Oct 31, 2022 · 1h 15m · how-i-built-this
Tripadvisor: Steve Kaufer
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of How I Built This, host Guy Raz interviews TripAdvisor co-founder Steve Kaufer on how he turned a near-bankrupt B2B travel search concept into a global travel titan through strategic pivots, user-generated reviews, and resilience in the face of major personal and economic crises.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Guy holds 38.5% of the talking time here. How this is scored →
Guy as informed peer 5.0 Guest teaching 3.6 Guest disagreement 0.4 Guy pushing back 1.3
speaking balance: gold is Guy, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:03:04 No sympathy for thin-skinned business owners
Kaufer bluntly dismisses business owners complaining about negative reviews, stating anyone unable to take criticism should not be in hospitality.
Hardest push from Guy ▶ 1:04:15 Raz challenges that fake reviews are impossible to stopRaz confronts Kaufer with the proposition that review farms cannot be eliminated 100%, forcing Kaufer to reframe their anti-fraud objective.
Biggest teaching moment ▶ 26:39 Explaining the zero-dollar house ad loopholeKaufer breaks down how portal economics caused TripAdvisor's 50% rev-share to yield almost nothing because Lycos filled inventory with internal house ads.
Guy holds their own ▶ 39:18 Raz analyzes early 2000s SEO dynamicsRaz demonstrates strong domain knowledge by explaining how early search engine optimization operated like shooting fish in a barrel before the market matured.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Guy as informed peer | Guest teaching | Guest disagreement | Guy pushing back | Why |
|---|---|---|---|---|---|---|
| The Disastrous Five Hundred Dollar Revenue Check | 5 | 1 | 0 | 0 | Raz opens the episode detailing the background of TripAdvisor and breaking down user review psychology before setting up Kaufer's first company. | |
| Lessons in Failure from CenterLine Software | 4 | 3 | 0 | 1 | Kaufer recounts the rise and painful collapse of CenterLine Software, explaining why he walked away without a payout. | |
| Vacation Frustrations Spark the Idea for TripAdvisor | 4 | 3 | 0 | 0 | Kaufer explains how a frustrating trip-planning experience to Mexico led him to hack search queries with negative keywords, inspiring TripAdvisor. | |
| Founding TripAdvisor as a B2B Travel Search Engine | 4 | 4 | 0 | 1 | Kaufer details the original B2B concept of licensing destination search queries to portals and airlines instead of building a consumer brand. | |
| B2B Rejections and the Shocking Lycos Partnership | 5 | 5 | 1 | 1 | Kaufer reveals how Lycos gave them a 50% rev-share deal that generated only $500 over three months because the inventory ran zero-dollar house ads. | |
| The Critical Pivot to Cost-Per-Click Lead Generation | 5 | 5 | 0 | 2 | Kaufer explains the pivotal switch to cost-per-click lead generation with Expedia and how creating an auction dynamic doubled their bid prices. | |
| Unleashing User-Generated Reviews and Explosive Growth | 6 | 4 | 0 | 1 | Raz and Kaufer discuss the explosive adoption of user reviews, the golden era of SEO, and the feedback loop of rewarding reviewers. | |
| High-Stakes Negotiations and Walking Away from Yahoo | 5 | 4 | 0 | 2 | Kaufer discusses the high-stakes decision to walk away from Yahoo's acquisition offer after a January traffic surge dramatically increased their valuation. | |
| The IAC Acquisition and Navigating Profound Personal Loss | 6 | 3 | 0 | 1 | Kaufer reflects on selling TripAdvisor to IAC for $210 million while simultaneously supporting his late wife through terminal cancer. | |
| Aggressive Expansion and Combating Fake Review Fraud | 6 | 5 | 2 | 3 | Raz presses on the inevitability of fake review farms, while Kaufer adamantly defends their aggressive detection methods and red badge penalties. | |
| Public Spin-Off, Pandemic Crisis, and Kaufer's Departure | 5 | 3 | 1 | 2 | Kaufer reflects on surviving the 2020 pandemic travel crash, his decision to step down as CEO after 22 years, and preparing for his next startup venture. |
Statements from this episode (17)
Kaufer's previous startup peaked at 160 employees before near-collapse
“We grew up to a 150, maybe a 160 people. Eighteen million in revenue. And then, you know, market changed a little bit. You know, the company grew up, and then it started having growth challenges, and then it started to contract, and so it finally sold to a com…”
Kaufer: Startups must secure customer commitments before building new products
“We made the absolute classic mistake of, hey, we thought this was what our customers would want, but we neglected to find customers that would say, yeah, if you build that, we will buy it before we actually built it.”
