Updated from 8 a.m. to reflect the fact that Barton moved to Italy after the acquisition of Expedia by Interactive.
NEW YORK (TheStreet) –– Though Rich Barton currently is best known as Zillow's (Z) co-founder and executive chairman, he has more wins in his career of 20 or more years in Silicon Valley than most will have in a lifetime. He started and sold a number of companies. including Expedia (EXPE), Zillow and Glassdoor, to name a few. Yet, it's been this "power to the people" mantra he's developed over his 20+ year career in Silicon Valley that has helped shape his portfolio, as well as his life, for the betterment of others.
Having started at Microsoft (MSFT) in 1991 under Bill Gates as a product manager, Barton got the push to spin Expedia out when he asked for advertising money and then-Microsoft CEO Steve Ballmer said no.
"It came down to me going to Steve and asking him for $100 million to spend on television advertising," Barton said during an interview at Zillow's San Francisco office. "That was the straw that broke the camel's back so to speak. He said, 'I'm not giving you that money. We don't do that.' Then I said, 'Well, the public markets are hot. We can spin this off. We could sell not too much of the company, and get $100 million to spend on advertising. That is what is needed to one day make us the largest seller of travel in the world, which was the goal. He said, 'Give it a shot,' and he was very supportive."
Following the acquisition of Expedia by Interactive Corp. (IACI), Barton spent a year in Italy and then returned to help continue building companies on a theme he described as "power to the people," enabling consumers to make better choices for the things they spend their money on. "It's kind of revolutionary stuff," Barton exclaimed during the interview. "I love the energy that comes from giving power to people, regular people, and let them take on the machine and break down the walls."
In that time, he's been able to build companies that focus on this mantra, including Seattle-based Zillow (Barton lives in Seattle), an online real-estate advertising company that has seen explosive growth since going public. In the company's fiscal first quarter, the Spencer Rascoff-led company had a non-GAAP profit of 2 cents a share on record revenue of $66.2 million, up 70% year over year.
He also helped build Glassdoor, an online jobs and company review site, that is currently tracking the same growth trajectory as Zillow but is about two to three years behind. He's also on the board at Netflix (NFLX), a venture capitalist, as well as some others, including a mobile discovery network, Trover (available on both iOS and Android), that allows people to snap a picture and tell others why the place is worth mentioning or going to.
"It started as a travel dream for me, I've wanted this app," Barton said. "I travel around a lot, I want to remember where I went, what I ate, what I saw, there's not a good mechanism for doing that right now. Trover's like this magic guidebook for touring the world."
Whatever he's been involved in, particularly with the appointment to the Presidential Ambassadors for Global Entrepreneurship (he was appointed in April 2014), Barton has been an advocate for the rise of the consumer, as well as capitalism around the world. "I'm a big believer that the spread of American-style entrepreneurialism goes hand in hand with the rise of a capitalist democracy," Barton noted during the interview. "The rise of capitalism is good for power to the people in countries."
What follows are highlights from the interview, including his thoughts on Microsoft and the company's new CEO, Satya Nadella, net neutrality, the future of Netflix and what's next for him.
Chris Ciaccia: You have an entrepreneurial background. You've started four companies, you came from Microsoft. What's it like to start four companies, coming out of a big conglomerate like Microsoft?
Rich Barton: Big companies are populated by frustrated entrepreneurs. These are people that want to own their thing, make a difference, without everyone looking over their shoulder. It's romantic to a certain extent. It's very American as well. And I think that the great large companies enable intra-peneurs, enable entrepreneurs who are inside companies. I was lucky enough to be at Microsoft at a time when it was not only the most interesting company in the world, but it was also run in a very enlightened way. It enabled me to run a start up inside Microsoft, and act very independently. Ya know, pick my own brand name. Do my own thing. In my last year or so at Microsoft, I as GM of the Expedia Group, reported directly to [Steve] Ballmer, so I didn't really fit in the org anywhere. This was very enlightened of Ballmer to do that, so I was really lucky. I've tried to keep that spirit as I've built other companies, but that gave me the impetus I needed to get my start. Steve and Bill [Gates] were my first venture capitalists, and building confidence there enabled me to really go quite courageous without much fear into starting the next thing, which was Zillow with a bunch of ex-Expedia guys. Then the next one was starting Glassdoor with Robert Hohman, he's a guy I hired into Expedia right out of Microsoft. He was a computer science major at Stanford, and now he's off being CEO of Glassdoor and kicking butt. It enabled me to help put together the guys to build RealSelf, Trover and a bunch of others. It's been fun.
