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The Long Tail

Chris Chaplow investigates.

Chris Anderson, editor of Wired magazine, the San Francisco full-colour monthly which reports on how technology affects culture, the economy, and politics, was conducting an interview in January 2004 with Robbie Vann-Adibé, CEO of Ecast Network, a 'digital jukebox' company.

A digital jukebox is just like the old-fashioned ones in bars except that the music offered is not selected from the 50 hit vinyl records stored in the box. Instead, they are downloaded from the internet.

Robbie posed an interesting question. What percentage of the 10,000 songs we have available sold at least one track per quarter?

The normal answer would be 20% because of the 80/20 rule. Knowing that half the 10,000 books in a superstore and half the 10,000 CD's at Wal-Mart do not sell once a quarter, Chris answered an absurdly high 50%. However, the correct answer was 98%.

Chris started to research this and found it to be universal in the digital economy. Apple said that every one of the one million tracks on iTunes had sold at least once. Netflix revealed that 95% of its 25,000 DVD's rented at least once a quarter.

This suggested that the "aggregate or total market for the niche music was huge and effectively unbounded". In the digital economy the niche songs cost the same to deliver to the customer as hits.

Chris' article was published in Wired in October 2004 and became their most cited article ever. The ideas were developed in the book The Long Tail: Why the Future of Business is Selling Less of More (2006) by Chris Anderson. In an afterward to the second edition Chris acknowledges with some irony that a book about niches has in itself become a hit.

The Long Tail

If you plot a graph of the value of sales or number of downloads on the vertical axis (y) against the inventory in descending order from left to right on the horizontal axis (x) you get a curve that is know in mathematics as the 'power curve'.

The sales for the first few items or 'hits' are very high, the line comes quickly down to where the good solid sellers are, then it tails out for the 'misses' or the niche sales. This bottom part of the graph is known as "The Long Tail".

There is nothing new in this graph but what is truly amazing is the size of the Long Tail in the digital world. "Seen broadly the Long Tail is about the economics of abundance - what happens when the bottlenecks that stand between supply and demand in our culture start to disappear and everything becomes available to everyone," explains Chris.

What we as consumers have taken for granted about the supply and what companies have perceived as the demand is wrong, because it was filtered by the economics of scarcity. The real demand is driven by abundance.

Times are changing

We are guided by mainstream media but the hits are not the economic force they were. Most of the best-selling albums of all time were recorded in the 70s and 80's; every year the main TV channels lose audiences to cable & satellite niche channels and to the internet and music downloads. Where are the audiences going? No one place -- they are fragmenting.

To date, major brand advertising has been largely limited to national TV, other prime media, and events since this was the easiest way reach millions of viewers and readers. However, the millions are the minority and the majority are in the Long Tail.

Amazon noticed this early on when they found that such a large proportion of their book sales come from obscure books that are not available in brick-and-mortar stores. The Long Tail is a potential market and the distribution and sales channel opportunities created by the Internet can enable businesses to tap into that market successfully.

Google noticed this with and developed its Adsense which enables publishers of niche websites to carry advertising. Other marketers in every discipline are now looking for ways of reaching the majority of consumers in the Long Tail. The internet and social computing appears to be the way to do this.

Chris Chaplow is the founder/director of Andalucia.com and can be contacted at chris@andalucia.com.

Purchase the Long Tail Book at Amazon