Rich Barton, Founder of Expedia, Zillow, and Glassdoor
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Rich Barton, Founder of Expedia, Zillow, and Glassdoor

Eric Bleeker: Hey Fools, I’m joined by Rich
Barton who, if you haven’t heard of him, is one of the more prominent venture capitalists,
having started companies such as Expedia, Zillow, and Glassdoor now — so quite the
track record. I wanted to begin our conversation … we’re
an investment company, so just beginning by talking about your investment philosophy. Rich Barton: As a venture capitalist, or as
a stock investor? Bleeker: Well, as a person who invests in
great companies in general. Barton: All right. Bleeker: What’s the common thread among
these companies? Barton: You called me a venture capitalist,
which I am, kind of on the side, but I primarily think of myself as an entrepreneur. I started
Expedia and I ran that for 10 years before it was sold, and then I left. I ran Zillow
for the first six or seven years, and started Zillow up. At Glassdoor I’ve never had an executive
role there. I’m a cofounder and the chairman, but I like to build companies and build teams,
so I don’t actually go into these things thinking about “What makes a great investment?”
I think, “What makes a great company?” What makes a great company in the consumer
Internet space, for me, is something that I call “Power to the People.” I am very
excited about providing new software, new sites, and new apps that give consumers power
that they didn’t have before to make really big, scary decisions in their lives, maybe
exciting decisions as well that involve money, so that they can make those decisions better. That’s what Expedia was about, throwing
back the curtains on these Byzantine reservation systems that ran the travel industry, and
handing it to you to do yourself. That was powerful. With Zillow, same thing; handing to you, and
to my mom, and my sisters, the ability to really have a God-like, data-rich view of
the whole of the real estate industry, and know what that house is worth, and know which
one sold when, and be able to go around the neighborhood on your mobile app and have this
incredible view of the whole market. That’s a view that regular people didn’t have before
Zillow came along. Glassdoor is the same kind of thing. We’re
throwing back the curtains on a world of really sensitive, interesting information about salaries
and what it’s like to work at a company, and interview questions, and CEO approval
ratings, and giving that to regular folks so they can be empowered. For me, that’s a really winning thesis;
playing on people’s innate sense of wanting to be revolutionaries. You combine those ideas
with killer teams of people, and magic things happen. Bleeker: Great. Good description. Let’s
talk about your current company that you’re gearing up, which is Glassdoor, as you just
mentioned. You recently secured a $70 million financing round, I believe. Barton: Yes. Bleeker: What’s that money going towards?
What’s the final vision that you’re trying to achieve with Glassdoor? Barton: At Glassdoor, where again I’m the
chairman, but I’m not executive; a great team of people down in Sausalito, California
run that, led by Robert Homan, who is the CEO. Robert is a guy who worked with me at
Expedia as a development manager and rose through the ranks, and now has his own company
and is really kicking butt. As you said, Eric, we recently did a late-stage
round of financing of $70 million. The goal of Glassdoor is really connecting people with
the jobs and the companies they love. That’s our really big mission. We want to help people
find and get better jobs at the right companies, that are the right fit for them. This new slug of capital enables us to take
this great product that we’ve built and really begin to accelerate it beyond the U.S.
and around the world. We already have a good chunk of our 23 million unique users who come
a month that come from overseas, but we haven’t really rolled out many language-localized
sites for Glassdoor. As you might imagine, a user-generated content
site like Glassdoor really scales globally quite nicely, so this $70 is about taking
Glassdoor around the world. Bleeker: Got you. Let’s take a step back
and look at the macro view. I was at CES this past week, and there’s virtual reality goggles
everywhere, drones. It’s an exciting time across technology. As you look across the
space, what are you really excited about
in 2015? Barton: What am I excited about? We might
think that the smartphone and mobile computing and touchscreen thing has played out because
there are now … I don’t know, how many devices were activated in the last year, a
billion? Bleeker: Over a billion smartphones sold a
year. Barton: A billion new devices were activated;
that seems like a pretty big number. You know what? Those numbers are going to get bigger. I consider the applications that companies
like mine have built, that sit on top of this new incredible, magic platform are really
just the beginning of what’s going to be possible. I think we’ve just really begun
to scratch the surface for the kinds of interconnectivity and monitoring and location-based stuff and
payments. This is really just starting. I think that what I’m most excited about
is where the platform of today is actually headed. Yes, there are new platforms that
are coming in goggles and wearables and drone things. I don’t see any of those really
impacting my businesses for quite some time. Bleeker: Yes. Let’s keep talking about that
“connected” track, because the numbers are 50 billion connected devices by 2020.
