David Soskin Internet World

David SoskinCEOCheapflights.co.uk1st May 2007

Understanding the long tail - Understanding the long tail - why small customers are vital why small customers are vital

to web successto web success

www.cheapflights.co.uk www.cheapflights.com

Internet World, Earls Court, London, 1st May 2007

Agenda:Agenda:

What is the long tail?

Why vertical and “Web 2.0” search extend the long tail

Outlook for “long tail” – orientated companies

Acknowledgement to Acknowledgement to Chris AndersonChris Anderson



The new growth market: The new growth market: Products you can’t find anywhere but online

Typical

Blockbuster:

3,000 DVDs

Typical

Borders Bookstore:

100,000 books

Source: Chris Anderson



Britannica vs.Britannica vs. WikipediaWikipedia

Established: 1768 January 15, 2001

Number of articles* 7,000,00064,900

* Source: www.amazon.com & en.wikipedia.org



AggregatorsAggregators



The long tail:The long tail: The root calculus

““the lower the costs of selling, the more you can sell. As the lower the costs of selling, the more you can sell. As such, aggregators are a manifestation of the second force, such, aggregators are a manifestation of the second force, democratizing distribution. They all lower the barrier to democratizing distribution. They all lower the barrier to market entry, allowing more and more things to cross that market entry, allowing more and more things to cross that bar and get out there to find their audience.”bar and get out there to find their audience.”

Chris Anderson

Source: The Long Tail



Crap vs. choiceCrap vs. choice

Old economy: crap matters

New economy: choice matters



Book Sales (USA), 2004Book Sales (USA), 2004

Sales Range Titles Units (Million)

1,000,000 or more 10 17

500,000 to 999,999 22 14

250,000 to 499,999 64 22

100,000 to 249,999 324 47

50,000 to 99,999 767 52

0 to 49,999 1,240,998 513

Total 1,242,185 665 Million+

Source: Book Industry Study Group



Google:Google: Ultimate long tail company?

““By going to the bottom with self-service, we were able to By going to the bottom with self-service, we were able to reach advertisers who fell below the threshold of traditional reach advertisers who fell below the threshold of traditional advertising. And by going all the way to the top, we were able advertising. And by going all the way to the top, we were able to capture very large and historically underserved businesses to capture very large and historically underserved businesses as well as a whole new area that never had access to these as well as a whole new area that never had access to these kinds of online services.”kinds of online services.”

Eric Schmidt, CEO Google




But how good is Google search?But how good is Google search?

“The ultimate search engine would basically understand everything in the world, and it would always give you the right thing. And we're a long, long ways from that.”

- Larry Page, Google Co-Founder

“Search as a problem is only about 5% solved”

- Udi Manber, CEO of Amazon’s A9.com search engine

“It's clear there's a lot of room for improvement, there's no inherent ceiling we're hitting up on.”

- Sergey Brin, Google Co-Founder



Search can get a lot better…



CheapflightsCheapflights

Before …



Not much use for Borat …Not much use for Borat …

UK Cheapflights users seeking deals to UK Cheapflights users seeking deals to KazakhstanKazakhstan

April 2006 – March 2007April 2006 – March 2007

7,117 clicks7,117 clicks



What appeals to Borat?What appeals to Borat?



End Result: End Result: Borat is a happy user



Long tail of advertisersLong tail of advertisers

Traditional Media Cheapflights



Long tail of advertisersLong tail of advertisers

Traditional Media Cheapflights



The Cheapflights long tail …The Cheapflights long tail …

Founded 1967

Employees100

Specialize in Greece & Cyprus




Founded 2004

Employees18

Specialize in Florida; flights,

holidays & cruise




Founded 1966

Employees 39

Specialize in Bulgaria, Croatia, Montenegro, Slovenia, Serbia and Romania



The Cheapflights long tailThe Cheapflights long tail



Dohop: A global flight plannerDohop: A global flight planner



Travel is a natural subject for the long Travel is a natural subject for the long tail – highly fragmentedtail – highly fragmented

Then Now

Travellers Mainly the very rich Everybody

Travel Companies State owned/ monopolistic airlines

Some charters, specialist

Scheduled

Many charters, specialists

Low Cost

Online travel agencies

Destinations Mainly short haul “Everywhere”



Long tail and Web 2.0



User reviewsUser reviews

Michelin

Rough Guide

Hardens

Frommers

Everyone



Frommers vs. WAYNFrommers vs. WAYN

HB slide



Trusted Places: Trusted Places: example a restaurant in London



The long tail:The long tail: Social networking

Then

club

local pub street school charity hobby sport

Now

World

Your -



Time spent onlineTime spent online

More and more people are using the internet

People now spend an extra 1 hour 16 minutes each month online compared with 2001

16-24 year olds spend even more time online: 11 hours 20 minutes per month on the internet

Source: Ofcom research, April 2006

8hrs 40 mins

9hrs 56 mins

0

2.5

5

7.5

10

2001 2005

Hou

rs

Year



How to create a thriving long tail How to create a thriving long tail businessbusiness

“ “ 1) 1) Make everything available.Make everything available.

2) Help me find it.”2) Help me find it.”

Chris Anderson




Long tail of the internetLong tail of the internet

Web 2.0

Reviews

Social networking

Blogging

Vertical search



Conclusion:Conclusion:

“Long tail” is suited to the internet

Vertical search is an ideal “long tail” application

Web 2.0 has accelerated the “long tail”

Understanding and using the “long tail” represents a significant and growing business opportunity

Thank youThank you

Questions,Questions, suggestions, feedback or complaints welcome…suggestions, feedback or complaints welcome…

[email protected]

Business

David Soskin Internet World