Jay Walker, 43, founder and vice chairman of priceline.com, has created a model for buying and selling that's so original, it's been patented. Walker calls his model "buyer-driven commerce," and he's racing to build a big company around it. On priceline.com, customers name a price at which they agree in advance to buy an airline ticket. (In the New York City area, customers can also submit prices for a new car.) Then, within 24 hours, priceline.com reports whether a company is prepared to meet the price.
Within six weeks of its launch last April, the service was attracting 1 million visitors per week. In its first four months, it sold 40,000 airline tickets. In an interview with Fast Company, Walker sketched out the future of Internet commerce.
What's wrong with online auctions?
They're the least-favorable way for someone to buy something. An auction is not a negotiation between buyer and seller. It's a competition among buyers. Auctions are seller-friendly, not buyer-friendly.
What about using "bots" to find the lowest price on the Net?
It's a dumb idea. As a seller, I receive no benefit in negotiating with the agent of a buyer. Will bots exist? Sure. But no airline is going to let bots come in and start negotiating over its ticket prices.
Think of Internet commerce as a high-school dance. You need boys and girls at the dance. Bots are a boy's dream. They're like a machine that goes out and asks every girl if she wants to dance. But what girl is going to pay attention to that machine? Nice idea, but all it produces is rejection.
So what's the future of Web commerce?
Dynamic pricing. The practice of having everybody pay the same price for a Tom Clancy book probably won't survive another 10 years. Look at how wine is bought and sold today, and you see a bit of how dynamic-price markets work. Early buyers get a discount in return for accepting a certain quality risk. We're inventing similar commerce systems online.