Walker, Jay Scott

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Walker, Jay Scott

(1955-)
priceline.com Incorporated

Overview

Jay S. Walker, founder of priceline.com, gave the public the power to "name their own price" online for the first time on goods and services in four areas: travel, with airline tickets, hotel rooms, and rental cars; personal finance, with home mortgages, refinancing, and home equity loans; automotive, offering new cars; and telecommunications, with a long distance calling service. As long as a customer was flexible and pre–paid, he or she could soon be airborne for far less money than ever before. An Internet commerce pioneer, Walker, who is also founder, chairman, and CEO of Walker Digital Corp., came up with the innovative idea of patenting priceline's method of doing business, along with a slew of other patents granted and pending that could revolutionize industries outside the Internet as well. Walker Digital is the largest intellectual property laboratory dedicated to business methodology.

Personal Life

Walker married Eileen McManus on April 18, 1982. They have two children, Evan and Lindsey, and live in Ridgefield, Connecticut. A licensed pilot, Walker also enjoys reading, book collecting, photography, collecting space memorabilia, and fine wines.

Walker is a member of Sigma Phi, where he served as chairman of the board from 1988 to 1990. He was named Ernst & Young's regional Master Entrepreneur and The Industry Standard's Most Influential New Business Strategist, both in 1999.

Walker was born on November 5, 1955, in Queens, New York, to Arthur, a real–estate developer, and Jeanette Walker, who had fled Europe at six to escape Nazi persecution. He cites his mother, a golf and bridge champion, as giving him his competitive drive. Indeed, Walker began his entrepreneurial career at a young age. At nine years old, he created and distributed his own newspaper, and at thirteen, he undercut the price of the canteen and sold candy to kids at summer camp. Walker's mother died when he was eighteen.

While Walker's early business efforts were not promising, as a student attending Cornell University in Ithaca, New York, he routinely played the Parker Brothers game Monopoly and quickly became an expert at the secrets of winning. Although Parker Brothers had threatened him with a suit if he wrote a book about his secrets, Walker and a partner wrote one anyway, entitled, 1000 Ways to Win Monopoly Games. The company did indeed sue, with legal fees eating up the $50,000 profit Walker made from the book. The suit was later dropped. Undaunted by this early setback, Walker obtained financing and began a weekly newspaper, Midweek Observer, in Ithaca, during a leave of absence after his junior year of college. The results were disastrous: Gannett, a leading publisher, ran his paper out of business, leaving Walker in debt to the tune of around $250,000, some sources say. He graduated with a bachelor's degree in industrial relations from Cornell University in 1977. That summer, he attended a course in publishing at New York University, with the idea that never materialized of selling a magazine filled only with coupons. Other early ventures, involving selling catalogs at retail outlets and selling advertising in mail–order catalogs, were similarly unsuccessful.

Career Details

The company Walker began in the catalog venture, Catalog Media Corp., saw its first success in 1985, when he made a deal between hundreds of catalog vendors and Federal Express. The deal was that the catalog merchants would subsidize Fed–Ex overnight delivery of their products to customers, thereby extending the Christmas holiday shopping season for the merchants until the day before December 25th.

Fresh from his first big business achievement, Walker then partnered with Michael Loeb in a company they called NewSub Services, which began operation in 1991. Walker's aim for the company was to offer an indefinite renewal service for magazine subscriptions by charging customer's credit cards automatically each year. A common procedure in other countries, the practice had not yet been introduced in the United States. He came up with a software program, which later received a patent in 1999, that allowed publishers to renew subscriptions automatically to a customer's stored credit card number, with the customer's permission. Loeb, whose father was the financial journalist and editor Marshall Loeb, had connections in the publishing industry, and the company sold half a million subscriptions within one year. By 1998 the company, later renamed Synapse Group Inc., had sold 30 million magazine subscriptions and had sales of nearly $300 million.

Walker was already looking for a new challenge to conquer in the early 1990s and set his eye on Internet as his medium. At first, Walker had the idea of starting an Internet casino. Then he began to wonder if he could simply profit from ownership of the idea of Internet gaming. He followed up with patent lawyers who assured him he could patent his idea. Business, at the time, invented many things, like credit cards and frequent flyer programs, and Walker was amazed to learn no one had ever tried to patent these original ideas. With that in mind, Walker began his next business, Walker Digital Corp., in 1994. Walker hired a group of computer engineers, cryptographers, and other technical personnel to devise new methods of doing business on the Internet and to develop the corresponding technology. Patent lawyers were also retained to secure ownership of any ideas that the research division of the company developed.

