Long Tail

From P2P Foundation
Jump to: navigation, search

The Long Tail concept was pioneered by Chris Anderson. It is also the title of his book on the topic.

The author's blog is at http://longtail.typepad.com/

Short Definition

Jason Foster: The Long Tail is "the realization that the sum of many small markets is worth as much, if not more, than a few large markets." (http://inhome.rediff.com/money/2006/dec/13fast.htm)

Long Definition

1. Wikipedia:

The concept of the long tail was popularized by Wired Magazine editor Chris Anderson, in his bestseller The Long Tail: Why the Future of Business is Selling Less of More.

As defined by Wikipedia, the long tail

“The term has gained popularity in recent times as a retailing concept describing the niche strategy of selling a large number of unique items in relatively small quantities – usually in addition to selling fewer popular items in large quantities. The distribution and inventory costs of businesses successfully applying this strategy allow them to realize significant profit out of selling small volumes of hard-to-find items to many customers instead of only selling large volumes of a reduced number of popular items. The total sales of this large number of "non-hit items" is called the Long Tail.”

2. John Robb:

"The concept of the Long Tail is that globalization, new tools of production, and the Internet have made it possible to radically increase the supply and demand of niche products (in certain product categories). In traditional markets, based on scarcity of shelf space and limited product diversity, the vast majority of revenues are derived from a very limited number of products. In long tail markets, a diversity of products made by new entrants (via newly democratized tools of production and globalization), in combination with unlimited low cost shelf space (the Internet), and an accelerated word of mouth (the Internet) have radically expanded the supply curve. Additionally, this newly diverse supply has energized demand for niche products that meet specific needs. In a traditional market, hit products often get 80% of the revenue. In a long tail market, hit products get 50% of the revenue while the other 50% is shared by a plethora of niche producers." (definition from Global Guerrillas weblog)

Forces Explaining the Long Tail

From John Hagel at Edge Perspectives:

"three forces are working to increase the economic and cultural importance of the “long tail" – the growing abundance of products that individually sell in small numbers but that, in aggregate, account for substantial consumption. These three forces are:

  • Democratizing of the tools of production – especially affordable digital technology that makes it economically feasible to make products, even in small quantities. In Chris’s words, this results in “more stuff, which lengthens the Tail".
  • Democratizing distribution – here Chris places particular emphasis on the role of a variety of Internet aggregators in creating “infinite shelf space" businesses where virtually every product in a category can be economically accessed. Again, to quote Chris, this creates “more access to niches, which fattens the Tail".
  • Connecting supply and demand – Chris focuses here on the emergence of businesses and taste makers that act as filters, helping to cost-effectively and flexibly connect people with available goods, no matter how narrow the interest or specialized the product. These filters can take a variety of forms, including search algorithms, sorting algorithms, editorial recommendations and customer reviews. Chris suggests that more efficient tools to connect supply and demand “drives business from hits to niches".

(http://edgeperspectives.typepad.com/edge_perspectives/2006/07/the_long_tail_a.html)

Players in the Long Tail

Chris Anderson at

"There are three basic types of participants in Long Tail markets: consumers, aggregators and producers (note that it's possible to be all three; these aren't mutually incompatible). The main effects on each are:

  • Consumers. Effect: Largely cultural. People have more choice, so individual taste increasingly satisfied even if the effect is an increasingly fragmented culture.
  • Aggregators. Effect: Largely economic. It's never been easier to assemble vast variety and create tools for organizing it, from search to recommendations. Increased variety plus increased demand for variety equals opportunity. Also note that just as one size doesn't fit all for products, nor does it for aggregators. I think the winner-take-all examples of eBay, Amazon, iTunes and Google are a first-inning phenomena. Specialized niche aggregators (think: vertical search, such as the real estate service Zillow) are on the rise.
  • Producers. Effect: Largely non-economic. I responded to a good Nick Carr post on this last year with the following: "For producers, Long Tail benefits are not primarily about direct revenues. Sure, Google Adsense on the average blog will generate risible returns, and the average band on MySpace probably won't sell enough CDs to pay back their recording costs, much less quit their day jobs. But the ability to unitize such microcelebrity can be significant elsewhere. A blog is a great personal branding vehicle, leading to anything from job offers to consulting gigs. And most band's MySpace pages are intended to bring fans to live shows, which are the market most bands care most about. When you look at the non-monetary economy of reputation, the Long Tail looks a lot more inviting for its inhabitants."