There’s something kind of scary to consumers, but as far as you talk about, with Power to
the People, if you look at industries that could be impacted, like healthcare, where
are you seeing some opportunities to move your investment philosophy where maybe you
didn’t have access to un-gating data previously? Barton: Yes. Healthcare is an interesting
one. I have one startup that I am on the board of, called RealSelf, that is kind of TripAdvisor
for cosmetic procedures, and it is doing really, really well. It’s a serious site where people, largely
women, go to talk to other women and share their stories that they’ve had with cosmetic
procedures, and there’s a really healthy, constructive influence of the people who perform
the procedures — the doctors and the other professionals who perform these procedures
— intermingling in this information marketplace to throw back the curtains and dispel inaccuracies
and make people understand and comfortable. That one is a small part of healthcare, but
I see that working really well there. My guess is Power to the People is going to work across
healthcare. I also think that humans have an almost infinite
capacity for gazing in the digital mirror. We want to look at ourselves and render ourselves
as data. We like looking in the mirror anyway, most people do. Regardless, most people do. If we can look in the digital mirror which
is being held up to us now by the Fitbits and the smartphones and soon the Apple Watch
and all these devices that we wear that monitor our heart rates and our steps and everything
— our sleep — that is all this data coming back from the digital mirror at us. That absolutely is an input to better healthcare,
but it’s an input to something else too, that I haven’t quite figured out. It’s
pretty interesting and appealing to people. It may seem a little bit narcissistic, but
I think it’s a trend that’s going to continue. Bleeker: Yes, I’m mildly addicted to my
Fitbit. Barton: I went through the phase. I wore the
Nike band for maybe a year, and I liked it. I liked how it made me think, but for whatever
reason it dropped off. I’m sure I’ll get an Apple Watch, and my guess is that one will
be a little bit stickier. Bleeker: I think the average is wearable devices
stop being used after four months. Barton: Is that right? Bleeker: There is a problem that people figure
out their habits, but you think about medical applications where someone with a chronic
health problem could consistently wear it; it’s really incredible. Moving on to a new industry that has its own
challenges, we’re a financial services company. No one likes the industry. I was wondering
what your opinion would be, where you see the future going, because we’ve actually
seen a lot of action for the first time in a long time, with innovative companies in
the space getting a lot of buzz, such as robo advisors. What are your feelings about where finance
might be headed, and some of the new technologies that are starting to get funding behind them? Barton: I’m not certain about the robo advisors.
