Global network effects, and the core values exercise that finally worked: Tao Tao of GetYourGuide

Not all network effects are the same shape, and the difference decides whether a competitor can take one city from you or has to take the whole world at once.

Tao Tao is co-founder and COO of GetYourGuide, the Berlin-based marketplace for booking travel experiences. More than 80 million tickets sold, around 75,000 experiences from 16,000 providers listed at any time, and a $194 million Series F at a $2 billion valuation.

Michael has been a customer for years, including for the experience where a small group unlocks the doors of the Vatican Museums before opening, turns on the lights, and has the Sistine Chapel to themselves.

The last part of travel to go online

Tao's framing of the market is the reason the company exists. Travel experiences are, as he puts it, the last greenfield that was never fully digitized.

Airlines went online first, decades ago. Then Expedia, Booking.com and Priceline brought hotels online. Experiences remained a roughly $300 billion market conducted offline: you asked the hotel concierge, you saw a pamphlet, you walked up, or you cannot remember how you found it.

And it sits inside a broader shift toward spending on experiences rather than things.

Beijing, and a friend stuck in a hotel room

Tao met his co-founder Johannes while both were studying at the Swiss Federal Institute of Technology. Johannes was doing molecular biology and neuroscience; Tao was a physicist. Neither had anything to do with travel, though both loved it.

One trip took them to Beijing, where Tao is from. Johannes booked his flights wrong and arrived a day early, tried to work out how to see the city on his own, failed comprehensively, and ended up stuck in his hotel room doing nothing.

When Tao arrived the city opened up: the Forbidden City, the Summer Palace, the Great Wall. The gap between those two days is the whole product thesis. What if you could discover things to do anywhere you went, with a local telling you what was worth doing?

Back at college, with three other friends, they started coding and cold calling local operators to say they would soon have a website. Some hung up. Some told them they were crazy.

His own gloss on the decision: it is the privilege of being naive and not knowing anything.

Four bookings, three from his parents

The original 2009 idea was not what the company became. It was a peer-to-peer platform for tour guides, an eBay for services in the spirit of couch surfing, where anyone could guide anywhere.

They launched it and got four bookings in a year. Three came from Tao's parents, out of pity.

What rescued it was serendipity. Professional activity operators started appearing unprompted, the first being a kayaking provider in Switzerland who simply asked to list his product and what it would cost.

That prompted actual research into the professional consumer experiences market, which consisted of Google searches asking whether a Booking.com or an Expedia existed for this. Tao is candid that their research was inadequate and that something did exist. But there was no global brand for discovering and booking experiences, so they went.

Learn faster than the incumbents

Fourteen years and more than a billion dollars raised later, Michael asks what the journey has been like.

Tao reaches for football divisions rather than the usual startup vocabulary. You start with friends in a Sunday league and get promoted year after year, all the way up. He likes the analogy because it carries two things: it is a journey with people you chose, and if you want to stay on the team as it climbs, you have to get better yourself.

His advice to other founders follows directly. Your primary superpower has to be learning and growing faster than your competitors, because incumbents already have the assets, the knowledge, and the network. Unless you are sitting on a genuine technology breakthrough, which almost nobody is, learning speed and agility are what you have.

What the Booking.com founder asked them

Among the lessons Tao lists, one has the cleanest edge.

An early advisor, investor and board member was the founder of Booking.com. One day he told them the most important thing is to follow your customer. They agreed it sounded obvious.

Then he asked what people search for in their search bar, and what the top ten searches were.

They did not know off the top of their heads. His response: they are telling you what they want, and you do not even know.

Tao's takeaway is customer obsession taken further than the phrase usually implies, and supported by data rather than instinct.

The acquisition that made culture real

The other early lesson came from an acquisition roughly a decade before the recording. They bought a small local company doing something similar, mostly by taking on its liabilities, and it did not work.

It was the first time Tao experienced what textbooks describe as organ rejection: the encounter with a genuinely different culture.

