to respond to the allegation. Not silence. Not rebuttal with facts and logics. But with a threat to pursue legal avenue. It really makes you think, doesn’t it?
Other stuff I find interesting
Commuting to work post-pandemic: Opportunities for health? A scientific paper on the health benefits that shorter daily commute brings. WSJ also published an article on the same topic. I’d save at least a couple of hundred dollars a month on rent if I relocate to West of Omaha and work from home 2-3 days a week. But my mental health and daily energy are paramount to me. So I instead choose to pay more for rent to be able to walk to work.
Why Japanese Web Design Is So… Different. I used to be baffled by the look and feel of some Japanese websites I visited. They look so heavy and littered with text and photos. A complete contrast to the minimalist style I often associate with the Japanese culture. This post sheds light on why and it makes sense to me
60 days to find a job or leave the country. A somber read on the H1B visa and the anxiety that H1B holders have to carry every day. The US is blessed to be an attraction to so many talented white-collar workers and entrepreneurs around the world. I don’t get why it has to be that difficult for people to build a life here. Give a green card to master-degree graduates from a US university. Raise the annual cap on green cards. Streamline the process. Just do something to make people’s lives easier. If you are in the position of power to do and don’t do anything, what good is it to have that power?
Wealthy Executives Make Millions Trading Competitors’ Stock With Remarkable Timing. I don’t believe for a second that a CEO-level person doesn’t have non-public information on a competitor. Nonetheless, I get why the number of insider trading charges is smaller than what we want. It’s not easy to prove and there is a fine-thin line to tread between catching insider traders and violating freedom to trade. And if there is a more obvious case, I’ll look towards Congress…
Should I Buy a House Now? An excellent article on whether one should buy a house right now, given the high mortgage rates. What makes me like the article is that it lays out the arguments for both sides and understands that buying a house is a personal decision and this decision is about more than just money. Hence, there is no blanke right or wrong answer. It varies from one person to another.
Almost 25% of the year 2023 is already gone. I have a few observations that I’d like to share.
Immigration headaches remind me that freedom is expensive
My wife is going through the permanent residence process with me. Two weeks ago, we went to the DMV so that my wife, who doesn’t yet know how to drive, could get a learner’s permit. We were told to go home. The reason is that the DMV staff couldn’t, on the spot, verify the status of someone who is applying to change her status. They told us to wait for a letter from the DMV, affirming that they already work with USCIS to confirm my wife’s case. We haven’t heard anything yet. The lesson here is: get your learner’s permit, state ID or driver license done before your i140 is approved.
Before this year, I filed my taxes using an online service, such as TurboTax or Credit Karma. This year, I had to use a tax agency. Because my wife is an independent who doesn’t have income yet, we decided to file as a married couple to get the maximum deductions. The problem is that my wife doesn’t have a Social Security Number (which is because of her immigration status), meaning that she must get an ITIN. There are two ways to get it. One is to apply for an ITIN electronically directly with the IRS, but it will require us to submit the hard-copy version of her documents, including the passport. That’s not a risk we wanted to take. So we went with the other option: to use an IRS-approved tax agent. It took 1.5 hours and more than $300. I got more deductions this year, but it will take at least 6-8 weeks to hear from the IRS and get my money. If you didn’t know, now you know.
That’s the life of an immigrant. We labor and work for freedom. Free from all the anxiety and administrative troubles. Such freedom is hard and expensive, but it’s not an option to live without it.
Marrying the right person is immeasurably important
My wife has come to the US to live with me for half a year. She is still waiting for her work authorization so that she can land a job and show folks what she is capable of. To a person that used to make a nice living in Vietnam and has 10 years of experience, that must be hard. But I have never heard her complain about it once. Instead, every day, I see her spend time getting fit, taking care of our cats and me, learning 3D design and polishing her portfolio. I can’t describe how much I appreciate that. My life would be much more miserable if she were not who she is.
I came to realize that as a married person, I take a longer time to make decisions since I need to consult with my wife and take into account her preferences. I have more responsibilities daily and as a result, a bit less time for myself. I am OK with all that because I feel that I have grown to be a better person and my life has become happier since.
They say that marriage is an asymmetrical bet that can change your life. I agree with that and so far have been very happy with mine.
In-person should be a must for new hires during the first two years
The debate over in-person vs remote working/work-from-home (WFH) may never stop. Each side has valid points, but I have grown to believe that new hires at a company should go to the office as much as possible during the first two years.
Remote working is a relic of the pandemic. Stay-at-home orders and the fear of infection during that time left companies no choice, but to allow workers to work remotely. Two or three years ago, it was all about survival and getting the best out of a horrible situation. Now that Covid-19 is behind us (knock on wood) and corporations are in a much stronger position, what was changed before can be changed again.
I am not arguing for permanent back-to-the-office requirement for everybody. I know that we can’t pretend that WFH never exists. That ship has long sailed. For tenured staff who already forged working relationships with coworkers and accumulated enough knowledge, WFH or hybrid should be sufficient and may continue. For new hires who need to learn their ways around and establish relationships, in-person should be mandatory.
New hires must learn their new ways around in a new environment. The higher the learning curve, the more important it is for new members to be in the office. My current team had our fair share of new interns and full-time employees in the past two years. My observation is that those who went to the office more often had an easier time to scale the learning curve. It’s not about intelligence and I am sure there are folks out there that are smart and self-motivated enough to succeed in any job while working remotely. But if in-person is more likely to yield results, that’s what organizations and teams should do. Additionally, it’s not just about working knowledge. Knowing those that you work with is as, if not more important, than knowing what to do. I strongly believe that as human-beings, we forge stronger and better relationships through face-to-face interaction than through Zoom or Teams meetings.
