Unless your company was affiliated in some way to the porn industry, it seems the digital gods would not grant you passage. But Simon Bicket, finance director at Cheapflights.com, would disagree.
Cheapflights was founded by John Hatt, former travel editor of Harpers & Queen, in 1996. It is now one of the most successful digital brands in the UK and boasts more than 1.3 million unique users and 11 million page impressions in an average month.
Bicket is not adverse to the odd risk. Before joining Cheapflights, he had his fingers burnt at another dotcom start-up that failed to get funding.
Cheapflights was a different story.
One of its major attractions, he claims, is its name. ‘It’s one of the most common search terms on the internet. It’s up there with sex as one of the top words. Our founder has a saying: “It’s like nakedladies.com. It’s a proposition that just about everyone has an interest in”,’ Bicket says.
Of course, a catchy name and a solid customer base is only part of the battle. Surviving as a dotcom also demands a long-term road map. While the majority of early web companies were extravagant get-rich-quick schemes (and many of them succeeded), Bicket insists that Cheapflights is here to stay.
‘At the end of the day, it’s not about racing for the fast buck. It’s about building something big and sustainable for the long term, which is why we don’t have venture capitalists involved,’ he says.
The last point is emphasised by chief executive David Soskin. ‘We are privately held. We don’t have any venture capitalists in the company at all, which I think is an extremely positive thing.’
He says the problem with the vast majority of venture capitalists is that they are interested only in a quick way out. ‘The very moment they arrive at a business, they are thinking about the exit,’ Soskin claims.
Although open to innovation, Bicket is far more traditional in his thinking: ‘I come from the real world. All my values are embedded in the real world.’
It is this combination of traditional bricks and mortar business sense, mixed with the flexibility, global reach and low running costs of internet-based companies, that has contributed to the success of Cheapflights.
Eventually the two hope to expand Cheapflights into a more traditional bricks and mortar business, in a similar way to other successful internet companies. Lastminute.com and Ebookers.com have both moved towards more traditionally-based company structures.
For now, the two describe Cheapflights as a media company, which at first glance may seem silly. Further investigation reveals the truth in the claim and goes some way to explaining the simple business model of the company. ‘We are a media company, we deliver information: that is our meat and bread. The job is to keep good information flowing,’ says Bicket.
The company earns its money from airline operators and travel agents that use the website as a shop window. They pay to advertise deals, knowing that if they don’t, their competitors will.
But advertising has been hit extremely hard over the last few years, which makes the success of Cheapflights doubly surprising.
Not so, according to Soskin. ‘We’ve escaped the advertising slump because we produce something that is extremely attractive to advertisers,’ he says, before noting some words of caution. ‘We have to be the cheapest form of advertising. (Travel companies) can go on television, they can go on radio, they can advertise in the broad sheets. There is huge pressure in he advertising industry to get the business of the travel advertisers. We have to undercut all the rivals in traditional advertising.’
Although the business model of a successful dotcom differs only slightly from that of a bricks and mortar company, there are differences. Bicket describes it as ‘quite extraordinarily fast’, while Soskin says it is ‘far more competitive’.
‘There isn’t a week that goes by without new online travel businesses. Everyone and their dog wants to get into the travel industry and reap the rewards of what is a very lucrative market,’ says Soskin.
The truth is, very little initial outlay is needed to set up a dotcom. In the late nineties, spotty teenagers were putting up professional-looking customer-facing sites from darkened bedrooms in East Croydon.
Although obviously not in this bracket, Cheapflights has not borrowed a single penny, and has been cash generative since day one. It has also spent a meagre £500,000 on advertising since its creation back in 1996.
According to Soskin, this is down to the founders’ ‘mousetrap’ approach to business. They want to create something so attractive that users will come back to it again and again, and, importantly, recommend it to their peers.
However, on a day-to-day basis, Bicket’s job does not differ greatly from the equivalent position in a traditional company. He says he has to do a full range of tasks from the ‘incredibly menial’ to the vitally important. ‘You can’t afford to trap yourself in an ivory tower. This is one of the things that is so exciting about small companies. You can influence at the highest levels, but still be responsible for delivering quite basic things,’ he says.
Being involved with a small business brings its own challenges in Britain, says Bicket. ‘It’s not a good place for small businesses, and it’s not just an issue of taxes, which I think we would all agree are too high. There is a lot more regulation. The government sometimes has a view that time is free and that a finance director’s time is well spent filling in forms and dealing with this, that and the other. Red tape has been building over the years. There is a raft of rules that make it difficult for small companies to cope.’
As if the issue of red tape was not enough of a burden for small businesses, chancellor Gordon Brown’s national insurance hikes could be a death knell to many. Bicket says that Cheapflights will have to take the increases on the chin and try to absorb the extra costs as best they can.
But Soskin is more damning. He says the hikes are a shortcut to high unemployment, and questions whether anyone in the Cabinet has actually worked in the private sector, let alone run a business.
As for the future, both Soskin and Bicket are clear about the direction in which they want to take the company. ‘Over the next few years, we will become one of the best known brand names in the UK. We will be operating internationally and we have a very good shot at being the largest travel site in terms of viewers,’ says Soskin. The company already operates in the US.
The business has also opened a similar service for cheap hotel rooms called Cheapnights.com.
The company believes more than £300m worth of travel products are sold every year through referrals to its site. In the present climate, it’s money the travel industry can’t do without.
THE GOOD, THE BAD AND THE DOWNRIGHT STUPID
The good – eBay.com
Originally the realm of cyber-geeks buying circuit boards, eBay.com has grown to be the most successful dotcom of them all. With a market cap of around $25bn, and revenues last year of $1.2bn, it is the darling of Wall Street, with shares trading at almost $90 as Accountancy Age went to press. ‘In just six years of operation, the eBay marketplace has evolved into an economic phenomenon,’ said founder and chairman of the board Pierre Omidyar in last year’s annual report.
The bad – Boo.com
By May 1999, Boo.com had raised $120m to support its ambitious plans for an online fashion store. Within 12 months, it had spent all but $500,000 of it, and gross sales were $1m a month less than it was spending.
The upstart’s flamboyance was infamous. It tried to establish itself in 18 countries simultaneously, spent £30m on advertising alone, and its executives would fly only first class. But the greatest sign of excess, was the hire of 40 Gurkhas to escort the founders wherever they went.
In fact, they were so loyal, they prevented KPMG from entering the company’s offices after it went into liquidation.
Dean Hawkins, Boo.com’s one-time chief financial officer, was reputedly so terrified of the firm’s decadence that he resigned after just two months in the job.
The downright stupid – Clickmango.com
The online health and beauty site was launched in April 2000 on the back of £3m investment. ‘The truth about Clickmango and its brave young instigators is that healthy living, ruled by nature and her down-to-earth remedies, is the way forward,’ chirped figurehead Joanna Lumley in a farewell letter.
But healthy living does not sit together too well with the majority of internet users, who are better known for slouching in front of a computer screen for 18 hours a day eating crisps.
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