Ciaccia: You worked pretty closely with Ballmer. How influential was he in pushing Expedia out into its own company? Did he give you a budget to work with? Microsoft and Expedia are two entirely different companies, one's e-commerce and the other is selling software. Can you talk about how he pushed you?
Barton: It wasn't a natural thing for Microsoft to spin things off, to carve things out and spin things out. They had never done that before, and I don't think they've done that since. It was something that came from our group, it came from me and my team. It was something that I wanted to do. We saw a big opportunity. We of course had an internal budget, Steve and the whole management team was supportive of what we were doing. They thought it was interesting. The Web was young and happening. It came down to me going to Steve and asking him for $100 million to spend on television advertising. That was the straw that broke the camel's back so to speak. He said, 'I'm not giving you that money. We don't do that.' Then I said, 'Well, the public markets are hot. We can spin this off. We could sell not too much of the company, and get $100 million to spend on advertising. That is what is needed to one day make us the largest seller of travel in the world, which was the goal. He said, 'Give it a shot,' and he was very supportive. By no means, was he or anyone pushing out the door.
Ciaccia: Do you have any thoughts on Nadella vs. what Ballmer did?
Barton: I don't follow Microsoft all that closely, but I do live in Seattle, so I see what's going on. I've been gone since 1999, so I'm way, way out of the loop. That said, I think Satya and I started at Microsoft around the same time, and at similar kinds of jobs. I don't know if he came in as a Product Manager or a Program Manager. I came in as a Product Manager in '91, maybe he started right around then. We never worked together, but I knew him. He was doing enterprise stuff, I was doing consumer stuff. I always thought he was a really smart guy, and a really good guy. I'm really hopeful. He's clearly brought some new energy, a new kind of energy to the place. It feels different. He dresses a little better, he's a little hipper. Ballmer had his own massive charm, and Satya has a different kind of style. Microsoft seems to be reacting well to it.
Ciaccia: You have a huge portfolio, whether it's stuff you're active or passive with. Is there any one you're particularly most proud of?
Barton: It's like choosing which of your children you love the best. What I love is the companies I've helped put together, is they all carry sort of the same power, this "Power to the People" banner. It's kind of revolutionary stuff. I love the energy that comes from giving power to people, regular people, and let them take on the machine and break down the walls. I don't have a hard time recruiting great people to go on a mission that feels important because it is. We're trying to help you, and people everywhere make better decisions with stuff they care about, and stuff they're spending a lot of money on, be it a job, a hotel room, a home, rental, mortgage, or even a cosmetic procedure. These are good things that are being built for consumers. In the end, at best, the way of the web, the smartphone and the Internet work, when you attract massive amounts of consumers to something, the industry has to follow, regardless of the way they may have felt about it initially. Because that's where consumers are, and that's what they want. That's what I feel good about, and Expedia has done well. Spencer has done a great job there, leading a great team there. I'm so lucky to know that guy. Robert [Hohman], is another superstar, and that's kind of the next most ripened fruit, and that one is performing quite nicely. We have on the order of 17 or 18 million users a month there now, and it's tracking along quite nicely, about 3 years behind Zillow on all metrics. I really love that one, it's coming along quite well.
Ciaccia: What does Glassdoor mean to the way people are looking for companies, salaries, jobs, etc.? How is that working?