There are some positions out there that are agnostic when it comes to working mode. Sales is probably on the top of my list in that category. And if a company’s primary working mode is remote, then this argument of mine is moot. But apart from those cases, I believe new hires should come to the office as often as they can in the first two years.
Does anybody actually know anything?
CEOs have unparalleled access to information in any organization and their job is to turn such information into informed decisions. For the past few months, we saw a host of CEOs admit that they were wrong with their hiring practice in 2022 and had to lay off thousands of workers to cut costs.
Banking executives at Silicon Valley Bank or Signature Bank are undoubtedly paid handsomely to manage risks and run their respective banks competently. Instead, their recent seizure by the Fed shows that they did neither of those things.
Smart venture capitalists and millionnaires like David Sacks usually pride themselves as libertarians and vocally push for less governmental intervention. Until their interests are at stake, that is. Because these VCs actively called for the government to step in and insure the uninsured deposits at Silicon Valley Bank. There must be folks out there who saw through the insolvency of Silicon Valley Bank before the recent drama. But does anyone have a liquidity & mismanagement crisis in the financial world on their 2023 bingo card? I certainly don’t.
These are four actual covers by Forbes, which is supposed to be a trusted and renowned business magazine
Airlines: Unit Economics, Served Four Ways. An excellent piece on the unit economics of the airlines industry. The key takeaway is that it’s exceedingly complex and difficult to run an airlines company; which, in turn, makes it challenging for investors to really get a firm understanding. I used to be interested in the consolidated power of some US-based airlines. But over time, my interest subsided when I realized that this industry belongs to the “too hard” pile for me.
Amazon’s drone business can’t get off the ground as regulations, weak demand stymie progress. I am going to make a bold prediction that we won’t see Amazon Prime Air in general availability in the next decade. The regulatory challenge is daunting, but I also don’t see the prospect of Amazon operating a fleet of drones smoothly across a vast and diverse country in the US in 10 years. Plus, who can tell the impact on unit economics? Amazon’s culture is about taking long shots and trying things out. Prime Air is closer to the bin than to reality.
($) A Supermarket Megamerger Will Redefine What You Buy at the Grocery Store. Operating a supermarket is challenging. To please customers, operators need to add more values and activities which increase the operating expense and operational complexity. Concentrate too much without unique selling points and operators will lose ground to competitors. Whoever can hit the sweet spot of rich offerings and operating leverage; AND manage to stay there for a while will have an upper hand. On paper, Albertson and Kroger seem to make sense, but we all know that there are other factors that can doom acquisitions and mergers.
Update on Meta’s Year of Efficiency. The one thing that I do not like about this open letter is that they announced layoffs in advance while the affected employees have to wait for months to find out if they have a job. Nobody should enjoy the anxiety of not knowing whether their livelihood will be intact. If you are an immigrant, it’s even worse. I assume there are reasons why Facebook did it this way and I wish they had been more transparent. With that being said, Zuck shared a few good points here on the direction of the company in “the year of efficiency”. “Since we reduced our workforce last year, one surprising result is that many things have gone faster. In retrospect, I underestimated the indirect costs of lower priority projects. Indirect costs compound and it’s easy to underestimate them. Our early analysis of performance data suggests that engineers who either joined Meta in-person and then transferred to remote or remained in-person performed better on average than people who joined remotely. This analysis also shows that engineers earlier in their career perform better on average when they work in-person with teammates at least three days a week. This requires further study, but our hypothesis is that it is still easier to build trust in person and that those relationships help us work more effectively.“
Google nixes paying out remainder of maternity and medical leave for laid-off employees. If I really try, I can see why Google management wants to do what the article claims. After all, when employment contract is terminated, the benefits reserved for employees may be ended too. The keywords here are: IF I REALLY TRY and MAY. The reality is that I am baffled by this kind of cold-blooded and vindictive move by Google. The savings wouldn’t make a dent to the bottom line. But as an employer that wants to attract talent, this would inflict a lasting harm.
Other stuff I find interesting
($) How Beijing Boxed America Out of the South China Sea. “In the years after Mr. Xi rose to power, U.S. officials didn’t realize the degree to which he would break from the past in taking a more confrontational foreign-policy approach, said former U.S. political and military officials. The disputed sea is ringed by China, Taiwan and Southeast Asian nations, but Beijing claims nearly all of it. It has turned reefs into artificial islands, then into military bases, with missiles, radar systems and air strips that are a problem for the U.S. Navy. It has built a large coast guard that among other things harasses offshore oil-and-gas operations of Southeast Asian nations, and a fishing militia that swarms the rich fishing waters, lingering for days. The U.S. missed the moment to hold back China’s buildup in part because it was focused on collaborating with Beijing on global issues such as North Korea and Iran, and was preoccupied by wars in Iraq and Afghanistan. China also stated outright in 2015 that it didn’t intend to militarize the South China Sea”
Migrants must overcome a new barrier at the border: The U.S. government’s terrible app. I have my fair share of anxiety dealing with paperwork here in America, but I never have to stay up all night or get up by 6AM every day and try to use a horribly built app to book an appointment. I believe that the US government can make a lot of people’s lives much better, including their employees’ lives, by upgrading their IT infrastructure. As the so-called wealthiest country on Earth, you can do that, America.