I assume that’s like a basket of ETFs, robotically chosen? Bleeker: Exactly. Barton: Well, that’s good. Most investors,
probably that’s a great product for them. Warren Buffett says the most important thing
… he says lots of interesting things, but the expense that a regular investor pays is
likely the single most important factor in long-term returns. I assume these robo advisors
are doing things for … Bleeker: 0.25%, or fees like that. Barton: Or maybe even less, 15 basis points,
who knows? And that’s good. The average person’s ability to try to pick stocks and
time it properly, that’s a trail of tears. People who are picking stocks themselves,
maybe they pick the right stocks but they probably don’t trade in and out of them
at the right times. It’s hard to really hold onto something when it’s down — and
not just hold, add to it — so I think the robo thing might be pretty interesting. But in general, in financial services, I think
that this Power to the People concept is a really potentially powerful one. I was a very
early Fool reader and … what was it called? TeleBroker at Charles Schwab. Charles Schwab, before there was the web,
had this thing called TeleBroker, and I actually entered trades on my touch-tone phone. This
is before you were doing stuff like this, so I’ve been a stock investor for a long
time. The first step towards empowering regular
investors to do more was Charles Schwab, and then ETrade and all these others. That’s
been a pretty interesting progression. I think the regular investor is much more informed
now, Motley Fool being a contributing factor there, so they’re much better informed. I don’t know that they’re making all that
much better decisions, but they’re much more empowered. There are pockets — vast
swaths — of the financial services industry that are still in the dark, though. Say municipal bonds; the way munis trade is
anybody’s guess, and that probably is a business that needs to have the curtains drawn
back, and there are probably 10 others that are not consumer oriented that need to as
well. Connected, ubiquitous technology is a gravitational
force on pulling back the curtains, so I think we’ll see that happen. Bleeker: Sounds about right. One thing I wanted
to step back … I follow you on Twitter. Barton: Thank you! Bleeker: One tweet that caught my eye was
you had said “Does Sony hack=Franz Ferdinand?” or something similar to that. I’m a natural optimist, but one of the areas
that people are rightfully cautious of is security issues around basically putting our
lives on the Internet. I just wanted to get your thoughts on some opportunities there
and how that will affect a lot of these developments in the next three-four years. Barton: It’s not my bag. I’m an optimist
too, so I don’t like to invest and spend time on things that are pessimistic by nature,
and the security industry is kind of pessimistic. It’s full of people who are, “Woo, scare
you!” That’s a big business right now, though.
It’s a big business in venture, as rightly it should, because quite obviously we need
to be getting a lot better at securing our data and our information against, not just
attack, but against benign use as well. Clearly, that’s a big area of investment.
For me, I’m just not interested in it, so I don’t do it. My power alley is pretty
narrow. I like what I like. I like consumer stuff, I like building consumer brands. I
like Internet/smartphone stuff. I don’t really like B2B stuff, even though
there are huge businesses that can be built there. It’s just not what I like to spend
my time on. Bleeker: Got you. We’ll go back into the
power alley here and talk about, you sit on the board of Netflix. Barton: Yes. Bleeker: I was curious about some of your
thoughts, heading into the next year. One announcement that really caught my eye in
the last week was ESPN going digital, that you can now subscribe without a cable package. Barton: Who did that, Dish or something announced? Bleeker: Dish actually got it. Barton: That’s through Sling, right? Bleeker: It’s called Sling TV, but it’s
not from Sling. Barton: Dish bought Slingbox … anyway. Bleeker: It’s a confusing mess, as all media
is. I was curious what your thoughts would be
about the future of that and where you see Netflix headed, because it’s a long-time
investment from The Motley Fool. I believe it’s a 30-fold gainer for many of our investors,
so they’re watching and seeing what’s the next disruptive potential for the company. Where do you see them headed over the next
three-four years? Barton: Well, I’m not a spokesman for Netflix,
obviously, but I’ve been involved for a long time, happily. Reed Hastings and the leadership team at Netflix
is one of the great teams I’ve ever had the privilege of working with. They really
are phenomenally smart, phenomenally ethical, and phenomenally ambitious. I think Netflix has on the order of — I won’t
get the number quite right — but 50 million streaming subscribers around the world right
now. It’s the company’s ambition to grow that to be much larger. There are many lands to go. There are many
lands to conquer as we roll Netflix out around the world, and the team is really smart about
that. As new countries are launched, we stub our toes sometimes. We learn, we adjust, and
we keep at it. The international roll-out of Netflix is the
exciting growth thing and it’s, from my perspective, going quite well. I’m also quite, quite amazed that this team
was able to cross the chasm from the DVD world to the streaming world. I remember when Reed
was recruiting me onto the board back in 2000 or 2001, it was a DVD by mail company and
I was very skeptical. I was like, “Come on. This form factor is over. It’s going
to hit the wall.” He said, “Rich, we didn’t name the company
‘DVD By Mail-Flix.’ We named it ‘Netflix’ because we will figure out how to get across
the chasm,” and you know what? He figured it out. Then finally, the third great, unbelievable
thing about Netflix, which everybody’s now aware of and has internalized really quickly,
is that Netflix is creating, now, some of the best television content, some of the best
video content, in the world. “Orange is the New Black” and “House
of Cards” and “Marco Polo” — this is really, really good stuff, and it’s coming
out of Netflix, this original content, and it has changed the consuming world’s perception
of what Netflix is, from kind of a distributor to a creator. This has been an incredible boon for the brand,
so I’m a very happy board director and a very happy shareholder of the company. Bleeker: I guess it wouldn’t be a tech interview
today if I didn’t ask about Uber. Two things … Barton: Okay. I’m not involved with Uber. Bleeker: As an outsider, though, what are
your thoughts with the growth of sharing economy, number one, and number two I believe its recent
valuation put it at about $40 billion. Barton: I think so. Bleeker: I just want to get your opinion as
a, so to say insider, what you’re thinking about valuations. Does anything concern you
with what you’re seeing? Because to your average person some things are looking a little
frothy, but are you more optimistic on these companies being able to grow into these very
high valuations? Barton: The average person can’t really
invest in these private rounds in Uber and Snapchat and these kinds of things that are
getting so much attention, so it actually doesn’t matter that much to the average
person. The average person can invest in public companies.