His conclusion is a good one. Culture is abstract until you come into contact with one that does not fit, at which point it becomes extremely concrete.

Strategy needs creativity, not just structure

The more recent lesson, from three or four years before the conversation, is about strategy.

Ask anyone whether they are strategic and they will say yes. The insight Tao says arrived later is that strategy is not only structuring and organizational thinking. It is also creativity.

Michael asks what that means concretely, and the answer is the most useful part of the episode for anyone who runs planning.

Take the classic framework of where to play and how to win. The creativity is in choosing the dimensions along which you evaluate where to play. His analogy: a picture can be classified by size, by color, by date. Different dimensions, all valid.

For GetYourGuide the candidate dimensions might be destinations, customer source markets, categories, or channels. Strategy is picking the dimension where you have a genuine insight that this is the one that matters.

He then names three types of strategist, which is worth keeping.

The intuitive type is creative, arrives at an idea, executes it, and it works. The problem is they cannot explain to anyone why it works.

The second type, which he says many business consultants fall into, takes a problem, slices and dices it, and produces a beautiful spreadsheet with charts. It is not particularly insightful and it does not create anything new.

The ideal has both: the intuition about what will work, plus the ability to explain, structure and build it out. He credits the book The Mind of the Strategist for the framing.

Michael tests whether this means execution. Tao clarifies that it does not. The intuition might be that the company should enter and win the Chinese market. The synthesis is then building the business case, creating options, weighing pros and cons, planning mitigations. Execution follows both.

Culture is the continuity, strategy is the cycle

Asked how culture survives a change in strategy, Tao uses a governmental analogy: elected politicians change every cycle, while the professional experts across departments provide continuity.

Culture is the continuous stream. Strategy should not change every year, and mission and purpose should not change at all. A good culture should be capable of embracing new strategies rather than resisting them.

In the early days they called it their constitution, because what it describes is the behavior of people. Amazon has its leadership principles, Netflix has its values, GetYourGuide has its own, and Tao's claim is that they can support whatever strategy the company chooses.

How they failed at values, then fixed it

This is the section to steal.

Their first attempt came from reading Tony Hsieh's Delivering Happiness, where a later chapter describes the importance of core values. Convinced, they searched the internet for core values and assembled a best-of mix from Amazon, Zappos and others. Then they put it on the wall.

Tao's verdict on the result is unsparing. It was a complete failure, because eventually people started saying the company did not live its values. They could not quite articulate the problem, but what it came down to is that the values were not authentic. They were not real.

Several iterations later, the leadership team went to an offsite and asked a different question.

Can we each write down the three or four people we think are outstanding? The ones we would clone if we could, so the company consisted only of them?

Everyone wrote down substantially the same two or three people.

Then they described those people in detail, and from that description they inferred the principles of their culture from the bottom up. That became the first real version.

Michael's addition is the necessary corollary: the same exercise tells you who is not able to embody those values over time.

Revenue to zero

Michael sets up the crisis. Just before COVID, GetYourGuide raised a very large round. Then the world closed.

Tao's account of January and February 2020 is that they were having a breakout. Ten years into the business, they were seeing 120% year-on-year growth.

Meanwhile they kept hearing about a virus in China. His mother was there for Chinese New Year and told him it was serious and she was coming home. They assumed it was regional. Then their Italian office, in the part of Europe hit hardest first, made it undeniable.

By the end of March, at a couple of hundred people and heading for a record year, revenue was zero.

What he describes going through his mind is not sadness but adrenaline. The sequence was employees first, making sure everyone was safe and in a reasonable place. Then customers, and an enormous volume of cancellations, with every customer refunded. Then activity partners, who suddenly had no cash flow and had not raised a large round, which meant a great many calls to understand what was happening to them.

The contrarian call

Then the second decision, which is why the company came out of it well.

They did no significant layoffs in 2020.

The reasoning: the team was always building for the future. Technology teams were building technology the company would need. Operational teams were building supply and brand it would need. So they kept investing.

