A master of “right place, right time” brings his skills to a new travel play
(Profile of Alex Zoghlin, first CTO of Orbitz)
June 1, 2000
ALEX ZOGHLIN, THE NEW CHIEF TECHNOLOGY officer of a soon-to-be-launched potential category-killer travel Web site code-named “T2,” has a habit of picking difficult things to do and then taking them to the limit: earning a black belt in Tae Kwon Do, becoming fluent in Mandarin Chinese–or, in his latest off-hours endeavor, training for the Ironman Triathlon in Hawaii, the most grueling of athletic contests. He modestly claims he’ll only get into it, if at all, via the event’s lottery for people whose performances in other triathlons aren’t good enough to qualify them otherwise. But if you look at his overall track record, you’ve got to wonder.
Long-haired, enthusiastic, and recently turned 30, Zoghlin is a classic Web whippersnapper, though with a more solid business background than many. His computer skills are largely self-taught. He began hacking at the age of three, going into his dad’s desk for the phone number and password to a teletype terminal so he could connect to the mainframe at the office and play Star Trek. His dad, unfazed by his son’s criminal tendencies, brought home an Apple II as soon it became available, and from that time young Alex always had a computer to play with.
Zoghlin’s executive career began with the office of student body president at New Trier High School on Chicago’s affluent North Shore–one of the snootiest publicly funded secondary schools in the country. His platform was to breathe helium before all his campaign speeches, and to promise (in the resulting Porky Pig voice) that if elected, he would do the same in public appearances throughout his tenure.
He dropped out during the second semester of his senior year to start a company to create billing software for large Chicago law firms; one client took exception to his working for a direct competitor and sued him. Faced with mounting legal bills, he said yes to a Navy recruiter who promised to extricate him from his difficulties. New Trier officials, still smarting from the indignity of Zoghlin’s presidential campaign, refused to grant him a diploma because he lacked a semester of gym, but the Navy accepted his transfer credits and itself bestowed his diploma.
After spending four years on active duty and serving in the Persian Gulf war as a cryptography specialist, Zoghlin headed to the University of Illinois at Urbana-Champaign to pursue a double major in business and Asian studies. Taking an $8-an-hour campus job, he worked at the National Center for Supercomputing Applications, joining Project Mosaic’s Web server team–the right place at the right time if ever there was one. He worked on Secure Sockets Layer, the protocol that even today encrypts Web-based transactions.
Unlike most other members of Project Mosaic, Zoghlin turned down a spot at the newly formed Netscape Communications Corp., because from his business-major point of view it seemed preposterous to try to sell software that was available elsewhere for free. (“Sizzle as a business model didn’t exist in 1994,” he says.)
Instead, Zoghlin proceeded to pick up so many consulting contracts with enormous corporations–MCI, General Motors, Sears Roebuck, Ameritech, and AT&T, to name a few–that he started a Web development business during his senior year, in February 1995. The dean of the business school insisted that Zoghlin do his business plan as an independent study for academic credit so he could come back and finish school with no time lost if things didn’t work out. The firm, Neoglyphics Media Corp., soon had more work than it could handle, and the professor supervising the project advised him to quit school. “And I got an A,” he says.
Neoglyphics’ claim to fame was doing the messy back-end stuff that most early Web design firms didn’t handle–working with legacy systems, keeping track of server traffic, generating Web pages on the fly, developing for Java before it was mainstream. Ironically, one of the company’s clients was Travelocity, which is the primary competitor to Zoghlin’s new venture.
Zoghlin and Neoglyphics started turning up on those lists that magazines make–“coolest companies,” “most influential people on the Web,” and the like–a feat all the more astonishing since the company was based in Chicago, the relative middle of nowhere. By 1998 Zoghlin had sold Neoglyphics for $70 million to Renaissance Worldwide, a Boston consulting firm. He walked away with about half the proceeds, made some moves as a venture capitalist (he had been an early investor in eBay), founded and sold a business-to-business sporting goods enterprise, and decided to look for the next challenging thing.
He’s picked a doozy. His mandate is to develop a Web travel agency owned by a consortium of airlines: United, Delta, Continental, Northwest, and–shortly after this interview–American Airlines. Besides these owners, who occupy seats on the board, the company has enlisted the participation of a total of 455 air carriers, 200 hotel companies (representing approximately 39,000 properties), 44 car rental companies, and several cruise lines and vacation packagers. As of this writing, the T2 project didn’t have a CEO, and Zoghlin was the only actual employee. Other corporate roles are being filled by consultants at the Boston Consulting Group (BCG), where the yet unnamed company is temporarily based.