Kaufer: Vacations suffer from information asymmetry because they cannot be returned
“There was huge information asymmetry. It was an incredibly important purchase, this, a vacation. It was a big purchase in your annual budget. I, you couldn't return it like, Hey, I bought a TV. I don't like it. I'm returning it.”
Kaufer: TripAdvisor made zero sales during its first nine months
“So, we could not get any sales for the first, like, nine months of trying.”
TripAdvisor's first quarterly revenue-share check from Lycos was only $500
“That first revenue check, dot, dot, dot, was 500 dollars.”
TripAdvisor sold its first 20,000 clicks to Expedia for $10,000 in 2001
“And we sold our very first, you know, real revenue client, 20,000 clicks for 10,000 dollars in the month of December, 2001.”
Kaufer: TripAdvisor stayed profitable every quarter from March 2002 until the pandemic
“March marked our first month of profitability. Since we didn't know how long it would take to turn things around, if we could turn things around, we had cut back on everything non-essential, and so our burn rate was about 70, and March we made it a profitable …”
Kaufer: Platforms must profusely thank users to drive repeat reviews
“The first thing you do is you thank them. The second thing you do is you thank them profusely. And then the third thing you do is you let them know how much other travelers really appreciate their comments. And all of that's just like, it's the dopamine. It's …”
Kaufer: TripAdvisor reached $20 million in revenue by 2003
“I think we closed 2003 with over twenty million in annual revenue.”
Kaufer: A critical mass of user reviews builds an unassailable defensive moat
“And the faster we could get to critical mass of enough reviews everywhere, the harder it was going to be for anyone else to come in and offer reviews as a major service.”
Kaufer: Selling TripAdvisor in 2004 was financially a crazy bad decision
“Financially, it was a crazy bad decision. But given everything I knew at the time with the risks you outlined before, the fact that it was kind of a life-changing experience for everyone at the company was absolutely the right decision.”
Kaufer: Expedia was TripAdvisor's biggest client before IAC bought it
“Expedia was our biggest client at the time. Expedia was owned by IAC.”
Kaufer: Expedia let TripAdvisor operate autonomously and sell to direct competitors
“We were moved from IAC into the public company Expedia when that was formed about a year later. And again, we were division within Expedia and to their infinite credit, they let us continue to operate on our own, you know, even though we were selling our leads…”
Kaufer: Hospitality operators who cannot handle feedback are in the wrong business
“If you are in the hospitality business this is your life. Don't be in the hospitality business if you can't take feedback. And if you can't take feedback, some of which is good and some of which is not living up to Expectations, however unreasonable they might…”
Kaufer: Fake review farms target Google but explicitly exclude TripAdvisor
“We see these review places offering to write fake reviews on Google and some other sites. And then they say, except TripAdvisor. Cause like, yeah, if like, if they try, we catch them, we shut them down.”
Kaufer: TripAdvisor reached 400 million monthly unique users
“The thing that I craved personally the most was the level of impact that the company had, and like four hundred million unique users a month, yeah, with a lot of duplication, you're still counting of impacting the lives, the vacations of
A couple of billion p…”
Kaufer: I have one more non-travel startup left in me at 59
“I want to do it again. I want to not travel not in software tools. But I figure I have one more startup left in me. And as I turn. As I had turned 59 years old, I look around and say, okay, better get moving. And so I am just open for another adventure that ca…”