Bid4Vacations sees dollar signs in B2B

EDITOR’S NOTE: A continuing series of exclusive Business Report question-and-answer interviews with top management of leading e-business companies in the Boulder Valley.

WESTMINSTER – Taking into account the travel industry’s propensity for under-booking excursions and the consumer’s love for driving a bargain, Pamela Bergeson answered opportunity’s knock with an online travel auction.

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As founder and president of Bid4Vacations.com, Bergeson got the idea for the business-to-consumer auction site after winning her own online bid for a computer. Blending the excitement of the win with her background in direct mail, sales and marketing, she launched the Bid4Vacations site in April 1999.

By August, the company landed $2 million in venture financing from Sequel Venture Partners. Its second-round financing goals, however, fell short of expectations, leading to layoffs in May. Bergeson addressed the issue by adding a business-to-business model to the company’s business-to-consumer focus. She believes the reduced capital actually strengthened her company’s foundation.

Business Report: What does the B2C side of Bid4Vacations offer suppliers and consumers?

Bergeson: We work with tour operators, cruise lines, hotels and resorts to sell their excess inventory to our registered users at a savings of 60 to 80 percent off retail. About 1.5 million of our 2 million registered users also have opted to receive our newsletter, which offers about 10 discount packages weekly, based on individual preferences.

On average, 1.2 million hotel rooms are empty and most cruise ships go out half empty because their price is too high. A lot of our bids start at $1 and make it possible for someone to live on a ship with five-star food for less than it would cost them to live in an apartment for the same amount of time. The auction method brings supply and demand together to optimize the right price.

BCBR: You recently shifted your focus to include a B2B model by developing a co-branded program. Why did you choose this direction and where is it taking you?

Bergeson: It actually helped that we didn’t get a lot of financing. We had to get smart quick. We tested banner ads and portals and found that the money on return of the investment was grim, so we launched the Vacation Auction Network (VAN). We co-brand our auction site to make it have the look and feel of someone else’s site and then share revenues.

VAN allows us to populate ourselves all over the Web. It’s less margin but more volume – travel sites are drawing sales to us. We launched about three weeks ago and already have about 100 sites.

BCBR: The travel industry is clearly the largest e-commerce category on the Internet today. What’s holding B2C models back?

Bergeson: B2C is a difficult model to make profitable because the Internet is still a place where people dream and surf rather than purchase. People will do things like check prices on the Internet, but they still predominantly take the traditional travel agency route. The last step of the Internet equation is to get people to buy.

The fear of being spammed and being scammed holds (buyers) back. Even though we have a secured server, a lot of times people will call in because they want to give their credit card number to a real person. What’s ironic is that the person they speak with is a total stranger!

I used to own a catalog business. When I got a 3 to 4 percent response rate on outside sales and a 10 percent rate on repeat customers, it was good. On the Web, you’re thrilled if you get a 0.9 percent rate.

The Internet is the same place today as direct mail was 20 years ago, but have you seen the Target ads? They’ve hooked up with AOL, meaning that the Internet is starting to infiltrate regular stores and therefore more homes. That will really help people come to trust that e-commerce companies aren’t the Mafia trying to get their credit card numbers.

BCBR: What was the difference between your first-round funding efforts and the second round? What’s changed in the process?

Bergeson: We’re actually in our third round now, and our partners and board members are saying we need to find people we make a difference to. Not people to invest in the company to get rich quick, but people who want to be part of the future we represent, like companies in the travel technology area.

I recently spoke at a start-up base camp, and one person asked me to look at his dot-com business plan. I told him: “You’re selling me and you’re passionate and maybe you’ll find some angel investors, but even great ideas that are dot-coms are not getting funded so easily anymore. Make it a B2B service, and you’ll have a viable business because you’ll be marketing to established companies.”