Priceline.Com - Expands Name-your-price Concept To Other Goods And Services, Goes Public In 1999 And Further Expands Its Business Model

From a consumer's point-of-view, it was a great concept, one that truly seemed to leverage the power of the Internet for the benefit of the consumer. The concept was deceptively simple: Let the consumer decide how much he or she would be willing to pay for an item, then find a business willing to match it. From a business point-of-view, though, there were many questions. How many airline companies, for example, would really consent to providing tickets on a name-your-price basis to consumers? And if it worked for airline tickets, could the concept be successfully applied to other goods and services?

These were some of the questions that Jay Walker and his company, Walker Digital, believed they could answer when they established the pioneering name-your-price Internet business, Priceline.com. When Priceline.com opened its Web site in April 1998, it was limited to offering airline tickets. Travelers could book tickets through Priceline.com by listing their points of departure and arrival and their travel dates (but without specifying a time of day), and then naming the price they were willing to pay for the tickets. Participating airlines, which Priceline.com refused to identify at first, had supplied Priceline.com with a database of unpublished fares, which Priceline.com searched each time a ticket request was made. If tickets were available at the requested price, Priceline.com would issue them within an hour for domestic travel and within 24 hours for an international ticket. Buyers were notified by e-mail, first to acknowledge their request and then to confirm whether the tickets had been issued. The tickets were nonrefundable and non-transferable, and flyers had no control over the time of day they would be flying.

Although Priceline.com claimed to have the participation of several major airlines in its program, the company refused to identify them, honoring the airlines' desire to have consumers pay higher prices by ordering through other sources. It was reported that Continental, U.S. Airways, and American Airlines were not involved and that Northwest Airlines and Alaska Airlines were in discussion with Priceline.com. It later became known that Delta Airlines was a major investor in Priceline.com. Airlines were willing to participate in Priceline.com 's program, because they felt that Priceline.com was offering tickets that otherwise would have gone unsold. The airlines did not perceive the Priceline.com model to be a threat to the published fare system, but rather as a complement to it. On its first day of business, Priceline.com claimed to have 621,000 visitors and requests for $575,000 worth of tickets. However, the company did not say how many ticket requests were actually filled.