Barton: It's working really well. I think of it as TripAdvisor for employment. You can really find out what people think of it, what it's like, what they think of the place. You can see what the interviewer questions are if you're a developer, a business development person, a journalist. If you're the CEO, you can see what people are saying about you. All of this is good, it's good, valuable stuff. It's good not just for people who are looking for a job, but for those who are going into a performance review. It gets people prepared because you're going to talk salary, and you want to know what your options are and it gives people more confidence. User-generated content (UGC) models, it's hard to think of models that are much better. Google has one of the classically great models. Microsoft with the operating system has a great model. UGC that Yelp (YELP) has and that TripAdvisor (TRIP) has, those are just dreamy. The more content you have, it attracts the more users to it. The more users, the more content. Now you have more content, it attracts more content. That happens in a number of ways, but Google SEO is critical for UGC, because it uses natural language and it's original content. We all value it quite highly. It spins and spins and spins. This is the moat around the business, and it gets wider and deeper every day. This is why you see things like Expedia buying TripAdvisor. That had it for a while, and then they spun it back out again into its own company. There are other companies trying to compete with that, and it's hard. It keeps spinning and spinning, and the moat gets wider. The same with Yelp. It just keeps getting bigger and bigger, and the same with Glassdoor.
Ciaccia: You said that Glassdoor is about two to three years behind Zillow.
Barton: Two to three years behind Zillow, on the current path.
Ciaccia: When can we see an IPO for Glassdoor?
Barton: Who knows, exactly? It depends on the market, and so many things, but I believe IPOs are really positive events for companies in most ways. It gives them strategic flexibility, and optionality. It gets people fired up as well. It's on a path to 2.5-3 yrs behind Zillow, and if the markets stay open, and it stays on the path it is, maybe 2015.
Ciaccia: You're also on the board at Netflix. They've pioneered streaming, this entire industry. Sony recently announced its own streaming service for PlayStation, but Netflix has made streaming what it is. Can you talk about where Netflix goes from here?
Barton: Reed [Hastings] is a very good spokesman for them, I was actually just watching his Re/Code interview earlier, but we have a board meeting tomorrow (June 12th) and I wanted to watch that before the board meeting. He's the right spokesman for the company. From my position, I think it's extraordinary. It's hard to think of any other companies that faces a mortal company transformational threat, a chasm. When you're the guy who dominates in the physical retail world, and now the Web is coming, it's very difficult for a company like Walmart (WMT) to jump over here and be as dominant here as it was over there [physical], and that's the story for most. When I joined Netflix, it was a DVD-by-mail company, postage stamp, operations kind of company, but the chasm was there, Reed knew it, we knew it. Even if you know it's coming, most companies don't do it, because you have to eat your own historical business to do it. Netflix has done it, it's crossed the chasm, and now it's more important in the digital streaming world than it was in the DVD world -- that's a miracle, that's a really rare case, it's way out there on the probability curve. I marvel at how the company has transformed itself from a content distribution company to a content creation company, and so well. I can't point at many companies that have been able to transform themselves yet again, like that. House of Cards, Orange is the New Black, these are big, big success. They would've been successes in any age, on any medium. They were incubated, and cooked up in house, and there's going to be more.
What's going forward? There's going to be more of that. The wonderful thing of the Internet, is it's everywhere. Looking at how Netflix will roll out around the world, will be interesting. Reed has great ambitions, and is going to pursue them.
Ciaccia: 'House of Cards' and 'Orange Is the New Black' are big hits, but Netflix has never really disclosed how big. Are there eventual plans to disclose that or is that something that's always going to be kept in-house?
Barton: Who knows what happens in the future, but there are lots of good reasons not to disclose them at the current time. First of all, we don't have to, second of all, we're not ad-driven. We can do our own math to see if things have worked out or didn't work out. Honestly, we don't quite know what kind of math to do because it's a whole new kind of math. The value of content that's created now is a much longer duration than it ever was in the old broadcast world, where you had this period of time, broadcast or movie release, and the bulk of the revenues that were ever going to be achieved were achieved, and then residual rights that kept rolling in, but it didn't amount to much. Now, things like Season 1 of House of Cards got even bigger when Season 2 came out. Mad Men Season 1 had this huge revival when the seasons where made available on Netflix, which was a few years ago. In fact, that ended up reinforcing the new seasons of Mad Men, which was put on a new channel. It disappeared from one of the broadcast networks, and they put it on one of the cable networks. So we don't even know how to do the math on how valuable the content is, and for how long. It's exciting.