They came out strong in 2021 and 2022, and 2023 was a very good year.

There were adjustments. A program where people gave up part of their salary in exchange for more options. Government-subsidized reductions in working hours in some countries.

But the underlying bet was a strategic insight in exactly the sense he described earlier. They believed the virus would pass. And in a coincidence no travel company could have planned for, two of his co-founders, CEO Johannes and Martin who runs growth products, were molecular biologists who had worked with coronavirus-type viruses in the lab during their studies and were reading the papers as they came out. Nobody knew for certain, but they did not believe it was a ten-year phenomenon.

Tao's perspective on the difficulty is worth noting, because it cuts against the obvious reading. COVID was hard, but not the hardest period in the company's history. The first couple of years were mentally much harder, because you do not know whether you are building something anyone needs, and you might be wasting years and money. COVID was closer to: this will pass, and if it does not, everyone has bigger problems. So they hunkered down and built.

The biggest winner of the pandemic was the QR code

Tao's joke contains a real argument about their business.

Before the pandemic the QR code was the ugly stepchild of technology. Afterward it was everywhere, and with it came a population that knows how to book online and has concluded that standing in line makes no sense.

The concrete version involves the attractions they work with, the Vatican and the Sagrada Família among them, where the mental image is an endless morning queue.

Those queues never made sense. But there was never urgency to fix them. The pandemic supplied both the time to implement digital ticketing and the reasons to do it, for hygiene and for contact tracing data. So two years of change compressed into a period when operators were suddenly open to digital and customers were being trained to search, discover and book in advance.

His observation about what the queue actually was: the bottleneck was never the museum's capacity. It was that only three people were selling tickets.

Revenge tourism, or the trend line

When travel reopened, shareholders asked whether GetYourGuide was simply benefiting from pent-up demand.

Tao's answer is a chart. Plot air travel from 1950 to now and it is a straight line up. Flight capacity only returned to normal that year, so what looked like a spike was largely a return to the trend, driven by more people holding passports and wanting to travel.

The one change he expects to persist is domestic tourism, as people discovered things worth doing a couple of hours away by car or train. Though, as he says, it is hard to beat the Vatican if you have never been.

Marketing by taking the product to its extreme

The Vatican lights experience, and its equivalents, are deliberate marketing.

The logic: their product is already inspirational, something people can dream about, so rather than making advertising, take the product to the extreme. They asked long-standing partners what the craziest thing was that they could do together to tell the story of what the place is about.

Not everyone can turn on the lights at the Vatican. But it communicates what the Vatican is, and what millions of people can do there regularly.

The McLaren version came from the same instinct, and Tao links it to their values. Learning, curiosity, going deeper rather than staying on the surface, rather than sitting in the hotel and buying a postcard. McLaren shared the interest in how things actually work, so the experience takes you into the technology center, past the door you would normally only pass if you bought a car.

The Sagrada Família one is my favorite. What is genuinely unique about it is that it is an active church whose chief organist is a well-known artist. So after the doors close, a small group stays behind for a private organ concert, with the sunset coming through the windows.

Three areas, and an org chart built from the bottom

Tao's remit covers three things. Supply, including local offices and sales teams working to add and improve inventory. Customer service, on both the business and consumer sides. And content, covering site merchandising, localization, and the operations behind them.

His approach to organizational design came from a board member, and it inverts the usual method.

Most companies get it wrong because they start from the top and draw the tree downward. Instead, start with the frontline person doing the work: the engineer, the salesperson, the translation specialist. Then design the chart that makes that person effective.

What falls out of that is fewer levels, because you do not want ten of them between that person and the CEO. That person should have a manager. They should be on a team that can make decisions quickly. And the team should have authority over its own resourcing, so it does not have to ask another team for permission.

Start from the jobs to be done at the front line, he argues, and you end up with a chart optimized for effectiveness rather than one that flatters managers' appetite for empire.

Building a board you can learn from

For independent directors, the stated objective is to find people they admire and can learn from.

