TECH TALK: Good Books: The Long Tail

Chris Anderson is the editor of Wired. His book, The Long Tail, has been one of the most eagerly awaited books of the year. He first espoused his ideas in a Wired article in October 2004. Subsequently, he started a blog which built on the theory of the long tail. The essence is captured in the byline of the book: Why the future of business is selling less of more.

This is what Chris wrote recently on his blog: Hits Aren’t Dead…What is dead is the monopoly of the hit. For too long hits or products intended to be hits have had the stage to themselves, because only hit-centric companies had access to the retail channel and the retail channel only had room for best-sellers. But now blockbusters must share the stage with a million niche products, and this will lead to a very different marketplace. Think of hits as the head, and the niche products as the long tail. The future is about being able to monetise the long tail.

From the books 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 whats 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.

Tomorrow: The Long Tail (continued)

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Rajesh Jain

An Entrepreneur based in Mumbai, India.