Mediterranean diet may lower dementia risk by a quarter, study suggests. “A Mediterranean diet of nuts, seafood, whole grains and vegetables could lower the risk of dementia by almost a quarter, according to promising early research that could pave the way for new preventive treatments. The findings, published in the journal BMC Medicine, are based on data from more than 60,000 individuals from the UK Biobank, an online database of medical and lifestyle records from more than half a million Britons.”
The story of how Dick’s Sporting Goods grew from a modest store in New York to one of the premier retail chains in the country is a fascinating page-turner.
Ed Stack is the son of Richard “Dick” Stack, who founded Dick’s Sporting Goods in Binghamton, New York in 1948. By the time Ed hit teenage years, Dick forced him to work part-time at the store because it was the family business and what put food on the table. Ed hated the work because it stripped him of valuable time to play baseball. Ed’s misery stopped when he went to college with the dream of becoming a lawyer. A few jobs here and there happened. One thing led to the next and suddenly Ed found himself back working at his father’s business. Ed applied what he learned while away from his father and improved the business. As Dick’s health declined, Ed gradually took over the company and ran the show. Father and son had vastly different opinions on how the company should operate. Eventually, Ed and his sister Kim bought out his father to gain total control.
The gripping account of Dick’s Sporting Goods’ transformation over the years includes valuable lessons to entrepreneurs, business leaders and students.
The business twice came close to bankruptcy, all because of the ambition to grow too big too fast. Through the near-death experience of Dick’s, readers can see that hyper growth is usually the rope that business leaders use to hang themselves. Grow too fast without supporting systems, especially cash flow management, and you may find yourself insolvent
To Ed, it’s very important 1/ walk the store and talk to the customer; 2/ pay attention to competitors and market trends; 3/ grow quietly under the radar as much as possible to avoid competition; and 4/ constantly change to stay competitive
I particularly like the chapters in which he walked the audience through the decision to stop selling guns at Dick’s. The ban on firearms sale hurt the company’s bottom line, but it was a brave decision. Not every CEO prioritizes doing the right thing over pleasing investors and their personal interests. Ed did that and as someone who advocates for gun control, I am thankful to him for doing that. I hope that the example that Dick’s Sporting Goods shows can inspire other leaders to take a stand and do the right thing.
“We did. Our available cash dwindled. Store sales couldn’t come in big or fast enough to keep up with our needs. Another indication that our operations were out of whack: our shrink numbers rose to 2 percent of sales, double what’s usually regarded in the industry as acceptable. All of these issues were directly tied to our expanding too fast. This wasn’t measured growth. In 1996, all of these factors converged simultaneously: We had no money and no prospect of getting more—we were up against our credit limit. We had too much cash tied up in too much inventory and no way to relieve that situation besides slashing costs and taking losses on our merchandise. We were crushed by high operating and capital costs that we’d brought on ourselves. We used primitive systems incapable of helping us run so large a company. And we were spread across too wide an area, without the logistics in place to keep merchandise moving smoothly.”
“Not only did we open too many stores too quickly, we opened bigger stores—we introduced a new Dick’s prototype that measured a whopping sixty thousand square feet. The architecture we put into these cathedrals cost more to build—fancy floors, which were just plain stupid, because nobody noticed. Expensive fixtures. Design details that added up fast. The changes probably boosted our overhead with no return on our investment and did nothing to drive additional sales.
We located them in markets where we really didn’t know what we were doing; in one year we opened three stores in Cincinnati, three in Philadelphia, and three in Baltimore, all cities in which we had little on-the-ground history or insight. We didn’t take time to understand the hunting and fishing business there. What did we know about the catfish culture in Cincinnati, or fishing for rockfish and blue crab in the Chesapeake Bay? Not much. That showed in low sales volumes. At the same time, we made other mistakes. These stores were overinventoried and cost more to run, market, and supply.”
Business lessons for retailers
“He considered it a disservice to that shopper to have him leave the store without everything he needed to get the best possible results from his purchase. He roamed the floor through the day, visiting with customers, making sure that each one felt, every minute he was in the store, that he was looked after. The moment the front door opened, we were to be on hand to greet the guy walking in and be ready to answer his questions or show him around. Treat him as you would a guest at your house, I remember him telling me: “If you had a visitor there, you wouldn’t keep doing what you’re doing. You’d drop it to say hello and make him feel at home.”
That was a lesson that stayed with me. You can have the greatest merchandise in town, but if you don’t throw your energy into customer service, you won’t keep people coming back. To this day, nothing annoys me more than to walk into a store unacknowledged. I hate having to roam the aisles looking for help. At 345 Court Street, that never happened.”
“And it reinforced a truth that has been demonstrated to me time and again, which is that the moment a business stops evolving, the moment its leaders sit back and think, Everything’s good, that’s when it starts to fail. Maybe that’s especially true for retail. Change has to be a constant. Improvement can never end. You have to stay fresh to your customers, and to do that you have to be perpetually rethinking everything you do, questioning your every assumption. You have to be willing to sometimes blow up everything in the name of staying focused, and exciting, and better—and ahead of your competition.”
“One of the principles that guided Walton was to grow his business quietly, unobtrusively, to stay below the radar so that his competition didn’t notice him. He did it by expanding his geographic reach in concentric circles, radiating out from his launching point in tiny Bentonville. We replicated Sam Walton’s strategy. From Binghamton, our expansion had come in small, outward steps—to Syracuse, then Rochester, then Buffalo. From there we moved in the early nineties to Albany, New York, about 130 miles northeast of Binghamton; put a second store in Buffalo; then opened another ninety miles to the southwest in Erie, Pennsylvania. After that we slid eastward to Springfield, Massachusetts, eighty miles from Albany, and Hartford, Connecticut, twenty-five miles south of Springfield. These were small or medium-sized markets, which gave us a shot at customers without having to worry too much about a bigger, better-capitalized competitor moving in on us.”
