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The Long Tail: The Review
Chris Anderson’s The Long Tail is an interesting book that discusses the digital revolution of the internet and its effects on how business has changed. The internet has forever changed the face of business with new technologies its ability to reach virtually anyone, anywhere in the world. The book emphasizes the concept that there is virtually a market for everything. Any idea, product, or service can be marketed in a manor where an audience will be reached and lay somewhere along the “long tail” of a statistical graph.
Especially appealing to entrepreneurs and business people, The Long tail encourages innovation and pursuing opportunities. Anderson talks of a “niche culture” and the concept that anything can practically be made into a market. If something is presented online in a manner that attracts interested people and consumers, then potential customers will eventually come. Anderson argues that as soon as something goes “digital” the dynamics of a product change. People become interested in the digital version and want to buy it. Although niche products would not normally command a lot of attention and sales, overtime consumers flock to the product purchase it. Over a period of time as the sale add up, it creates the statistical long tail that the digital revolution created. Ideas spread quickly on the internet.
The author describes digital files as another aspect of the revolution. For example, iTunes, the virtual music store, can practically have any form of audio or visual media posted on its website, as compared to a mom-and-pop store that has limited shelf space. This concept all but puts traditional music stores out of business since they have limited selection and higher overhead costs. The competition makes it difficult to compete with the digital world.
Another topic Anderson goes into detail about is the power of filters. Filters help consumers narrow down what information they seek about products or services. They can “tailor” the results they seek. Although filters have been around for a long time, they are now making their presence felt on the internet, and in a very powerful way. Since there is an abundant amount of information everywhere on the internet, there has to be a system to filter or index what you need to find, quickly. Companies like Google and Amazon are such services that enable the power of filters. They have changed the way people find, use, and share information. These companies are central to enabling the long tail to exist. Without their filtering capabilities, it would be difficult to find that one niche product or service that you need, but cant seem to find.
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In the 2006 book “The Long Tail: Why the Future of Business is Selling Less of More”, author Chris Anderson expands on his 2004 feature article in Wired Magazine discussing how niche markets are becoming increasingly important. Our economy is transforming from a mass-media powered market to niche markets. No longer are we forced to have to watch what’s broadcast on a few channels, we can watch whatever we want on Hulu, Youtube or what’s been saved in our DVR. We do not have to listen to fuzzy radio stations, we can create our own station’s using Pandora, last.fm, or by plugging in our iPods. The new commerce model is all about consumers having what they crave rather than being force-fed by mass media. This book chronicles the shift into a new era of commerce and consumer choice.
So, what is this “long tail” and why is it so important? First, it is important to understand the basic statistical background on which the long tail is based. The long tail refers to a normal curve in statistics, more specifically, the Pareto principle. The Pareto principle suggests that “80% of the consequences stem from 20% of the causes”. Applied to business, you could say that “80% of your sales come from 20% of your clients”. Chris Anderson claims in his book that “our culture and economy are increasingly shifting away from a focus on a relatively small number of hits at the head of the demand curve (the 20%), and moving toward a huge number of niches in the tail (the 20%)”.
That being said, Chris Anderson says that the long tail is the “death of the 80/20 rule”, because nothing is exact when measuring mass-markets vs. niche markets. It could be that 80 % of sales are controlled by 10% of the population, or 95/20, or even 90/30. Either way, sales of mass media currently outweigh niche markets, but that may soon be changing.
There are three “forces” that affect the long tail. The first force is democratizing the tools of production, which means that the larger amount of things that are available, the longer the tail extends to the right. A level playing field will create opportunity for more people to participate. For example, now that camcorders and other movie equipment are increasingly cheaper, more and more people will make movies or short films. The top 20% would be mega-blockbusters made by big-time move studios, the other 80% are movies made by independent filmmakers or videos floating around the internet.
The second force is cutting the costs of consumption by democratizing distribution. This is saying that when markets become easily accessible to people with less money, more people can participate, causing the tail to “fatten”. A good example of this is eBay. Before eBay, if you wanted to open a store you had to buy a physical location to run your business and create a supply chain that brought everything to that location. With eBay, all you need is an e-mail address and you can sell thousands of things and only have to worry about shipping costs.
The third and final force is connecting supply and demand. This means that the more information there is about products, the more people will be able to know about them. The barrier to entry here are what Anderson describes as “search-costs”, which include wasted time, hassle, wrong-turns, dollar value and confusion. Using a service that decreases search-costs allows people to get what they want faster and easier. Some examples of services driving the third force are the blogosphere, Netflix, iTunes, and best-seller lists.
The Long Tail is saying what many people already know to be true. That is, as technology increases, niche markets become increasingly easy to access. Now, as the costs of connecting supply and demand decrease, the nature of the market is changing. Demand will inevitably shift towards niche markets, which means that companies will want to find ways to market towards the new majority.
This book presents a very interesting idea, one that I am personally very excited about. It
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