The long End of the Tail
Source and Attribution
This summary is based upon Chris Anderson’s 2006 article and book, “The Long Tail: Why the Future of Business Is Selling Less off More,” and ties an old familiar statistical graph to current consumer trend, 2006.
The long tail is the colloquial name for a long-known feature of statistical distributions that is also known as “heavy tails”, “power-law tails” or “Pareto tails”. In these distributions a high-frequency or high-amplitude population is followed by a low-frequency or low-amplitude population which gradually “tails off”.
In many cases the infrequent or low-amplitude events–the long tail–can cumulatively outnumber or outweigh the initial portion of the graph, such that in aggregate they comprise the majority.
In this book the author explains how due to changing technology it is now not only feasible but desirable in business to cater to the “long tail” of this curve.
The author explains how in traditional retail, you have the 80/20 rule, with 20 percent of the products accounting for 80 percent of the revenue. Online, instead, he sees the “98 percent rule.” Where 98 percent of all the possible choices get chosen by someone, and where the 90 percent that is only available online accounts for half the revenue and two-thirds of the profits. He also explains how filters and recommender systems that help people find what they are really looking for are crucial ingredients. Thus, in a nutshell, Anderson’s theory is that mass culture is fading, and being replaced by a series of niches. Thus the subtitle of his book, “Why The Future of Business Is Selling Less of More.”
The author explains that the three forces of the long tail are:
- Democratization of the tools of production such as GarageBand for musicians.
- Minimization of the costs of distribution which in turn minimize the cost of consumption such as wideband internet connections.
- The connection of consumers to one another to minimize the noise down the tail, such as this Amazon review system.
In this brave new world of niche markets, the author explains the new producers, markets, and tastemakers all of which are largely driven by the technological forces of cheap hardware and increasingly sophisticated recommender systems that tap the on-line purchasing habits of consumers and match individuals with the products that are likely to interest them the most. Anderson goes on to explain the power. Offering only the most popular products. This is another basic premise of the book – that until the birth of the Internet, physical space constrained retailers to offering only the most popular 20% of items because they represented 80% of the purchasing power.
The author’s arguments hold up the best when he examines the entertainment industry. It is obvious that the recording industry is at a loss as to what to do about the fact that their sales are fading fast other than to blame piracy and sue consumers that dare decide that an overpriced vanilla-sounding boy-band CD is not worth the price. You can also see the desperation in the movie industry too, that has resorted to begging people to go to the theaters at the Academy Awards but continues to mainly output recycled and formulaic products and reaps the expected mundane ticket receipts.
However, I think that the author overlooks two points. First, people crave common conversation with their fellow man. If we are all broken up into groups of a dozen each that all have the same politics, like the same music, and watch the same movies, then the community at large is duller for it. Take “American Idol” for example. It is obvious that this is not a hit show because America thinks that the winner is going to be the next Elvis Presley. In fact, the winners usually represent the plain vanilla output that has brought the recording industry to its knees in the first place. Can you see someone as gritty as Joe Cocker ever winning this contest? It is the audience participation and the feeling that you are part of the outcome that is the appeal. Also, people flocked to the highly successful Harry Potter movies and the Lord of the Rings trilogy just as much because everyone else was going and taking their kids to see them and thus they were part of society’s “common conversation” as they were because of the quality of the films. The second point that the author overlooks is that the monopolies whose death he cheers due to the “long tail” are simply being replaced by other monopolies. Who else but large businesses with the resources to mine the hugely diverse “long tail” shall prosper in the long term? A case in point is that the author himself keeps coming back to the same companies when he talks about “long tail” success stories. ?????
The author does a good job of tying the old familiar “long tail” statistical graph to the rapid change in purchasing habits over the last ten years, which is something that nobody else had succeeded in doing until he articulated the trend.