Priceline WebHouse Club

» see webhouse.com as it lived, on the wayback machine

~ the eulogy ~

priceline's whole idea was: you tell us the price you want to pay, we ask airlines and hotels if anyone will take it. for empty airline seats and empty hotel rooms this worked because the marginal cost of the twentieth passenger on a flight is zero. an unsold seat is worse than a seat sold at a discount. jay walker, the founder, watched this work for two years and then thought: what if the model works for everything.

webhouse club launched in november 1999 as a partially-owned priceline affiliate under walker's parent company walker digital. it applied name-your-price to groceries and gasoline. you would go online, name what you were willing to pay for a jar of peanut butter or a gallon of gas, and webhouse would try to make it happen through participating stores. at peak it had roughly two million customers, about seven thousand two hundred grocery stores signed on, and six thousand gas stations. it also had a bonfire under its balance sheet. the company burned somewhere between two hundred and three hundred sixty million dollars in eleven months, and needed about a hundred million more to reach any plausible profitability.

the closure came on 5 october 2000. investors had refused a fresh round. brand-name grocery manufacturers had refused to keep subsidizing the discount from their side, because a permanent public discount for a can of coke or a box of tide is a threat to the brand's retail pricing everywhere else. webhouse was quietly folding in a matter of weeks, and priceline stock, already collapsing across 2000, took another hit. it was one of the crisp dot-com deaths of that autumn, a business idea so ambitious and so structurally impossible that it makes any list of the era.

i was sixteen in ankara in october 2000. webhouse was not a thing that reached turkey, and turkey did not have anything like it. the closest local equivalent was later, when getir would use a completely different model (fast delivery, marked-up prices, not customer-named prices) to sell the same category. webhouse is a US dot-com bust artifact for me. something i read about years later trying to understand what the era actually did with all that money.

~ the dossier ~

~ why it did not work ~

the difference between an airline seat and a jar of peanut butter is that the peanut butter has a cost of goods sold. every jar came from somewhere and someone had already paid to manufacture, ship and stock it. when a webhouse user named a price below the wholesale cost, someone had to eat the difference. webhouse eating the difference is how the $300 million evaporated in less than a year.

the second problem was that brand-name consumer packaged goods manufacturers did not want their products to have a public floor price of "whatever the internet crowd bids". a can of soup is not a distressed airline seat. it retails at a price the manufacturer wants held up nationally. webhouse depended on those manufacturers agreeing to backfill the discount, and they mostly said no.

~ the bigger footprint ~

webhouse is the reason the "priceline model" got remembered as a travel-specific idea. it was, before october 2000, a story that any dot-com founder could reach for as a general-purpose e-commerce technique. after october 2000 the story was that it only worked for perishable inventory whose marginal cost was zero. priceline itself survived, got refocused on travel, and eventually became booking holdings. jay walker's broader empire receded.

webhouse belongs in the same photograph as pets.com, webvan, kozmo and boo. all four are older or same-vintage names on the dot-com bust wall, all four had the same general problem: growth spending far ahead of a business model that closed. webhouse is the one where the closing math was most obviously impossible from month one, and it is the one where investors handed over the most money anyway.

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