Examples he gives include Clare Gilmartin, formerly CEO of Trainline and therefore experienced at running a public company in the UK, and Fritz Demopoulos, whom he describes as probably the most successful non-Chinese entrepreneur in China for building Qunar, which listed on NASDAQ.

The purpose is twofold: advice, and accountability. These are people who know what excellence looks like, which is what makes checks and balances meaningful rather than procedural.

Raising an up round during a drought

The Series F was $194 million at a $2 billion valuation, structured as $85 million of equity plus a $109 million revolving credit facility.

Tao treats them as parallel rather than dependent. The credit facility is optionality: a line you can draw on or leave alone. It is backed primarily by reputation and history with banks they have worked with for years, which is itself a reason to build the banking relationship early.

The equity is about continuing to invest. He notes the company was approaching profitability and already very profitable in core markets like Europe, so they did not need it. It is a strategic war chest, and the stated next objective is winning the United States.

On why they could raise an up round while consumer technology companies were taking down rounds, his answer starts with performance rather than positioning. At their stage you cannot raise on a pitch.

But the structural explanation is more interesting. Travel businesses are not built overnight, because you have to build a global network. GetYourGuide never had explosive several-hundred-percent growth. They never exceeded roughly 100%, but they sustained it for fourteen years apart from the COVID years. Which means they never carried a moonshot valuation either, always a reasonable multiple of revenue, benchmarked by investors against public comparables with similar revenue and margins.

And the priority he names is one founders should note. The most important thing about the round was not the up valuation. It was doing it without structure. You can manufacture any headline valuation by accepting a large liquidation preference, warrants, or other terms that distort incentives across the shareholder base.

Why now: they started the company during the 2008 financial crisis, and his view is that a crisis is the best time to invest, because marketing is cheaper, talent is available, and competitors may be weaker.

The flywheel, and where the money goes

The spokes are building a customer audience, building the product, and generating supply.

Almost half the company is in technology, building for consumers and for the activity operators. There is a third side he flags that people often miss: distribution partners, including airlines and card companies such as Amex, who distribute their inventory. So there are three constituencies requiring good software.

Then brand building, in Europe and in the United States. And inventory, where his framing is a reminder of how early it is: they have around 75,000 to 80,000 activities against a market that plausibly contains one to two million.

What makes travel network effects different

This is the part worth reading twice, and Tao explains it by contrast.

Consider mobility companies, ride hailing or scooters. The approach is city by city. Owning New York and leading that market tells you nothing about Boston. Every city is a fresh fight for share.

Travel does not work that way. If you have supply in New York, you need global demand to make it liquid. If you have American demand, you need global supply to serve it. Which is why the network takes so long to build.

And why, once built, it is extremely defensible.

His thought experiment: try to disrupt Expedia for hotels in the United States by attacking a single destination like New York. You would need all of their supply there. But more importantly you would need the global demand that makes the supply liquid and keeps the hotels satisfied. Conversely, if you attack a customer source market like the US, you need the global supply they already have.

His conclusion: scale in travel is the moat.

Travel as a bridge

Michael raises US-China tensions, noting Sequoia separating its Chinese and Indian funds, and asks Tao, who is from Beijing and had recently traveled back to see his grandfather.

Tao's first response is sadness. A more connected world is better on straightforward economic grounds: the peace dividend means money that does not go to military spending can go to technology, infrastructure or education, and any decoupling introduces inefficiency into trade.

His answer on what can be done is specific to his industry. Travel builds bridges of empathy, and that is the contribution it can make.

The detail from his LinkedIn post that he returns to: for three years, Chinese students had not encountered a foreign exchange student, there were no Chinese students on American campuses, and people in the US and Europe had not seen inside China.

His argument is simple and hard to disagree with. If you only read the news, the other side becomes an object. Once you are there and speaking to people, you learn how they think. And experiences, as opposed to staying at the hotel pool, are the part of travel that actually produces that.