(http://www.longtail.com/the_long_tail/2006/12/can_you_make_mo.html)

Examples

Long Tail in Books

Example of one of the effects of the long tail: the dramatic growth of the used books sector through online sales, see http://www.bisg.org/news/press.php?pressid=29

Long Tail in Music

1. On the long tail and music (filesharing):

"The hits at the top of the charts lose sales, but the niche artists further down the popularity curve actually benefit from file-trading. Form the paper - "Artists who are unknown, and thus most helped by file sharing, are those artists who sell relatively few albums, whereas artists who are harmed by file sharing and thus gain from its removal, the popular ones, are the artists whose sales are relatively high." But then "File sharing is reducing the probability that any act is able to sell millions of records, and if the success of the mega-star artists is what drives the investment in new acts, it might reduce the incentive to invest in new talent. This is, at its heart, an empirical question which is left to future work." (http://slashdot.org/article.pl?sid=05/11/26/146221 ; http://www.thelongtail.com/the_long_tail/2005/11/the_effect_of_p.html)

The original paper by David Blackburn is at http://www.economics.harvard.edu/%7Edblackbu/papers/blackburn_fs.pdf ; a summary of evidence from other studies, at http://www.thefactz.org/economics/p2p_summary.html


2.

"Before the long tail effect swept through the music industry, consumers were offered a limited selection of recording artists that were selected for them by professional “hit makers” whose goal was to sell as many albums as possible. For musicians, a professional music career was an all-or-nothing game as niche opportunities yielded very little income and performances in local clubs reached very few potential fans. When the Internet connected non-mainstream musicians to niche consumer markets, suddenly, professional hit-makers were no longer all-powerful deities. The long tail of music enables a broader range of musicians to find fans, sell albums and in general, have a professional presence in the music industry." (http://web.mae.cornell.edu/lipson/FactoryAtHome.pdf)

Discussion

See also: A Critical Reader's Companion to the Long Tail. By Tom Slee.


Hod Lipson & Melba Kurman:

"A key effect of the long tail of retail, as described by Anderson, is that products that earn little sales revenue can collectively, if enough of these low sellers are offered to the market, make up a revenue stream that rivals or exceeds that of the relatively few bestsellers and blockbusters. In contrast, in the bricks and mortar retail world, products with low sales volumes typically did not make it to the store shelf, since they earned less in sales revenue than the cost of stocking and selling them. In stores with finite shelf space, low volume products, in order to enable the merchant to still turn a profit, were priced much higher than their faster-selling counterparts. As a result, custom products were expensive and despite demand from niche customer markets, a retailer could not stay in business by selling low-cost, unique objects to a scattered global customer base.

A key tenet of the long tail of retail is that the cost of maintaining physical inventory drops dramatically when unsold goods are kept by a decentralized network of online merchants, or stored in an offsite warehouse. Early online retailers hit upon a profitable business model when they realized they no longer needed to pay for physical shelf space, nor base their entire revenue stream on volume sales of a few “greatest hits” types of product lines. By liberating online merchants from the tyranny of physical shelf space, the long tail of product sales allows ecommerce merchants to profitably sell a far broader range of products to a globally distributed customer base. The long tail effect enables online merchants to profitably sell a broader range of unique products to a global marketplace of potential customers who will purchase enough niche items to keep their sellers and makers afloat financially. Consumers also benefit from the long tail of retail since they gain access to a much larger amount of available inventory that likely costs less. The long tail of retail is aided by Internet search capabilities that help consumers find their desired niche items and esoteric merchants online. Online user reviews and online ranking capabilities provide consumers insight into the value and popularity of online merchants they can’t see face to face, or novel products they’ve never tried before." (http://web.mae.cornell.edu/lipson/FactoryAtHome.pdf)

What the Long Tail will change 1

Citation from Wired magazine:

