Some Uber[1] observers were sarcastically relieved that new CEO Dara Khosrowshahi's[2] first meeting with employees on Wednesday[3] went without a single sexist gaffe. That part of Uber's history is probably behind it, given Khosrowshahi's reputation for low-key levelheadedness and the stellar record of his former company, Expedia, in hiring women (they make up 52 percent of its staff and a quarter of tech employees, compared with 36 percent and 15 percent respectively at Uber). But a less frat-like culture could make Uber a better employer without making it a more profitable company. On the business execution front, I have misgivings about Khosrowshahi at Uber.
These misgivings aren't about his worst business decision - to pass on the ground-floor acquisition of Booking.com because its margins were too low and Expedia was, he thought, doing fine buying and reselling rooms from big hotel chains. Khosrowshahi later admitted his error and introduced the Booking.com model at Expedia. He has been justly praised for that by Ben Thompson, who writes the Stratechery tech blog. Many people focus on Expedia's stellar stock performance since Khosrowshahi's overhaul of the platform and a series of high-profile acquisitions.
But in terms of operational benchmarks, Expedia's performance compares badly to that of Priceline - the company that did buy Booking.com. The hotel market sees the two firms as a duopoly in online bookings, and, after Expedia's acquisition spree, they are roughly the same size in terms of revenue. They operate on the same market. Yet Priceline's gross margin is consistently above 95 percent while Expedia's is below 85 percent. Priceline has made almost $1.2 billion in net profit so far this year while Expedia has lost $29 million. Priceline does a better job managing costs and...