“The key to everything I’ve talked about—the way the stores looked, the products we sold, the booming sales—was that our leadership team kept visiting our stores. I’d spend two days a week, three weeks a month, out in the field. I’d fly into a city such as Charlotte, where we had several stores, and all the store managers would meet me and our team from Pittsburgh at one store. We’d walk the aisles and talk to them. More important, we’d listen. I wasn’t there to critique their operations.
I wanted them to tell me what their customers were saying—about the store, about particular products they liked or didn’t like, about what they wanted but we didn’t have. I wanted these managers to tell me what we were doing right and, more urgently, what we were screwing up. The longer these visits went on, the more enthusiastic the managers and their staffs were about talking, because it became clear that we sincerely wanted to know what they thought. The insight they offered was the difference for Dick’s. It kept us relevant to our customers, and it kept us alert to shifting trends in popular taste.
“I’ll give you an example of how one of these visits changed our business. In 1997, a group of us went to Baltimore to walk through our stores there. Our manager in Columbia was a guy named John Jones. I asked him how things were going, and he told me that kids were coming into the store all the time, asking for this new product, a compression base layer that football players had started wearing under their pads. ”
“When you dig down into the roots of success, it has little to do with brilliance. I’ve known plenty of geniuses who didn’t amount to much, and quite a few numbskulls who’ve done well. We all have. Life teaches that success also has little to do with talent—we’ve all met really talented, creative people who can’t translate that talent into a successful career. No, success is all about what’s inside you, and the most important element of success is simple perseverance—often tedious, sometimes soul crushing, but the great differentiator in whether smarts, talent, and education add up to something bigger. Great musicians practice to perfection. Engineers refine and test, refine and test again. Athletes never stop training. And my dad, knocked on his ass, got up, dusted himself off, and got back in the fight”
“And a thought came to me, in my father’s voice—a memory decades old, from an exchange otherwise forgotten—delivered in his signature tough-guy style: “If you start something, you finish it. End of conversation.” I might have just as easily conjured another voice, my gramp’s: “If you tee off on number one, you putt out on eighteen.”
“Once seated at a table, he and I exchanged pleasantries for a few minutes before he reiterated that Callaway wanted to open us up. But before we do, he said, I have to ask you a question. Who were you bootlegging the product from?
“Bruce,” I said, “I can’t tell you that.” “Well, if you don’t tell me,” he shot back, “we won’t open you up.”
“Bruce, I’m not going to tell you,” I said. “I don’t think it’s our job to police your brand, and I’m not going to tell you.”
I could see he was getting angry. “If you don’t tell me,” he said again, “we won’t open you up.” It was pretty clear to me by now that getting the names of the people selling us product was the real reason I was there. I doubted he ever planned to bring us aboard.
I looked him in the eye. “Bruce, my mother taught me two things, growing up. Number one, you go to church on Sunday. And number two, you don’t rat on your friends. I’m not going to tell you.” Bruce said it was a shame that we wouldn’t be doing business.
Google execs tell employees in testy all-hands meeting that Bard A.I. isn’t just about search. Leadership is about providing vision and belief. If you are paid to think of big pictures, instead of doing the dirty work every day, wouldn’t it be disappointing to provide ambiguity and inconsistent answers to a high-profile product like Bard? I get that it’s difficult to know what to do with an experiment like Bard. But a rushed announcement, followed by ambiguity and a botched demo, erodes trust in the leadership of Google.
Buffett ❤️ Apple: Case Study. I often see folks go out of their ways to be contrarian and find whatever reasons they can to justify buying other stocks than Apple. But as Buffett said: you get paid to be right, why wouldn’t anyone consider Apple as an investment? I am not saying that it’s THE best investment choice out there as any given time. I am saying that Apple and the boring index fund are a lot better than many stocks out there.
($) How Chili’s Is Prepping for Tough Times, Starting With the Fries. The article offered a couple of good examples on what CEOs can do to increase productivity and save costs. Chili’s CEO considered the practice of counting shrimps a time-waster. By ending that practice, the company estimated cost savings at $6 million a year. The changes made at Chili’s restaurants aren’t popular with everybody, proven by comments cited in the article. However, the stock price rebounded handsomely this year and same-store sales increased despite declining traffic. At least there is that.
Amazon’s big dreams for Alexa fall short. Alexa is an interesting innovation in that it enabled the birth of many smart devices; which offers value to consumers (I am one of those), while lacking a way to monetize its value. Amazon has not been able to prove that Alex is additive to sales on its platform and I am not surprised. How many shoppers call Alexa when they want to discover something? If it’s a routine purchase, there is already Subscribe and Save. I don’t believe that Amazon staff lacks the effort to prove Alexa’s worth. I do believe that they couldn’t find it because there likely isn’t any
Business Breakdowns on Wise. A really interesting Business Breakdowns episode on Wise. Wise is my go-to platform whenever I want to send money back home to Vietnam. There are two factors that affect the net amount that my family receives: exchange rates and platform fees. Accounting for these factors, Wise usually beats other alternatives such as Xoom or Western Union. Hence, it’s really fascinating to learn about Wise’s origin, how it works in general and what competitive advantages the company enjoys
Other stuff I find interesting
($) The Surprising Ways Walking Delivers a High-Intensity Workout. “Walking with more intensity can burn as many calories as higher-impact activities such as running or even HIIT classes, experts say. That could mean incorporating weights, hills, intervals or a faster pace without breaking into a jog. Taking an 11-minute brisk walk daily will also lower your risk of stroke, heart disease and a number of cancers, according to a study from the University of Cambridge published in February.”
