One On One With Expedia's Erik Blachford

Microsoft swaps Expedia for USA Networks shares; an insider's view of the Bill Gates game plan.

Imagine reporting to both Bill Gates and Barry Diller. In that position — at least temporarily — was Expedia Inc.'s senior VP of marketing and programming, Erik Blachford. Even as Microsoft announced a $1.5 billion deal to swap its 70% share of the nation's No. 2 travel site for about 5% of USA Networks Inc., Blachford took a few minutes to speak with InformationWeek senior editor Cheryl Rosen about Gates, .Net, and selling travel through the TV.

The right way to think about Microsoft in '95, Blachford explained, is as a venture capitalist seeking both financial and strategic return. "It spread its bets, and it knew that in addition to any financial return, it was also in the game in terms of having sites that would operate as showplaces for Microsoft software." Expedia remained a 100% Microsoft shop, fully .Net-enabled and working with HailStorm to support Passport.

The USA Networks deal brought together Expedia's technology for managing the "super-complicated world of travel supplier inventory" with the consumer merchandising expertise of Barry Diller's empire — with an eye toward interactive TV commerce. "All the pieces exist," Blachford said of set-top box selling. "There have been enough trials to show it makes sense."

What made Expedia's platform distinctive, Blachford argued, was that its pricing engine ran on PCs rather than the mainframe environment of traditional airline distribution systems. That architecture allowed the site to display an average of 400 options per trip and let consumers assemble their own vacation packages from wholesale fares and hotel room blocks on the fly. The system had achieved 87% year-over-year growth in bookings — "pretty tough to scale to" — by simply adding more servers.

Short-term, the USA Networks alliance offered Expedia access to Ticketmaster and CitySearch to expand its customer base. Longer term, Blachford saw the travel and entertainment businesses converging: "We could offer customers a package that includes a flight to Vegas, a room at the Bellagio, and tickets to Cirque du Soleil."