I don’t know how things look to you there; there are some things that might feel a little
frothy, but in general I think it’s pretty rational. It’s certainly very rational in
my world, relative to what it was like in 1999. We’re not seeing that in the public
markets. In the private markets, we just don’t know.
We don’t know what the numbers are. My guess is that Uber is a gigantic company, growing
faster than anybody’s ever seen. That’s my guess. My guess as a user of Uber is that it’s
not changing the taxicab business, it’s changing the transportation business. I use
Uber every day. I don’t have to get rid of my car, because I can afford to have it,
but if I were making that tradeoff I might get rid of my car. I think that a whole new generation of people
who are being brought up in the so-called “sharing economy” — it’s really kind
of a renting economy — are going to maybe not buy cars because they don’t have to
buy cars, because they have a car on demand whenever they want, and it’s clean, and
it’s driven by somebody friendly who they get to rate after they ride, and who rates
them after they ride, so we have a much more civil interaction that happens between these
people than what we’ve had in the past with the car and driver relationship. This is a revolutionary idea, Uber. I’m
excited to see how it plays out globally and just how important it becomes. My guess is
that $40 billion valuation is easily justifiable. Bleeker: You touched on this a little bit.
We advise, and we give information to people investing in public companies. One shift I’ve
seen; Facebook didn’t go public until it was already a $100 billion company. Uber,
$40 billion. What do you think the long-term impact on
this will be for public investors? It feels like there’s been as shift when companies
are going public later and later. I just wanted to get your thoughts on that general theme. Barton: I think there are a few standout companies
that are waiting. Maybe this trend was kicked off by Google, and it’s gone right through
several; Facebook and Twitter, and now the big private companies, Uber and what have
you. It’s not that many companies. Not many companies
have that much power relative to their investors and their employees, to stay private for that
long. Only the really exceptional growers and exceptionally large, fast-growing companies
can do that, and they can do that because they can keep their investors at bay because
their investors know they’re going to get paid out. They can keep their employees at bay as well,
who they’ve comped with stock, and say “We’re going to have a pseudo liquid market for you
if you really want to leave, but just hang on. We’re going to get there. Hang with
us.” As well, those companies that stay private
like that, they actually do have kind of a currency that they can use to acquire companies
too. They have that optionality of using their stock to acquire companies. Most private companies don’t have that luxury,
because they are not Uber and Facebook. The companies I’ve taken public — Expedia and
Zillow; companies that just went public in the last month, Hortonworks and New Relic
— these are companies that are going public at about the right time, at about the rational
time. Maybe printing at $500 million and hopefully
trading up to $1 billion in valuation; something in that realm. There’s going to be a lot
more of that inventory coming into The Motley Fool and into your customers’ hands in 2015.
I would guess more inventory of that coming in 2015 than we’ve seen since 1999. Bleeker: I would like to talk for a second,
too, about Zillow. Barton: Yes, good. Bleeker: We’re sitting underneath the headquarters! Barton: I’m sure you’ve chatted with other
people at Zillow already. Bleeker: We have. You founded the company.