The tech workers exiled from Europe’s last dictatorship. It’s always disturbing to learn about a dictator suppressing citizens’ wishes. It’s equally sad that some good folks have their lives turned upside down and must live away from their family & friends, just because they have the courage to do something.
In Scramble for Clean Energy, Europe Is Turning to North Africa. “Solar panels in sun-rich North Africa generate up to three times more energy than in Europe. And North Africa has a lot more room for them than densely populated Europe. Result: Europe’s drive to end its reliance on Russian natural gas supplies, triggered by the Ukraine conflict, is resulting in a rush to install giant solar energy farms and lay underwater cables to tap into North Africa’s abundant renewable energy.“
Gary Kennedy worked at American Airlines for 30 years and served as the General Counsel during arguably the company’s most tumultuous period. He was the leading legal voice when American went through the bankruptcy more than a decade ago and the merger with US Airways. Gary reflected his experience in the book Twelve Years of Turbulence.
This book pulled back the curtain on the airline industry and the bankruptcy process. Chapter 11 is something that I read on the news once in a while, but it still remains a novelty. A foreign concept. Through the account of Gary and American’s own bankruptcy proceedings, I learned more about this unique process, including some key players and protections offered by the laws. Additionally, this book is a valuable resource on the airline industry. I became more familiar with how airline executives could struggle to deal with the unions. If I had been on the fence about investing in airlines, which I was not, I would have made up my mind after reading the book. I do have to call out the light touch that Gary applied to his book. A lawyer by trade, he could have made this book as boring as a legal brief. But I never felt that way going through all the pages.
I am pushing myself to read more and more books that can give me an edge in investing. That means reading what few others read. That also means the more a book is about a specific industry or offers insights into the inner workings of a company, the better. I think this book is a good start on that journey for me. Even if the book is not a mainstream work, it’s easy to read, yet it taught me a few unique things here and there. If what I have said so far and the snippets below interest you, give it a go.
“Carty reminded the union leaders that months earlier he had shared with them his concern that the continued deterioration of the company’s financial performance was driving officers to leave the company at alarming rates, and that he needed to take action to stem the tide. He had also told them that he had instituted a program to entice certain officers to remain with the company during the difficult times. Carty’s explanation fell on deaf ears.”
“As the details disclosed in the 10-K became widely known, matters grew more urgent as the unions cried foul and demanded that American reopen negotiations on the concessionary package. The unions wanted to rewrite the deal before the ink was dry on the first deal. The flight attendants went one step further. The Association of Professional Flight Attendants (APFA) announced a decision to rescind the earlier vote approving the concessionary agreements. They planned to have a revote on the concession package. It was total chaos. No one knew exactly what to expect or what could be done to get the concessions back on track and the company moving forward.”
“At another debate centered on the 2007 PUP payment, Arpey told the executive officers that he had decided to forgo 100 percent of the payment due him. He made this decision in spite of the fact that he didn’t receive a PUP payment in 2006 because he refused to accept the stock awards granted to him by the board in 2003. He reasoned that by refusing payment, he could provide “cover” for the rest of the management team and use his sacrifice to curry favor with labor. He desperately hoped to placate labor and build upon the trust he worked so hard to establish with employees.”
“I know. And the rest of the team should take the payment,” he said. “But as CEO I’m the one with my neck on the line and I just can’t do it. I made a promise to employees and I’ll lose all credibility if I accept the money.”
“In the end, we retained the program and it paid out as promised. Despite my admonition, Arpey waived his right to receive any payments. Labor’s reaction to the payments was awful even though Gerard’s sacrifice cost him millions of dollars”
“Over the last eight years, I have interviewed hundreds of senior executives for a major academic study on leadership, including six airline CEOs. Mr. Arpey stood out among the 550 people I talked with not because he believed that business had a moral dimension, but because of his firm conviction that the CEO must carefully attend to those considerations, even if doing so blunts financial success or negates organizational expediency. For him, it is an obligation that goes with the corner office.”
“Consequently, some labor leaders worked hard to discredit management and disrupt the airline. While the vast majority of employees were dedicated, hardworking individuals, the tactics used by certain union officials proved ruthless and unrelenting. At the 2007 Annual Meeting of Shareholders one employee referred to Arpey and other executives as “arrogant, greedy, selfish, and heartless individuals.” That statement was mild in comparison to what labor leaders, particularly the pilots, unleashed in the coming months and years.”
“Under the direction of new APA president Lloyd Hill, elected in 2007, the pilots initiated what is commonly referred to in labor union circles as a “corporate campaign.” The campaign was designed to embarrass and harass management at every turn. By the time the campaign was in full swing, we were in contract talks with all three company unions. The campaign lodged by union leadership against management was aggressive and mean-spirited. Even for veterans of previous corporate campaigns, the degree of vitriol and bullying was astonishing”
“The seat spacing is called “pitch,” and is measured in inches. At American, pitch ranges from a low of thirty-one inches in coach to sixty-four inches in the first-class cabin of large international aircraft. On some competitor airlines, like Spirit, pitch drops to a meager twenty-eight inches. For American, the pitch in first class of the Super 80 was only thirty-nine inches.