Ciaccia: Silicon Valley and Seattle are two different areas, both geographically and in terms of diversity. How does the tech industry in Seattle compare to Silicon Valley and what you see?
Barton: Seattle has kind of red-headed stepchild syndrome. I don't know if that's the right term, but Seattle has such an inferiority complex relative to the Valley, because it's this weak, but aspiring little brother. There are a lot of similarities, though. There's lots of talent, money pouring in, it has all the right ingredients for a great start up ecosystem, and it's doing really well. Still, it's way behind in terms of scale and density of atomic collisions of all this stuff that's being created. The center of the world for that is here, and it's only getting bigger and widening its lead over the rest of the world. This is a pretty incredible place. It can be screwed up, though. Good government is essential to this ecosystem as well. Bad government could move in and bad policies could be made, and really hurt things here or anywhere. I like Seattle because I can see all the ideas that are going on here, but I don't have to talk about start-up ideas at my kids' soccer games.
Ciaccia: You touched on policy, which leads me to my next question. Being a board director at Netflix, Netflix has really spearheaded this whole campaign with regards to net neutrality. Some businesses in the Valley aren't as heavily involved with what's going on with net neutrality, and everything that's going on with the Federal Communications Commission (FCC). What's your take on that and what we're seeing from the FCC's decisions?
Barton: I'm not a spokesperson for Netflix on this, but as a guy who's involved in lots of Internet endeavors, it is concerning that the de facto monopoly that cable has now in providing Internet connectivity to homes is in the hands of someone who tries to increase that market share. Having that kind of control where really there's not a ton of consumer choice, comes especially when the origination of those companies comes from the people. We gave them the rights to the airwaves, to dig the trenches, to put the cables in. They are now the sole provider for most people. It is our right as most people to regulate them. Most people in the country believe it should be a free and open Internet. I'm fully supportive of real net neutrality, not fast lane, slow lane, like the FCC is trying to do right now, which I'm really against. Facebook and Microsoft I'm sure feel the same way, though maybe not quite as loud as Reed. I also think business is a good mechanism for working out what the business model should be. For instance, ESPN. ESPN is watched on cable by X% of people on air time by the people who watch it. I don't know what that percentage is, but it's probably less than 10%, maybe 3%, 5%, something like that. ESPN does not pay to be carries, it doesn't pay the MSOs (Multiple-system operator), the Comcast's (CMCSA) of the world. Quite the opposite, actually. The MSOs are mandated by the consumers, and so, the MSO's actually share back a large percentage of the fees they collect from their subscribers to ESPN. In ESPN's case, I don't know exactly what it is, but it's probably, $5, $6 a month. It's a massive business, and it's done really well. You might even know more than I. I don't know why that same business model doesn't work on the Web. Right now, 30% of all downstream Internet traffic is Netflix in the U.S. That's probably a lot higher percentage than what ESPN is. I'm not sure why they don't pay Netflix to be carried because it would be a pretty bad consumer experience without Netflix. There is a healthy business discussion going on. It would be a really bad thing if there is no other choice than that one choice. If that happens, then we as a society need to step in and see that things are being taken care of.
Ciaccia: What's next for you?
Barton: I have two kids to raise (laughs). You know, I've always got stuff on my plate. The visible ones are things like Glassdoor and Zillow, but there are also ones like Avvo, RealSelf, and Nextdoor is getting pretty visible. It's not in New York City yet, but it's a private social network for neighbors only in your neighborhood. If you have a lost dog, a computer to sell, if you need a leaf blower, a stranger knocking on doors. It's doing quite well, that's one in my stable, and others are in my stable. I also have a smartphone app, Trover, that I'm particularly into.
-- Written by Chris Ciaccia in New York
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