What do you think buying a home is like in 10 years? How is this going to be different?
How will this process continue to evolve? Barton: Ah, okay. With Zillow, we’ve moved
from a phase where the consumer has limited information, who’s shopping for a home and
has to get all their information from a professional, to a kind of super-informed consumer. This consumer has a ton of information, context
information, can build their own spreadsheets and do their own math and know what’s going
on in the market. That was step one for Zillow. The next step was taking that mobile. We didn’t
have a mobile product until an iPhone that could handle our maps came out. When the iPhone
that could handle a map-based interface well came out — and I don’t know what year that
was. It would be interesting. It’s probably pretty recent. Bleeker: 2008, my phone had GPS. Barton: Yes, okay. But in a map-rendering
thing. Anyway, the next phase was to take that desktop
real estate shopping experience, and take it and put it on the iPhone while you’re
mobile, while you’re walking around the neighborhood shopping, or driving around.
Then you can open Zillow up and hold it up and look at the houses all around and know
everything. That was a game-changer for Zillow, and now
the large majority of activity that happens on Zillow from users happens on smartphones. Now, where do we go from here? Well, these
devices are really good at connecting people, and we shop as groups. A very interesting
direction we’re heading is trying to take these natural groups that form around home
shopping, and have everybody know what everybody knows. That should be a big advance. Another one is the trafficking of all these
documents and processes that swirl around the main line of buying a house; are you prequalified?
Are you getting a mortgage? Did you get the inspection? All this paper-intensive — title
insurance — all this stuff that needs to happen, that all has a really interesting
opportunity to be much more digitally smooth, so there’s a big win there. A really interesting offshoot of that for
us is the mortgage business. At Zillow we have a really fantastic … the very best
place to shop for and buy a mortgage, on or off the web, is in Zillow mortgages. It’s
a really unbelievably consumer-friendly marketplace where you get great service and great prices
on mortgages. That, we’re doing a good job at. There’s another one as well, in the rental
business. We’re making a big investment in rentals. People are shopping for rentals
and homes simultaneously. They’ve never really been able to do that before, in one
place. They can now do that in one place on Zillow, and we’ve made a lot of strides
there. I’m really proud of the rental team and the opportunity we have there. Lots of interesting stuff. Bleeker: It seems like a lot of industries
with needless complexity are on notice right now! I would like to talk about, one more time
with Glassdoor. We were actually rated the number one small and medium sized business
to work for — my little plug there. Barton: Nice! I saw that. I forgot that. Congratulations,
that’s great. Bleeker: Thank you. We’re very big into
culture, and we’ve actually been meeting with a number of companies, learning about
their culture. I was just curious. You’ve been very operationally
heavy in Expedia and other businesses. How have you seen culture evolve? This is obviously
at the center of Glassdoor as well, rating company cultures. Barton: Yes. Bleeker: How have you seen this evolve over
the past 20 years? Barton: The awareness of culture, or the importance
of culture? Bleeker: Exactly. The way companies structure
their culture. Barton: I think Glassdoor is a part of a general
trend towards companies realizing just how important culture is. I think that’s an obvious evolution of business
being an industrial hard asset-based thing, capitalism being, “What ships do you own,
what railways do you own, what mines do you own, what trucks do you own?” to “What
intellectual property do you own? What brands do you own? What software do you own? What
data do you own?” What made hard assets was money, then the
commodities that you were trying to lock up. What makes intellectual property an asset
is us; brains. When you make that breakthrough realization
that it’s the brains that are the asset of the company, that are the factory of the
IP that’s coming out, now you start thinking about making sure that where that brain works
is good. Is it a fun place to work? Is it a healthy
place to work? Does that place to work have good values that I share? Do people support
each other or are they jerks? That I think is why culture has become so important. Glassdoor is simply an acknowledgement of
that, an accelerant of that, and to a certain extent a policeman of that, and I really enjoy
that. Bleeker: Great.


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