Pitch is something that receives a lot of attention from airline execs. It is consistently the subject of heated debate, particularly between the finance and marketing departments. Pitch greatly affects passenger comfort but also has a direct bearing on profitability. The near-impossible riddle to solve is the correct mix between comfort and revenue. On one hand, less pitch equals more seats, and more seats should equate to more revenue. But as pitch decreases, passengers complain and move business to competitors. The battle is even fiercer in the first-class cabin. A generous amount of pitch is essential to attract high-paying corporate customers. But as pitch increases, the total number of seats available for sale decreases. It is a constant tug of war.”
“The next important event in our bankruptcy case involved the appointment of the Official Committee of Unsecured Creditors, informally called the UCC. The UCC is comprised of several of the largest unsecured creditors and is appointed by the United States Trustee. The trustee is an arm of the Justice Department and is charged with the responsibility to monitor and oversee bankruptcy cases. The UCC plays a pivotal role in a large bankruptcy case. The committee meets with the debtor on a regular basis, reviews the debtor’s business plan and its plan of reorganization, has standing to participate in court hearings, and has the right to hire professionals, like lawyers and financial analysts. The UCC’s job is to maximize the payout for unsecured creditors. Often, the interests of the UCC do not align with the interests of the debtor.”
“One of the most powerful and fundamental tools available to a debtor is found in Section 1113 of the bankruptcy code. This provision was, in many respects, at the epicenter of our bankruptcy case. It allows an employer, under certain circumstances, to reject collective bargaining agreements (“CBAs”). If our unions would not accept new labor contracts voluntarily, we intended to use this provision to force them to accept the drastic changes outlined in our business plan.”
Graham & Dodd Annual Breakfast 2022. I love reading on how Ted and Todd make investment decisions. “Businesses are run by people, and Buffett says he likes taking the cash flow and removing it from managers and investing it himself. There’s a known adage, when looking to buy a business: look to buy a business a dummy can run, because eventually a dummy will run it. Every time Combs meets with a company, there are two questions he always asks management: (1) How long do you spend talking to investors, and (2) what would you be doing if you were not publicly traded? The median response is 25% of the time is spent talking to investors. In response to the second question management usually lists a number of things that make a lot of sense, and Combs then proceeds to ask why they don’t do that, and they say because they feel handcuffed. When management is focused on the quarterly performance, and they don’t have the proper time horizon, they are not empowered to do the right thing. As a fiduciary you are setting yourself up for failure if you don’t have the right time horizon.“
($) Apple’s iPhones Winning Over Gen Z—and the World’s Premium Market. “From Europe to Asia, Apple’s market lead in the premium bracket is growing, and polls show that people in their teens and early 20s, known as Gen Z, increasingly see the iPhone as a must-have. Converts say they are drawn by its design, cameras and AirDrop features for sharing photos. Around 52% of people age 18 to 29 in South Korea were using an Apple smartphone as of 2022, up from 44% two years earlier, according to polls by Gallup Korea. Samsung’s share of this age group slipped to 44% from 45% in that time, the polls showed. For all older age groups, Samsung phones remain most prevalent.” I had some personal experience with how Samsung marketed its products in Vietnam. To me, this didn’t come as a surprise. Samsung can be innovative and technologically advanced. However, its products and ecosystem leave a lot to be desired. It’s not about being the first to introduce some features or being sassy while mocking its biggest rival. It’s about making things that are useful and valuable to consumers. I hope leaders at Samsung will read this piece and change their approach from bottom to top. No amount of marketing money can fix the fundamental shortcomings of its products.
($) Indonesia Shows It’s Possible to Tame Rainforest Destruction. Now, forest destruction in Indonesia is at its lowest pace in two decades. The rate of forest loss fell by more than half in Indonesia from 2015 through 2021, while it worsened in Brazil and the Democratic Republic of the Congo, homes to two other vast rainforests. It is a turnaround with lessons for policy makers, businesses and environmentalists around the world who are concerned about the effects of rainforest loss. Indonesia’s success owes to a three-pronged and overlapping approach. Strict directives prohibiting wholesale forest clearance flowed from the top rungs of government starting about five years ago. Multinational consumer-product companies pledged to avoid palm oil that involved forest destruction, blacklisted forest-slashing plantations and tracked their activities with satellites. And environmental nonprofits exposed murky supply chains that long made it hard to know whether palm oil came from a company that was knocking down forests.
More CCTV, more crime: India’s most-surveilled cities are the least safe. It’s unfathomable to read about high levels of crimes against women in India. This report is the strongest evidence that the preventative method of installing surveillance cameras just doesn’t work. Lawmakers need to think of a better solution to crimes against women that increased by 15% nationally and 40% in the capital, compared to the previous year
What Booking.com does is very easy to understand: to facilitate online travel reservations between travel service providers and travelers. The company was founded in the Netherlands in 1996 under the original name Bookings.nl. In 2000, Bookings.nl merged with Bookings Online to form Booking.com; which was subsequently acquired by Priceline Group five years later. The acquisition was so successful that the parent company Priceline Group changed its name to Booking Holdings in 2018.
Booking Holdings includes many well-known brands to travelers such as Booking.com, Priceline, Agoda, Rentalcars.com, Kayak and OpenTable. These different platforms enable online reservations for accommodation, flight tickets, rental cars, activities and restaurants. As of the end of 2022, Booking Holdings’ services are available in multiple languages to millions of travelers around the world, making the parent company one of the most powerful players in the travel industry.