Zoghlin has been spending his time lining up development partners, including ITA Software (a shopping engine for searching airfares), Datalex (a booking engine), NOVO to design the user interface, TRX for customer service tools, and Worldspan, one of several computerized reservation systems used in the travel industry. The site is scheduled to launch this summer, perhaps as early as the end of June. Total investment figures have not been released, but Zoghlin says an estimate of $100 million that appeared in The Wall Street Journal is “close.”
The idea is to collect information from all the travel companies–fares, schedules, even those elusive “Internet specials” that are usually only available on an airline’s Web site–and make all of it searchable in an infinite number of ways.
The possible complications are myriad: the pitfalls of linking to ancient legacy systems, tensions among the partners, well-funded competitors such as Expedia and Travelocity, and potential antitrust scrutiny by a Justice Department that’s newly sensitized to the New Economy. Internet World talked with Zoghlin recently about the T2 project and his ambitions for it.
INTERNET WORLD: This seems like a very corporate gig. Why did you pick it over other opportunities?
ALEX ZOGHLIN: I have two camps of really good experience. I have startup experience–I understand the things that need to be put in place for a company to go from the beginning, how to get people to believe in something they’ve never done before, and get companies to give money. And having worked for GM and most of the Fortune 10, I understand the business reasoning of very large corporations, which is really a matter of not letting bureaucracy get in the way.
I have never been part of an organization in the middle area, where you’re putting in the infrastructure for growth. I decided that I wanted to work for a company that will go through this growth phase very quickly and will bring in the best people possible to solve that problem.
IW: Are you at all uncomfortable that they’ve hired the CTO first?
ZOGHLIN: No. If you look at the nature of what we’re doing, it’s all about technology. So technology is–at least in the short run and especially until the launch–the most important thing in the company. The other positions are being very well run by managers within BCG, and we’re actively recruiting the rest of management to replace them over time.
1W: What role are the owner companies playing in that? You have a lot of cooks potentially bugging you.
ZOGHLIN: I look at this like GM. Right now I have four cooks, with the four airlines [American has since joined to make it five]. At GM I had, like, 500 cooks, because not only did I have all the different technology managers, but I had all the different lines of business, from Chevy to Buick, and then you had marketing wanting a say.
Here it’s quite a bit easier. The airlines are my board of directors. Like any other board of directors, they give guidance, and insight, and hope–but from a day-to-day operational level, they have a hands-off approach, which is very good.
IW: You don’t feet like a total turncoat having worked on Travelocity and now doing this?
ZOGHLIN: No. My company Neoglyphics did a lot of cognitive engineering and human-computer interface stuff for Travelocity, but in fact I personally didn’t have a lot of work there. And Travelocity is a technically adept company, and they did their work themselves.
I want to take no credit for what they have on their Web site, which is frankly not very good, but that’s a whole other question. It feels like Kmart to me–there’s just too much going on. Oh, no, you’re going to quote me on that, aren’t you?
IW: I am, I’m terribly sorry. But that’s good, because you can look at it and say, that’s not what we want to do.
ZOGHLIN: Yeah. Let me assure you that what has been out there today on any travel portal–not naming any names–will not be us. Because if it’s not good and if it’s not transparent to the user, and they don’t understand how we get the fares we get, and they don’t know that they really are the lowest, they won’t use us. If we do anything else except what’s right for the consumer, we’ll fail at this point. Our competitors are too large and well funded and entrenched for us to do anything except the very best things.
IW: ALL these travel companies are giving the same information to your competition as they are to you, aren’t they?
ZOGHLIN: Sure. Everyone goes through one of four or five computer reservations systems that all have the same information. These are all publicly available fares. We’re getting the same stuff as everyone else, except that the special fares that are on the Web sites of particular airlines, we are pulling into one place to book.
Today, if you go to one online portal, and you put in “New York to Chicago,” you’ll get a whole set of fares, and if you go to another one and put in the same exact information, you’ll get a different set. Someone looking for a low fare on the Internet literally has to go to seven or eight or nine places.
Our plans are really simple. We’re going to pull all information from all sources and give it all to the consumer in an unbiased and transparent fashion.
IW: Thereby sealing the fate of travel agents worldwide.
ZOGHLlN: Umm…maybe, maybe not. My PR agency says to avoid this subject completely, but I’m not going to.
My mother is a travel agent. The airlines started chipping away at the commissions a long time ago. My mother is a smart lady, and she saw the writing on the wall. She said, “Boy, I’m not making a lot of money on this stuff. I’d better get out of this–especially these low fares. If I’m making 3 percent on a $70 fare, what am I making? Nothing!” You might as well flip burgers.
