The Long Tail

Good Books: (via Emergic) Chris Anderson's book, The Long Tail is about: Why the future of business is selling less of more?

From the book’s description:
The Long Tail is a powerful new force in our economy: the rise of the niche. As the cost of reaching consumers drops dramatically, our markets are shifting from a one-size-fits-all model of mass appeal to one of unlimited variety for unique tastes. From supermarket shelves to advertising agencies, the ability to offer vast choice is changing everything, and causing us to rethink where our markets lie and how to get to them. Unlimited selection is revealing truths about what consumers want and how they want to get it, from DVDs at Netflix to songs on iTunes to advertising on Google.

However, this is not just a virtue of online marketplaces; it is an example of an entirely new economic model for business, one that is just beginning to show its power. After a century of obsessing over the few products at the head of the demand curve, the new economics of distribution allow us to turn our focus to the many more products in the tail, which collectively can create a new market as big as the one we already know.

The Long Tail is really about the economics of abundance. New efficiencies in distribution, manufacturing, and marketing are essentially resetting the definition of what’s commercially viable across the board. If the 20th century was about hits, the 21st will be equally about niches.

The Economist wrote: The niche, the obscure and the specialist, Mr Anderson argues, will gain ground at the expense of the hit. As evidence, he points to a drop in the number of companies that traditionally calculate their revenue/sales ratio according to the 80/20 rule -- where the top fifth of products contribute four-fifths of revenues. Ecast, a San Francisco digital jukebox company, found that 98% of its 10,000 albums sold at least one track every three months. Expressed in the language of statistics, the experiences of Ecast and other companies such as Amazon, an online bookseller, suggest that products down in the long tail of a statistical distribution, added together, can be highly profitable. The internet helps people find their way to relatively obscure material with recommendations and reviews by other people (and for those willing to have their artistic tastes predicted by a piece of software) computer programs which analyse past selections.

The Wall Street Journal wrote in a review:
In a traditional graph of sales and demand, there is a stratospheric swoop upward where hot products and services are tracked, and a long descending line tracing the less spectacular performance of low-volume also-rans. For years, these outliers fell off the edge of the market or held only a marginal position, with minimal profits. These days, though, technology has allowed such niche interests to thrive, finding steady customers and rising levels of interest.

The long tail has lifted into prominence troupes like the Lonely Island, or bands like the Arctic Monkeys (popularized by MySpace, the user-generated site aimed at young people), or art-house movies like "Capturing the Friedmans" (made popular through Netflix, the online-based movie-rental outfit). Thanks to technology's power to target pockets of consumers, niche forms of cultural expression are reaching otherwise fractional audiences, and the fractions are adding up in ways they never have before. In the process, the economy is reshaped, and our tastes are too.

Blockbuster may have to devote its (limited) shelf space to 50 copies of the latest action blockbuster; Netflix can (theoretically) offer every movie ever made. Through sophisticated filtering, Netflix and Amazon and iTunes can make a deep inventory pay off by matching niches with consumers. Technology has shattered an aggregate popular culture -- the icon-producing kind. But it has also come to its rescue.

Steven Johnson wrote about the book: It occurred to me reading The Long Tail that the general trend from mass to niche can explain some of this increased complexity: niches can speak to each other in shorthand; they don't have to spell everything out. But at the same time, the niche itself doesn't have to become any more aesthetically or intellectually rich compared to what came before. If there's a pro wrestling niche, the creators don't have to condescend to the non-wrestling fans who might be tuning in, which means that they can make more references and in general convey more information about wrestling -- precisely because they know their audience is made up of hard core fans. But it's still pro wrestling. The content isn't anything to write home about, but the form grows more complex. In a mass society, it's harder to pull that off. But out on the tail, it comes naturally.An example from the book: What’s extraordinary is that virtually every single one of those tracks [on Rhapsody] will sell. From the perspective of a store like Wal-Mart, the music industry stops at less than 60,000 tracks. However, for online retailers like Rhapsody the market is seemingly never-ending. Not only is every one of Rhapsody’s top 60,000 tracks streamed at least once each month, but the same is true for its top 100,000, top 200,000, and top 400,000 -- even its top 600,000, top 900,000, and beyond. As fast as Rhapsody adds tracks to its library, those songs find an audience, even if it’s just a handful of people every month, somewhere in the world. This is the Long Tail?

The New Yorker wrote:
Both eBay and Google turn out, in Anderson’s account, to be long-tail businesses, too. On any given day, about thirty million individual items are bought and sold on eBay, many of them cheap and obscure. Barely a decade after Pierre Omidyar founded eBay, more than seven hundred thousand Americans report it as their primary or secondary source of income, according to a study by the market-research firm AC Nielsen. For Google, the long tail is populated by small advertisers. Major corporations pay to get their ads placed next to the results of popular search terms, such as luxury S.U.V.s and flat-screen televisions. But much of Google’s annual revenue, which now exceeds five billion dollars, comes from tiny companies whose ads appear next to queries like Victorian jewelry and Hudson Valley inns....The forces behind the long tail are largely technological: cheap computer hardware, which reduces the cost of making and storing information products; ubiquitous broadband, which cuts the cost of distribution; and elaborate filters, such as search engines, blogs, and online reviews, which help to match supply and demand. Think of each of these three forces as representing a new set of opportunities in the emerging Long Tail marketplace, Anderson suggests. The democratized tools of production are leading to a huge increase in the number of producers. Hyper-efficient digital economies are leading to new markets and marketplaces. And finally, the ability to tap the distributed intelligence of millions of consumers to match people with the stuff that suits them best is leading to the rise of all sorts of new recommendation and marketing methods, essentially serving as the new tastemakers.

The Long Tail is a must-read book. The book aggregates a variety of concepts + how technology links niche interests to thrive in a natural way + reshaping economy and tastes.