Revenue streams and expenses
Let’s talk one thing that everybody understands: money. Booking Holdings (Booking) has three revenue streams: Agency, Merchant and Other revenues.
Agency revenues come from travel bookings in which the company connects travel service providers with travelers. Think of it as matchmaking. Travel service providers are responsible for processing payments as well as all the related costs. For the services provided, Booking earns a commission per every transaction for which it invoices the service provider after travel is completed.
Merchant revenues, on the other hand, are derived from transactions in which Booking does the matchmaking AND facilitates payments from travelers. In this model, because Booking offers more value than in the Agency model, it earns not only reservation commissions, but also other related fees.
Last but not least, Other revenues consist of 1/ revenue earned by OpenTable; 2/ advertising on all of its platforms and 3/ compensation for sending referrals to other online travel agencies.
On the other side of the equation, Booking has the following main, including but not limited to, expenses:
Marketing: In 2022, Booking spent almost $6 billion on its brands, search engine keyword purchases, affiliate programs and other performance advertising. This expense line item usually makes up around 1/3 of Booking’s revenue. Investors pay attention to Booking’s marketing expense because the more efficiently the company can generate traffic and business, the better the earnings will be.
Sales: Booking incurs different expenses for processing payments and making sure these payments go through smoothly. There are also costs related to call center, content translation among others. Sales makes up about 8% to 10% of Booking’s revenue.
Personel: salaries, payroll taxes, bonuses, other benefits and compensations make up around 15-20% of the total revenue
Administrative: recruiting, training, office expenses and other administrative costs amount to 5-6% of Booking’s revenue
Technology: back office software and keeping sites running reliably cost Booking about 3-4% of its annual turnover
Agency vs Merchant Model
Let’s talk about the two primary business models in the travel industry.
In the Agency model, as mentioned before, Booking acts as a matchmaking middleman between travelers and service providers without being involved in the payment. Revenue comes in the form of commission on a transaction basis. Booking only gets paid after generating actual business for its partners, ie. after guests booked, used and paid for services. To travel service partners, there are several advantages. First, they get to decide on their prices and inventory, maximizing revenue and profits. Second, there is no longer a risk of the agency (Booking) going bankrupt. Third, service providers have positive cash flow since they are paid by travelers first before having to pay Booking.
Nonetheless, there are a few downsides of this model to service providers. Being free to control inventory means that they are at risk of having unsold perishable inventory. Additionally, these providers have to absorb the costs of processing payments, including interchange, fraud protection, chargebacks and compliance. Travel merchants, especially those in the US, have higher interchange rates (2%+) than merchants from other high-frequency categories such as groceries or gas. In other words, US-based travel merchants lost at least 2% of its revenue per transaction when they process payments. It’s a real cost that any business owner will take into consideration.
In the Merchant model, the likes of Expedia and Booking Holdings buy inventory in bulk from supply partners, at a significant discount obviously, and sell it either a la carte or in a bundle with add-on services. To supply providers, the Merchant model solves the volume question and takes care of all the expenses related to payments. However, they don’t have control over inventory or prices and they have to suffer on the margin as Online Travel Agencies (OTAs) demand a meaningful discount for the value offered.
The model in which a travel service provider should engage with Booking, in my view, depends on the size of the provider and where it operates. If a provider is a small boutique hotel with 20 rooms, because the provider doesn’t have leverage over Booking, they would have to absorb a high commission rate in the Merchant model. Hence, the Agency model looks more attractive from the margin perspective. However, the provider will have to manage and sell inventory, as well as deal with all the payment-related issues.
If a provider is a well-known hotel chain with multiple properties and hundreds of rooms, the dynamic is different. In this case, the provider is more likely to engage the Merchant model: use its significant bargaining power to negotiate a lower commission while ensuring that every month, some inventory is already sold.
I want to touch on payments a little bit before we move forward. This issue may not be top-of-mind, but can have meaningful consequences to a business. First, if a merchant processes payments by itself, it has to invest in infrastructure so that popular payment methods are available and it is compliant with all regulations. This task is not always easy or cheap. Here is Booking on the topic:
We are processing more of our transactions on a merchant basis where we facilitate payments from travelers through the use of payment cards and other payment methods (such as PayPal, Alipay, Paytm, and WeChat Pay). While processing transactions on a merchant basis allows us to process transactions for properties that do not otherwise accept payment cards and to increase our ability to offer a variety of payment methods and flexible transaction terms to consumers, we incur additional payment processing costs (which are typically higher for foreign currency transactions) and other costs related to these transactions, such as costs related to fraudulent payments and transactions and fraud detection. As we expand our payments services to consumers and business partners, in addition to the revenues from these transactions, we may experience a significant increase in these costs, and our results of operations and profit margins could be materially adversely affected, in particular if we experience a significant increase in non-variable costs related to fraudulent payments and transactions.
…In addition, as our payment processing activities continue to develop, we expect to be subject to additional regulations, including financial services regulations, which we expect to result in increased compliance costs and complexities, including those associated with the implementation of new or advanced internal controls, including, by way of example, those arising from the E.U.’s Payment Services Directive 2 and similar legislation. The implementation of these processes may result in increased compliance costs and administrative burdens.