So she started selling cruises, package tours, European vacations. Things where her expertise as a travel agent and a well traveled person were valued as a service and the commission was much better. So she actually sells less and makes more.
We’re going to be collecting those people who are just looking for the lowest fare all the time, and we’ll be searching through a billion fares to find it for them. My mother says these are people she doesn’t want to work with anymore.
IW: Did you go for this partly because your mother is a travel agent?
ZOGHLIN: No, I went for this because it looked like the hardest, most complex problem that had to be solved. This is a problem that has not been solved in the world today, and if it gets solved, and especially if we start rethinking this whole back-end piece, about how the airlines work, it could literally transform an entire part of the economy. For the benefit of the consumer.
IW: You say very blithely, “Oh, what if we reengineer the back end?” The airlines have years of money and emotion tied up in those systems, and you’re going to be stuck with them for a while.
ZOGHLIN: Eighty percent of all the computations that we do for the consumer are happening away from the traditional airline systems, completely. So our ability to add functionality to that, and modify it, and shape it to what the consumer really wants is really easy–much easier than any of our competitors, who are directly tied to individual systems.
IW: You are not directly tied to one of these mainframe systems?
ZOGHLIN: We’re going to be doing all the pricing, all the availability, all the scheduling on a huge farm of mid-tier computers, not on a mainframe, so our ability to add functionality to that can literally happen in weeks, not years.
IW: OK, so you’ve got this farm, and all this stuff will dump in there.
ZOGHLIN: We also have third-party data sources like the Official Airline Guide. They collect all the schedules from all the airlines. Then there’s a company called ATP that has all the fares, and everybody submits their fares there, and we’ll get that feed. So we’re going to have this huge number-crunching system.
Let me explain how it works today. If you go to another travel portal that’s hooked up to one of these mainframes, and you put in New York-Chicago, first it would probably ask you which airport you want to go out of in New York, and which airport you want to come into, and what time you want to do it. Then it will look up the schedules and find the 10 or 15 flights that are there, and show those to you. Then it might look for one or two stopover places to find you a cheaper fare. And that’s really what it does. Maybe a thousand fares, maybe 10,000 fares. And that’s about it, because it wants to minimize the time it takes on a particular transaction.
We are making no such assumptions about here to there. We’re saying, well, there’s three airports in New York, and two in Chicago, and there are an unlimited number of possible stopover places in the world. We will search every single one of those every time. And instead of a 20-minute window for when you want to leave, we can search a 72-hour window, so if you were willing to leave 12 hours later, and we could find it for $100 cheaper, we would show it to you.
IW: Could you choose based on whether you wanted it to be cheap, or just to get there as fast as possible?
ZOGHLIN: Of course. One of the beauties is that once we’ve taken the functionality off the mainframe, we can completely personalize the experience for you. So if you say, “I have $300 to spend, and where can I go this weekend?” we can show that to you. Or you can say, “I want to go skiing–what are the best places?” And we have skiing as a variable to search on.
IW: So you’re taking the middleware approach.
ZOGHLIN: I’m a big believer in mid-tier computers taking over the world.
IW: How will people know there’s no favoritism among the fares you show?
ZOGHLIN: Transparency. We’ll show you everything–all the machinations, all the alternative flights that no one else shows you–and we hope and expect that our consumers will compare us to everyone else and the marketplace will bear out our claims.
IW: It seems this kind of massive data is well suited to farming out. Like, if you have an exotic travel Web site, you can attach to all the flights to Mali or something like that. Is that part of the plan?
ZOGHLIN: Sure. We are looking at all the different ways that we can use the infrastructure we’re building.
IW: I hope it doesn’t all go down in a flame of overcomplexity.
ZOGHLIN: Or congressional controversy.
IW: I imagine that’s been discussed.
ZOGHLIN: Part of the problem is a lack of communication on the company’s part. Once you understand that in fact we are a travel agency–that we receive commissions like everyone else, that we have an IATA number, we go through clearinghouses, we have no access to proprietary data that other people don’t have-once all those things get clear, and once it’s clear that we’re building this engine that shows completely unbiased fares that are best for consumers and that this is purely a consumer friendly play, all those problems will go away. I dare any congressman to argue against full information for the consumer.
IW: You’ve said that you do things until you reach certain milestones with them, and then you move on. So what’s the milestone for this?
ZOGHLIN: I think when this company reaches $10 billion in revenue, it might be time to look for the next big cool thing.