Why don’t we look to Google, one said? Yes, why don’t we do a vertical search, said another. And so they discussed four categories – medical, financial, automotive and travel. 

Well, turned out they made the smart choice. Last week, Baidu, China’s largest search engine, made a US$306 million investment in Qunar, China’s biggest travel search engine.

The move makes Baidu the majority shareholder of the company which was established in 2005 by three partners, Fritz Demopoulos (pictured), Douglas Khoo and Chen Chao Zhuang. 

Qunar allows Chinese consumers to search for air and rail tickets, hotels, and tour packages. The company also provides group-buying deals and user discussion forums for reviews. Currently Qunar is one of the most frequented travel search engines in China, receiving 45 million unique visitors a month and listing more than 11,000 air routes and 102,000 hotels worldwide. 

Qunar will remain an independent company and this being a strategic investment and partnership, Baidu says that Qunar and the search engine will “cooperate in certain areas of online travel search”.

In parallel with the move, Demopoulos steps down as CEO while Zhuang, who became COO two years ago, becomes CEO. 

Speaking to Demopoulos, a day after the announcement, I asked him how he felt. “It’s great, a great accomplishment. I guess I am a free agent, for the first time in six years.”

Qunar is his third start-up. The three partners had previously raised $27 million in funding from investors such as Lehman Brothers, GSR Ventures Management, Mayfield Fund, and Tenaya Capital.

Said Demopoulos, “We thought this was a good time to exit. We were getting a lot of traction but had to go to a new level. How do you get to the next level? Continue the organic path or raise money from a strategic investor? We evaluated the different opportunities and this made a lot of sense.

“Baidu is the largest search engine, they have a great culture, they sell ads like we do and we both live and die by ecommerce. We liked them too.”

Their initial decision to go into travel, and not the other three categories, was a process of elimination. At the same time, Demopoulos had been inspired by something Barney Harford (now Orbitz’ CEO, but then Expedia Asia Pacific boss) said at an event in New York that Google was Expedia’s largest competitor.

“That got me thinking – why would an OTA consider a search engine competition?”

Qunar’s success is probably due to many factors but one key factor is the complementary strengths of the founders. Demopoulos, an American-Austrian, came from a media background and he ran the day-to-day operations of the business. He was first posted to Beijing by News Corp to look after business development. When they wanted to transfer him out of China, he decided to stay on. “This was where the opportunity was,” he said. 

Khoo, a Malaysian, who stepped down from the day-to-day three years ago, had a 15-year career with WPP and built up the sales side of the business. Zhuang, who had a background in search, formed the technology pillar. 

Asked what was the biggest challenge of building up Qunar, Demopoulos said, “Success starts and ends with people – recruiting people, building the company culture, finding the right people for the right job, that was difficult. There’s a war for talent in China and that was a big struggle.

“The second challenge – China’s a dynamic market, and it’s changing all the time. Having preconceived notions does not help at all and you have to make certain leaps of faith which are often not intuitive but in the end, you realise it’s the right answer.

“We also struggled with the fact that online travel is a well-established category with certain economics – like the commissions structure. For us to break through that was difficult. It helped we were outsiders but at the same time, we felt insecure because we didn’t have the knowledge.”

As for being a foreigner doing business in China, Demopoulos, who’s lived in the country for 14 years, said, “The number one rule for any entrepreneur is to be self aware. I was self aware I wasn’t Chinese – that’s obvious, right? – and there were certain things I couldn’t do but I was also self aware that there were certain things I could do because I wasn’t Chinese.”

As for his next venture, he’s keeping options open. “I continue to be passionate about digital media and advertising, online travel, the business of sports, China and emerging markets and venture investing,” he said.

He’s got his fingers in a few pies and he will take time to decide what to get involved in. 

For sure, though, he will play more golf.