A property owner is unlikely to be as good at Booking in setting up a great payment system. Hence, it may help to reduce operational workload to just outsource this particular task to Booking. Second, interchange rates for US-based merchants are often north of 2% and have serious impact on the bottom line. A single boutique property owner can’t negotiate a more favorable term with the networks. In this case, the likes of Booking Holdings can offer value. Booking pays partners in the Merchant model in two ways: either through a virtual credit card or by bank transfer. With its market power, I think Booking Holdings can negotiate a better deal with the networks and help merchant partners lower the interchange costs. If merchants want to take payments through a bank transfer, Booking charges 1.1 – 1.9%, which is often lower than credit card interchange rates in the US. In Europe, where interchange rates are regulated and much lower than those in the US, this factor is not as relevant.
The difference in interchange rates, depending on where a property is located, is the perfect transition to the second factor determining which model a travel service provider should adopt. Here is what Booking wrote in one SEC filing:
For example, in the European Union and the United Kingdom, the Package Travel Directive and other local laws governing the sale of travel services (the “Package Directive”) sets out broad requirements such as local registration, certain mandatory financial guarantees, disclosure requirements, and other rules regulating the provision of single travel sales, travel packages, and linked travel arrangements. The Package Directive also creates additional liability for a provider of travel packages, which could be the OTC, for performance of the travel services within a packaged trip under certain circumstances. Some parts of our business are already subject to the broad scope of the Package Directive, and as our offerings continue to diversify and expand, we may become subject to additional requirements of the Package Directive. Compliance with this directive could be costly and complex or, as a result of these requirements, we could choose to limit offerings that would otherwise be beneficial for the business, any of which could adversely affect our business, results of operations, or ability to grow and compete. Any changes to the Package Directive, including any changes to the scope of the travel services covered, increased levels of consumer protections, or changes to the requirements of financial guarantees could be costly or complex to comply with and may also adversely affect our business, results of operations, or ability to grow and compete in the future.
Because of the regulatory overheads, Booking Holdings and its peers are not motivated to engage in the Merchant model as they may be elsewhere. Hence, merchants in the UK or Europe may not have this option available even if they want it.
How They Are Staying Competitive
Booking Holdings thrives when their flywheel works properly: having more travelers attracts more service providers while having more service providers is a real value-add to travelers. As long as Booking proves that it can help partners grow sustainably (ie. bring more business and value at a competitive commission), partners will come. The question becomes: how can Booking keep travelers making reservations on their platforms when there are so many alternatives out there?
The first step is mind share. Booking has to be the first name in travelers’ mind when they start the process of booking a trip. Showing up at the top of search result pages helps. Ads such as Super Bowl commercials also helps drive awareness. Both of these things require technical skills and investments. Because I think Booking Holdings is very good at SEO, judging from my experience searching for lodging, and can spend millions of dollars every year on marketing, it’s a real competitive advantage.
But the work doesn’t stop when travelers go to Booking’s sites. Travelers tend to look at other sources and see if they can get more value elsewhere. First-party providers are motivated to lower the price for the same booking on their website a bit just to avoid commission to OTAs. Therefore, Booking must first ensure parity in everything: photos, features, map location, pricing, booking protection and cancellation policies. In this area, I think Booking is brilliant in creating the Genius program. Genius is a marketing program in which participating partners get more visibility and business in exchange for, at least, an automatic 10% discount on their “least expensive and most popular room type or unit”. The more a traveler books with Booking, the more Genius benefits they have. It incentivizes travelers to do business with Booking while offering to providers access to these coveted frequent travelers. Consumers save money, partners generate more business and Booking is a happy middleman. Win-win-win.
Furthermore, it’s important that Booking becomes a one-stop shop for all things travel. A trip includes other components than just accommodation, including, you know, flights, car rentals and activities on a trip. Looking up several providers for each of the components takes time. Hence, it’s really valuable to travelers when Booking can let them reserve everything on one platform. To the best of my knowledge, AirBnb does not offer flight reservations. First-party websites like Marriott.com do offer vacation packages, but they only have the inventory that they own and reviews on those properties. With Booking, consumers have access to a wider selection and more extensive reviews.
On the connected trip, on our long-term vision is to make booking and experiencing travel easier, more personal and more enjoyable, while delivering better value to our traveler customers and supplier partners. We have expanded our offering into travel verticals other than accommodations with a focus on flights.
And in the future, we will work to link relevant travel components together to provide a more seamless and flexible booking and travel experience. We believe that as a result of this initiative and the improved consumer experience we will drive increases in customer engagement and loyalty to our platform over time. We have continued to make progress on further developing our flight offering on Booking.com, which is now available in over 50 countries.
This flight offering gives us the ability to help our consumers book another important component of their travel in one place on our platform and allows us to engage with potential customers who choose their flight options early in their travel discovery process. We continue to see that over 20% of all of our flight bookers globally are new to Booking.com. We will continue this important work to provide our customers the best possible trip experience we can offer.
Source: Booking CEO on Q4 FY2022 Earnings Call
Booking used to rely on the Agency model. They started to transition more to the Merchant model in 2017 and gained great strides. As of 2022, it made up 44% and 42% of Booking’s total gross volume and revenue respectively, up fro the mid-teens five years ago. Then they followed up with initiatives such as additional offerings (flights for instance) and payments. I think the management team has done the right things to grow their business and be competitive. The numbers don’t lie. Booking Holdings long trailed its rival Expedia in gross bookings (GB) before the pandemic, but since then, has recovered faster and better than Expedia. That translated into a bigger gap in revenue. While Expedia’s revenue hasn’t come back to pre-pandemic level, Booking’s already surpassed it in 2022. The current status, by no means, is a guarantee of future outcome. Booking must not be complacent, especially when a challenger like AirBnb is growing fast and furious, albeit at from a smaller base.