Thursday, February 03, 2005

The Long Tail

A month and a half ago, had an article called The Long Tail. It was about products that sell to very few people — as distinguished from best-sellers.
Robbie Vann-Adibé [is] the CEO of Ecast, a digital jukebox company whose barroom players offer more than 150,000 tracks - and some surprising usage statistics. He hints at them with a question that visitors invariably get wrong: 'What percentage of the top 10,000 titles in any online media store (Netflix, iTunes, Amazon, or any other) will rent or sell at least once a month?' …

[T]he right answer, says Vann-Adibé, is 99 percent. There is demand for nearly every one of those top 10,000 tracks. …

Vann-Adibé, like executives at iTunes, Amazon, and Netflix, has discovered that the "misses" usually make money, too. And because there are so many more of them, that money can add up quickly to a huge new market.

With no shelf space to pay for and, in the case of purely digital services like iTunes, no manufacturing costs and hardly any distribution fees, a miss sold is just another sale, with the same margins as a hit. A hit and a miss are on equal economic footing, both just entries in a database called up on demand, both equally worthy of being carried. Suddenly, popularity no longer has a monopoly on profitability. …

[A]s egalitarian as Wal-Mart may seem, it is actually extraordinarily elitist. Wal-Mart must sell at least 100,000 copies of a CD to cover its retail overhead and make a sufficient profit; less than 1 percent of CDs do that kind of volume. What about the 60,000 people who would like to buy the latest Fountains of Wayne or Crystal Method album, or any other nonmainstream fare? They have to go somewhere else. …

What's really amazing about the Long Tail is the sheer size of it. Combine enough nonhits on the Long Tail and you've got a market bigger than the hits. Take books: The average Barnes & Noble carries 130,000 titles. Yet more than half of Amazon's book sales come from outside its top 130,000 titles. Consider the implication: If the Amazon statistics are any guide, the market for books that are not even sold in the average bookstore is larger than the market for those that are …

[M]ost successful businesses on the Internet are about aggregating the Long Tail in one way or another. Google, for instance, makes most of its money off small advertisers (the long tail of advertising), and eBay is mostly tail as well - niche and one-off products. By overcoming the limitations of geography and scale, just as Rhapsody and Amazon have, Google and eBay have discovered new markets and expanded existing ones.

This is the power of the Long Tail. The companies at the vanguard of it are showing the way with three big lessons. Call them the new rules for the new entertainment economy.
  1. Make everything available. …

  2. Cut the price in half. Now lower it. …

  3. Help me find it. …
Here's a brief extract from the Wikipedia article on The Long Tail.
The Long Tail is the colloquial name given to a feature of certain statistical distributions (Zipf, Power-laws, and/or Pareto distributions). Such distributions can be visualized by the image below. In these distributions a vast population of events occur very rarely (or more generally have low amplitude on some scale, e.g., popularity or sales) while a small population of events occur very often (or have high amplitude). The huge population of rare (or low amplitude) events is referred to as the long tail. In many cases most of the events are in the tail.

Such distributions are surprisingly common. Three examples: The word "is" is very common in English text, while the word "distribution" isn't; most words in English are part of the long tail. Lots of energy was released by the earthquake of Dec 26 2004, but there are tiny earthquakes all the time; most earthquakes are part of the long tail. Lots of loaves of bread are sold every day, but very few jars of pickled pig's feet; most food items sold are part of the long tail (assuming that the store carries them at all).

The last example has led to the term Long Tail coming into usage as a term in popular economics to describe what happens as a store becomes extremely large. Products that are in low demand or have low sales volume can collectively make up a market share that rivals or exceeds the relatively few current bestsellers and blockbusters, if the store or distribution channel is large enough. …

A former Amazon employee described the Long Tail as follows: 'We sold more books today that didn't sell at all yesterday than we sold today of all the books that did sell yesterday.'
I guess what this means is that even my blog will have some readers.

And speaking of long tails, did you know that the

reports that
Exotic pets, including hedgehogs, have become popular in recent years among pet owners, especially in North America. Such animals can carry and introduce zoonotic agents, a fact well illustrated by the recent outbreak of monkeypox in pet prairie dogs. …

Hedgehogs are small, nocturnal, spiny-coated insectivores that have been gaining popularity as exotic pets. These animals are considered to be unique, low-maintenance pets, and an estimated 40,000 households in the United States now own them.
So there is probably a significant market for information about diseases carried by exotic pets. (If you are reading this on my web site, double click zoonotic for a definition or select and release for a Google search. This works for any word or phrase on this blog site.)

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