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Bad news for the little guys after all?
Just over a year ago, in sunny Orlando, we were optimistically looking forward to a Travel 2.0 future where the playing field was level for online innovators.
At the PhoCusWright Conference the travel industry met to discuss the long tail in travel, and envisaged an environment where (in PhoCusWrights’ words):
“Little guys compete on the merits of the products and services, not the size of their marketing budgets. Big guys are all of a sudden at increased risk if they ignore too many little things.“
Thanks to the long tail in travel it seemed there was a chance for an almost infinite number of destinations and niche providers to find their perfect match online amongst the tiny minority of consumers searching for the very thing they offered.
And thanks to web 2.0 technology, revenues would be shifted along the tail, redistributed from a few big players in the head and disseminated more widely to the many, many players in the tail. The “new market” shown in the graph.
Well, it turns out we may have been deluded – at least about that whole revenue and profit part. Research from digital music sales, online retailers – and dare I suggest even travel industry analysts themselves – started to suggest that the long tail does not deliver on its market level revenue redistribute promise.
Google delivered what may be the knock-out blow. As Google CEO Eric Schmidt explained (interview in full here)
“It’s a 90/10 model. We love the long tail, but we make most of our money in the head”.
So Pareto’s Law (the 80/20 distribution of pretty much anything) lives on? Certainly, an unequal distribution suggests the significant bulk of revenues continue to come from the minority of products/customers – 90% from 10% in Google’s case. In case he wasn’t clear enough, Eric Schmidt drives it home:
“I would like to tell you that the Internet has made such a level playing field that the Long Tail is absolutely the place to be, that there’s so much differentiation, so much diversity, so many new voices. I’d love to tell you that that’s in fact how it really works. Unfortunately, it’s not.”
An exaggerated death, or the emperors new clothes?
So is the whole concept of The Long Tail dead?
The Register takes a typically sardonic view, declaring: Anderson downgrades Long Tail to Chocolate Teapot status They add that Chris Anderson, author of The Long Tail, has “downgraded it from “the future of business” to something that’s, er, not very helpful for your business at all.” In Chopping the Long Tail down to size, another post on The Register, data from an extensive study of digital music sales is discussed – with a quote from economist Will Page that:
“Is the ‘future of business’ really selling more of less….. Absolutely not. If you had Top of the Pops now, you’d feature the Top 14, not Top 40.
Personally, I think even without the melodramatic approach taken by The Register, the evidence has been coming in from the travel and tourism sector that a handful of big players – even if they are Web 2.0 players – dominate when the wider market picture is viewed.
In their great Travel 2.0 webinar earlier this year, Hitwise and Jupiter Research demonstrated that while visits to Travel User Generated Content sites was growing (though still a tiny proportion of overall travel visits online) – this growth was not evenly distributed along a neat long tail. Rather than a lot of little players accounting for the bulk of travel user generated content, instead it is just 2 players that account for almost 85% of travel UGC market share (Tripadvisor and IgoUgo as shown in Hitwise’s data below) and 5 players accounting for 99% of marketshare.
Not a long tail scenario. Instead, TripAdvisor’s dominance could be explained in terms of critical mass, economies of scale, consolidation and its position at the “head” not in the “tail”.
Slide from Hitwise webinar on Travel 2.0
So, the long tail is not dead, just unprofitable?
Chris Anderson himself, writing recently in Wired, tries to square the research coming in with his predictions of more widely distributed markets. But he has to concede that the data just doesn’t stack up for redistributed revenue:
“I’ll end by conceding a point: It’s hard to make money in the Tail. As Schmidt notes, it’s also hard to make money if you don’t have a Tail (to satisfy minority taste, which improves the consumer experience), but the revenues are disproportionately in the Head.”
So the value of all the little things combined, does not outweigh the value of the tiny minority of big things after all….
Does that mean niche products and marketing activities are over? Or the little guys competing on merits, not marketing budgets are doomed? Does it mean that we should forget about the low traffic, highly specific terms used in online search?
No, I don’t think so at all. There is value in niche activity, tactical search and online marketing - and the smaller business has to compete somewhere. I just don’t think we’re going to see that level playing field, or the industry’s revenues shifting from the big players to the small players any time soon.