"People are going deep into the catalog, down the long, long list of available titles, far past what's available at Blockbuster Video, Tower Records, and Barnes & Noble. And the more they find, the more they like. As they wander further from the beaten path, they discover their taste is not as mainstream as they thought (or as they had been led to believe by marketing, a lack of alternatives, and a hit-driven culture). An analysis of the sales data and trends from these services and others like them shows that the emerging digital entertainment economy is going to be radically different from today's mass market. If the 20th- century entertainment industry was about hits, the 21st will be equally about misses. For too long we've been suffering the tyranny of lowest-common-denominator fare, subjected to brain-dead summer blockbusters and manufactured pop. Why? Economics. Many of our assumptions about popular taste are actually artifacts of poor supply-and-demand matching - a market response to inefficient distribution." (http://www.wired.com/wired/archive/12.10/tail.html)

What the Long Tail will change 2

It makes not just for a different distribution, but for a bigger pie:

"What's important here is the recognition that as you remove scarcity from the equation, it may dilute the huge mega-successes, but inflates the ability to have a lot more moderate successes that add up to a lot more overall. The existing system, with scarcity, is often a bimodal distribution. There are the haves at one end, and the have nots (or the hoping to be the haves) all the way at the other end. However, as scarcity is removed, the distribution morphs into the famed power law curve. There are still hits at one end, though, there may be fewer of them. However, rather than simply jumping all the way from the super successful to the poor, starving and hopeful, you get a much nicer distribution from top to bottom of super successful, to moderately successful to less successful -- but with a much great overall value under the curve.

Unfortunately, many of the complaints about economics without scarcity focus on the fact that some at the high end of the bimodal distribution (the "rockstars" or the "mega hits") will lose some of that status without forced scarcity. But, the problem is that argument completely ignores what it does to the rest of the curve, moving up many who were at the other end (the poor, starving artists) into a position to be able to actually create a lot more product, rather than having to go out and find "a real job" that pays them a regular salary. The only "losers" here are a few people at the very, very top. Everyone else, however, benefits -- and the net benefit is tremendous. It does involve a shift in business models for those who relied on the hits, but it's a huge opportunity to expand a business while making it a lot less variable and a lot less dependent on catching one or two big hits to make the numbers work." (http://www.techdirt.com/articles/20061206/011155.shtml)

Conditions for a Long Tail business to succeed

From a list of 10 recommendations by [Guy Kawasaki]

  • "Near-zero inventory carrying costs. If you plan to sell a few units of lots of things it can’t cost you much to keep those things in inventory. This is separate from the cost of production. It might cost Ferrari a lot of money to make cars, but if it will consign them to you for free, what do you care?
Actually, you do care: there’s warehouse space, insurance, and shrinkage. Even digital content like music, movies, ringtones, and photographs require bandwidth and storage. Not only must the product be cheap to make, it must be cheap to keep in inventory.
  • Near-zero selling and marketing costs. Long-tail products must either “sell themselves" or external people must sell them for you. If you have to send one email or take one phone call to sell a Cecilio and Kapono ringtone, you’re dead. (Don’t know who Cecilio and Kapono are? That’s the point.) This is where two cool concepts butt heads: long-tail versus wisdom of the crowd. The former says a market of one is good. The latter says that when lots of people buy something, it’s probably good. How then does one person find something that’s good for her out of the millions of products to buy when there’s no crowd to follow?
  • Near-zero support and training costs. Do you see a pattern developing? One support call or email, and you’re dead too. Your offerings must either require near-zero support and training, or other people must support it for love and glory."

(https://guykawasaki.com/the_wrong_tale_/)

Is the Long Tail Hollowing Out?

Nicholas Carr, in The Guardian, summarizing Richard MacManus:


"The blogger Richard MacManus recently examined trends in online traffic over the past five years. He found that between the end of 2001 and the end of last year, the number of Internet domains expanded by more than 75%, from 2.9m to 5.1m. At the same time, however, the dominance of the most popular domains grew substantially. At the end of 2001, the top 10 websites accounted for 31% of all the pages viewed on the net. By the end of last year, the top 10 accounted for fully 40% of page views. There are more destinations online, but we seem to be visiting fewer of them."