On April 6, 1998, Walker started his online business, priceline.com, with $20 million from the sale of a third of his ownership of NewSub and $100 million from outside investors, including Paul Allen, cofounder of Microsoft; George Soros, a financier; Jim Manzi, a computer–software executive; and John C. Malone, a cable television executive. Four months later, Walker was granted a patent for its development of a "buyer–driven" business method and the corresponding software. The method entailed allowing prospective customers of goods and services to send a binding purchase offer to a prospective seller over the Internet. This was the driving force behind priceline.com, which first offered consumers the chance to bid for airline tickets. Users would indicate their travel dates and the price they wanted to pay, enter their credit–card number, and participating airlines would review the bids and decide whether to accept the traveler's offer. If they agreed on the price, the traveler was obligated to purchase the ticket. Prospective travelers stood to gain by receiving discounted tickets while airlines gained by being able to fill any as–yet unsold seats. Priceline sold an estimated 40,000 tickets in the first three months of business. The idea caught on because of the appeal of discounts as well as the humorous ad campaigns that starred ex–Star Trek cast member William Shatner. Some early complaints noted that the success rate was only about 10 percent but rose as more airlines gradually participated in the process.

During the technology boom, the company went public, and its March 29, 1999, Wall Street debut was a huge success. The offer price of $16 per share ended the first day of trading at $69, making it one of the most successful initial public offerings ever, giving the company a $9.8 billion market value and making Walker an instant billionaire. The stock reached to more than $82 on the next day. At its all–time high, the company's stock reached $165 a share. Just over a year later, the stock reflected the deflated technology market at nearly $30. Though the company has yet to post a profit, like many other former high–flying technology companies, analysts predict priceline will be in the black by 2001 and, in fact, posted a quarterly profit for the first time in late 2001. Its 2000 sales stood at more than $1.2 billion and its loss narrowed to $315 million.

Priceline soon grew beyond merely airline tickets, with customers able to name their price on home financing, hotel rooms, new cars, rental cars, and telephone long distance. Some argued that the system behind priceline wouldn't work with the new products and services it added, but Walker firmly defended his idea to invent new business methods and patent them. "Amazon.com is a wonderful company, but anybody can sell books on the Internet. Same thing with eBay and auctions. What they will ultimately need are proprietary advantages," he told the Wall Street Journal. Walker suffered a set–back when he left the day–to–day operations of priceline to others in November 1999, to launch WebHouse Club. The company was not affiliated with priceline but used Walker's patented technology to allow people to bid on gasoline and groceries. The business shut down in October 2000 because of insufficient operating funds. Walker then stepped down as priceline's vice chairman in late 2000, selling off most of his stake in the company, currently leaving him with about 10 percent ownership. He left priceline to focus on the company he started that came up with priceline's business model, Walker Digital, where he is now chairman and CEO.

Since Walker's departure in late 2000, priceline has struggled amid the publicity regarding complaints about customer satisfaction and increased competition from other Internet businesses. In September 2000, the Better Business Bureau expelled Walker Digital due to complaints that it didn't adequately explain the restrictions on its discount airline tickets, but the company was reinstated two months later when it changed its disclosure policy. Its stock price stood at about $4 as of late 2001.

Chronology: Jay Scott Walker

1955: Born.

1977: Graduated from Cornell University.

1991: Started NewSub Services offering automatically renewable magazine subscriptions.

1994: Founded and chaired Walker Digital Corp.

1998: Founded priceline.com.

1999: Priceline's initial public offering one of the most successful in history.

1999: Launched WebHouse Club.

2000: Stepped down as priceline's vice–chairman.

2000: Became CEO of Walker Digital.

Walker Digital owns around 60 patents, which provide methods for generating and executing insurance policies for foreign exchange losses, disbursing prepaid phone time, and issuing postpaid traveler's checks. Some of Walker's more than 400 patents pending would allow people to place fast–food orders via Palm Pilot or other digital device. With the company churning out a patent application every two weeks, Walker has lobbied to streamline and speed up the patent process. Critics argue that patenting business methods may not be the best way to go. When Walker asked former CEO of AMR Corp., parent company of American Airlines, why he had never patented his creation of frequent–flier mileage, he said the idea never occurred to him but added in the Wall Street Journal, "It seems to me that if business processes were patentable you would very severely limit competition."

Social and Economic Impact

Internet mogul Jay Walker introduced the nation and the Net to a totally new way of buying. His patented system, which allowed users to name their own price on airline tickets, revolutionized the way people do business on the Internet. With one of the most successful IPOs in history, Walker became an instant billionaire off what may have been his greatest idea—priceline.com—and patenting its underlying business system.

Since Walker hit on the novel idea of patenting business systems, that has become his sole order of business through Walker Digital, a new age "think–tank," which creates and patents new ideas in commerce almost weekly. Given that he has many patents in hand and hundreds of patents pending, one of Walker's ideas might well revolutionize business methods in the future.