Stephen adds: Assuming that the Long tail only accounts for 10% of Google’s income, that means that it accounted for a paltry HALF A BILLION DOLLARS of revenue …in the third quarter last year! The Long Tail lives on but with companies like Amazon and Google holding virtually limitless inventory (and having the economies of scale to reduce costs still further), they still hold the dominant market position and this includes that part of the market that can be described as long tail.
Post by Vicky
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Finally, an apology to subscribers whose email/RSS feed has misbehaved this week. Tracking Tourism was upgraded to the new version of Wordpress at the weekend and this resulted in a test message being issued to subscribers, via Feedburner (the tool we use to manage email and RSS feeds). We apologise for any inconvenience and believe the issue is now fixed. If you continue to encounter any problems with your email/RSS feed, please do let us know the details so we can investigate further. Thanks, Vicky!
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on Tuesday, December 16th, 2008 at 4:41 pm and is filed under Future trends, Marketing strategy, Opinion, Travel 2.0.
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16th December, 2008 at 5:30 pm
I agree with:
“There is value in niche activity, tactical search and online marketing – and the smaller business has to compete somewhere”
Travel Long Tail can be leverage with large scale marketing and with actors inside the Long Tail
Big guys have hight cost distribution, and in this time of mondial crisis, new marketing for small operators have lot of opportunities.
Just to think out of the box and with good partners
Marketing department of big guys can’t think like this or they will spend many time to do it as they are in daily process who cut their brain 
You will see this in action with TravelEuroMed2U and the World Travel Bloggers Contest with 3 big cities destination : Marseille and San-Francisco and Beijing in the game
And I am sure you will be very interested by all the datas this event will bring in the worldwilde ecosystem.
I will keep it for YOU.
Good stuff for your long winter evening
Cheers
Claude
16th December, 2008 at 5:44 pm
Many thanks Claude and I applaud your plans for next year, which sound fascinating (and I can’t wait to learn more).
I think you have a point about marketing department of big guys having a high cost, high effort mindset – by necessity of the organisation process. At EyeForTravel various big players were talking about the 30,000 euros here and 30,000 euros there spent on various social media apps and tests. More than many small business budgets combined. Yet when they get it right and make the effort, small operators do often leverage more results from their efforts – they have to.
Looking forward to your lovely data and will make you a pretty graph especially
16th December, 2008 at 6:39 pm
Hi Claude
I think that’s an interesting observation you’re making and it suggests an interesting dynamic.
Put simply, big companies don’t have the ability to market the long tail but they often have the inventory to offer the product. The trick fr the niche player is to slip through the middle!
16th December, 2008 at 8:32 pm
What the long tail in travel needs are distribution aggregators like Amazon that would give them the required exposure to the demand that is out there. Yes, you can get some of it through SEO and SEM but again for many small players in the long tail that’s something they often don’t have the expertise or time to do effectively.
To succeed you have to appear on the radar screen whenever your service is relevant to a buyer and in any channel the buyer chooses to use to purchase.
This is not a new principle and as valid as ever. Thanks to the long tail effect at least these small players have an opportunity to participate in the market but it’s far from being an automatic success factor.
17th December, 2008 at 12:12 am
Thanks for this article – I hadn’t seen the Eric Schmidt quotes before…very interesting.
Even if the tail doesn’t end up providing the bulk of revenues for any industry, it is still worth noting that the tail often represents massive market potential (as Stephen’s note points out.) The obvious travel example is adventure travel. Of course niche tour operators will never have the same revenue as airlines and hotels, but adventure travel is still a $50 Billion(ish) industry. There is a lot of revenue to claim in that niche (I hope!).
17th December, 2008 at 9:50 am
You’re absolutely right Tyson. As Stephen pointed out to me, that 10% is still worth half a billion dollars to Google. Space for some niche players to earn their crust there, I think.
And the role of the small and niche players is part of the very fabric of the tourism and travel industry, even if it isn’t representing the bulk of revenue.
17th December, 2008 at 9:54 am
Joe, your point that what the long tail in travel needs are distribution aggregators like Amazon that would give them the required exposure to the demand that is out there is a very important one.
