You don't need to follow each and every seagull. If you see a bunch of sea gulls flying around the same place over the ocean, then there should be a Big Octo there.
But the upgrade isn't necessary to beat the game. There's a little mini-game that you can't beat if you don't have it (the Rito Flying Man contest), but you can beat the game without.
*shrugs and walks away*
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Hybrid Mode