Where AI is already useful

Tao credits colleagues with the foresight to build a data science and machine learning team years earlier, which any marketplace needs, because ranking, relevance and recommendations are core to the product.

What large language models added is most obvious in translation. The cost fell far enough that translation can be scaled, so content can be rendered into 50 languages effectively instantly. Operators can upload in their own language. And the Hungarian customer visiting Mexico, who does not read Spanish, gets content that previously had no business case for translation.

He expects customer service to be substantially reshaped. And on relevance, they had recently launched an AI-generated synthesis of customer reviews, on the reasonable premise that nobody reads 5,000 reviews and what you actually want is the relevant points.

Michael, who has led localization efforts, notes how slow that work used to be.

What he never thought he would see

Tao's answer is the obvious one, with a detail that makes it better.

He never thought he would see a day of zero revenue. Though to be fair, he says, it was not exactly zero. They had one booking in New Zealand, from someone in New Zealand booking something in New Zealand.

The 5 things I took away from this conversation

1. Ask what kind of network effect you actually have. City-by-city and global networks look the same on a pitch deck and behave completely differently. If a competitor can take one market from you without taking the rest, you do not have the defensibility you think you do. Tao's Expedia thought experiment is the cleanest test I have heard.

2. The clone exercise beats any values workshop. Write down the three or four people you would clone if the company could only consist of them. Compare lists. Describe those people. That is your culture. Tao's team tried the internet-assembled version first and got told, correctly, that they did not live it.

3. Draw the org chart from the front line up. Start with the engineer or the salesperson, ask what makes them effective, and design outward. Levels get removed rather than added, and teams end up with decision rights over their own resourcing. Starting at the top produces a chart that flatters managers.

4. Strategy is choosing the dimension, not filling in the grid. The consultant version slices a problem competently and produces nothing new. The creative part is deciding which axis to think along in the first place, and that is the part that cannot be delegated to a framework.

5. An up round without structure is the real win. Any valuation is available if you accept a liquidation preference or warrants that distort the cap table. Tao's team treated the absence of structure as the headline achievement, not the number, which is exactly backwards from how these get reported.

FAQ

What are network effects? A network effect exists when a product becomes more valuable to each user as more people use it. In a marketplace this runs both ways: more supply attracts more demand, and more demand attracts more supply, so scale becomes self-reinforcing and difficult for a new entrant to replicate.

What is an example of a global network effect? Tao's example is travel. Supply in New York is only valuable if there is global demand to fill it, and American demand is only serviceable with global supply. Contrast that with ride hailing, where owning one city confers no advantage in the next, and each market must be won separately.

Why are network effects a competitive moat? Because they cannot be attacked in pieces. To take a single destination from an established travel marketplace, a competitor would need not just that destination's supply but the worldwide demand that keeps the supply liquid, which means effectively rebuilding the entire network before winning anything.

How do you define company core values that people actually live? GetYourGuide's method was to have the leadership team each name the three or four people they would clone if the company could only consist of them, then describe those people in detail and infer the principles from the description. Their earlier approach, assembling values from other companies' published lists, failed because it was not authentic to them.

Can culture survive a change in strategy? Tao's view is that a good culture should be able to embrace new strategies, because culture is the continuity while strategy runs on cycles. He compares it to a government where elected officials change but professional expertise persists, and notes that mission and purpose should not change at all.

Also mentioned

• GetYourGuide, and the Vatican Museums, McLaren Technology Centre and Sagrada Família experiences
• Booking.com, whose founder was an early GetYourGuide advisor and board member
• Delivering Happiness by Tony Hsieh, the book behind their first failed attempt at values
• The Mind of the Strategist, Tao's source for the three types of strategist
• Trainline and Qunar, the companies his independent board members built and ran
• Amex and airline partners, the distribution side of the marketplace that is easy to overlook

Listen to the full episode

Tao Tao on Between Two COO's

Between Two COO's is hosted by Michael Koenig. Subscribe on Apple Podcasts, Spotify, or wherever you listen.