The means to tap into pre-existing critical mass, economies of scale etc.
Do you see Tripadvisor/Expedia as the candidate to deliver on that – given the almost Amazon like dominance Tripadvisor has built in its market space – or could you even see someone like Amazon themselves entering into ravel distribution/retail?
18th December, 2008 at 5:55 pm
Vicky -
I don’t think it will be Tripadvisor/Expedia. I think we’ll see more niche providers and aggregators who focus specifically on long tail products. The expedia model is too focused on flight/car/hotel and their interface doesn’t lend itself to long-tail trips.
I’m also anticipating more consolidation among long tail providers. The rise of successful, branded tour operators (e.g. Intrepid Travel, GAP Adventures) makes me think that there are some real economies of scale for tour operators.
18th December, 2008 at 6:01 pm
One angle not mentioned about the long tail of travel…..
Many travel companies in the long tail don’t actually consider themselves travel companies at all…. they could be art gallery guides, activity organisers etc….
Few, if surveyed, would say they are travel companies.
Would be interested to know what the criteria are for being considered a travel company
18th December, 2008 at 6:18 pm
Tyson and Alex – both good points.
Tyson, I suspect that there is possibly room for accommodation (pardon the pun) between the big and small guys – the small guys have the niche destination level product but the big guys have access to the wider transport options.
Alex – nice point and one that made me wonder tangentially whether Eric Schmidt’s observation applied to travel anyway or whether travel displays different characteristics. I’ll assume not but it’s question nevertheless.
18th December, 2008 at 8:14 pm
Alex, your point about the companies in the long tail not regarding themselves as travel is one that I too find interesting. In Scotland they use the term “tourism is everyone’s business” and although that can be hackneyed, I think it has a lot of truth as a visitors experience can be impacted by so many factors.
I suspect when PhoCusWright were talking about the Long Tail in Travel they had something very specific in mind – from carriers and operators to hotel chains and distributors. That’s absolutely right and fair enough, because it fitted the parameters of their conference and the clientele for whom they are delivering industry analysis.
But I agree with you that the reality of the long tail encompasses everything from hospitality, arts and culture, attractions, leisure services – businesses that would perhaps say they are in tourism – but not travel.
24th December, 2008 at 7:16 pm
Like Tyson, I doubt that TripAdvisor, or any of the major OTAs for that matter, are the ideal aggregation vehicle for those many long tail suppliers who, as Alex mentions, don’t even consider themselves as part of the travel industry. A disconnect still exists between that segment of the wider tourism industry and the “travel” players that is only slowly being addressed.
This gap needs to be closed, however, if the travel planning and research experience is to become better, and starts to be based on personal preferences by travelers rather than commercial distribution relationships by suppliers.
It just shows, how much still needs to happen until the benefits of the web, based on connected, intelligent data are put to use for the online traveler. It’s going to be interesting to watch the developments in this area in 2009 and beyond.
27th July, 2009 at 9:38 am
I would have to agree with Stephen’s comment in response to Claude, big companies can offer better prices than that of the little person and thats why these people are taking a hard knock at the moment.
I have been here before and commented but I see that I have been moderated I hope that this is not for too long as I am learning a bit here.
Thanks in advance.
27th July, 2009 at 2:31 pm
Hi Amy, thanks for your comment. The reason the previous comments were not approved is that multiple comments, on old posts, in a very short space of time and with obvious back links in the name automatically get filtered out as being spam.
We get 100s of spam comments a day, plus lots of fake comments that are simply after link-juice from the search engines.
Apologies if genuine comments got caught up in that and glad you find the blog useful!
Thanks
Vicky
28th July, 2009 at 8:30 am
Hey there Vicky
Thank you so much for getting back to me, and sorry that I may have come across as spam I know that feeling all too well, I am enjoying your site and have gone back to older post to see if I could get further information from there, I will try not comment all at once and rather visit on a daily basis instead.
Thanks for all the information again like that saying goes you learn something new every day 
28th July, 2009 at 11:40 am
Not a problem Amy and please don’t be put off commenting – I shall keep a closer eye on which comments my spam filter is binning!
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