Can an independent producer make money on the Long Tail

Jeff Bach from Quietwater Films :

"My reality as a content creator and producer is that it is basically not possible for anyone in the "normal" realm to make a living in this Long Tail space. I create and produce "paddlesports" content. Canoes and kayaks. I am a provider of niche content. My customers are John and Jane Public and are people who like outdoor recreation, especially the watery kind. Affluent, active, with disposable income to spend on products like mine. They are doing it as I had hoped.

But the reality at this time for me and my company is that I need to find multiple large national distributors if I hope to even come close to making a living at this game. And I need to produce fresh content on a reasonably frequent basis. In short, I am a much smaller and more struggling version of the giants that have preceded me. I have the same issues and problems my predecessors did. The only thing that has changed is that I am trying to do it with an awareness of Web 2.0 and Long Tail and several other "New Media" phrases that you can insert here.

Your Long Tail theory is a basic and profound truth that I happily embrace AS A CONSUMER. But as a producer and creator of Long Tail content it is basically spelling out my doom. Other than your book examples which are still basically about VERY LARGE entities and aggregators, I am finding very few self supporting examples of independent Long Tail producers. I'm left with a bad taste in my mouth as I see more and more that the "old school" of thought, economy and media will continue to endure and dominate until.......I don't know when, because I'm not seeing a change in the economics of selling enough to support yourself." (http://www.thelongtail.com/the_long_tail/2007/09/an-independent-.html)

Is the long tail destroying the creative 'middle class'

Harold Jarche:

Referring to the graphic at http://www.jarche.com/wp-content/uploads/2010/05/profitpockets583_2.jpg

The graphic distinguishes three pockets of profits, heads and tails, and a middle. But is there really room in the middle?


"The reason you can make money in the niche pocket is that it costs far less to compete here. First, because there’s less competition and the competition is less fierce, and second because it’s cheaper and easier to reach your target market because they’re choosing to pay attention.

After seven years as an independent working online and participating in online content creation, I am starting to wonder how much room there really is in pocket #2 and if it’s just a (very) short extension of pocket #1.


Jaron Lanier in You Are Not a Gadget, says:

- The people who are perhaps the most screwed by open culture are the middle classes of intellectual and cultural creation. The freelance studio musician, the stringer selling reports to newspapers from warzones are both crucial contributors to culture. Each pays dues and devotes years to honing a craft. They used to live off the trickle down effects of the old system, and like the middle class at large, they are precious. They get nothing from the new system.

If you’re not one of the recognized leaders in your field, can you make a living online or are you just part of the long tail, valuable only to aggregators and their advertising revenues? As a content creator are you providing the fodder that lets Google, Facebook and YouTube earn huge market valuations? Will there be a middle class in the networked economy, or only heads & tails?" (http://www.jarche.com/2010/05/heads-you-win-tails-you-lose/)

French-Language Citation

" le modèle de la "longue traîne", en démultipliant la surface de vente et en ouvrant le stock des venderus, il est possible de donner une jeunesse quasi éternelle aux produits de fond de stock. L'idée vient de l'analyse des ventes des libraires et va maintenant pouvoir s'appliquer à tout type de vente en ligne. Imaginons un blogueur fédérant une communauté de passionnés de bicross, il va pouvoir proposer à celle-ci une boutique comprenant un rayon de pièces détachées, un rayon de vêtements, un rayon livres, un rayon dvd,... à chaque fois il va présenter à des internautes intéressés des produits qui n'auraient pas forcément leurs places dans la vitrine du magasin principal." (http://www.groupereflect.net/blog/archives/2005/11/zlio_vs_yahoo_s.html)

More Information

Pages on this Wiki

External Links

The Long Tail Book

Sample chapters at http://64.13.209.91/longtail/LongTail_exclusiveExtract.pdf

UK Book site at http://www.longtailbook.co.uk/

The Long Tail New York book launch video

The Random House book promotion video

Comments by John Hagel at Edge perspectives, at http://edgeperspectives.typepad.com/edge_perspectives/2006/07/the_long_tail_a.html