By Chris Anderson
Published by Random House
In January 2004, Chris Anderson, the editor of Wired magazine, was asked by the head of ECast, an online entertainment company, what percentage of the 10,000 albums available through its website he thought sold at least one copy in any quarter.
Anderson instinctively thought of the 80/20 rule, but realising it might be a trick question, plumped not for 20%, but suggested that an apparently outlandish 50% of the albums in the catalogue would sell one copy or more. He was wrong; astonishingly, 98% of the albums sold at least one copy.
When those sales are mapped onto a graph, a classic distribution curve quickly emerges: the big titles – Madonna or the Stones, for example – sell a great deal, after which the chart slopes sharply down, and then flattens and then very gradually trends towards zero. But it almost never gets to zero; there is a long, long list of titles that sell just a few copies – 20, 10 or maybe just two or one. Graphically, it’s a long tail.
Over the next two years, as he discussed his discovery with many others, Anderson realised he was on to something: the long tail goes a long way to explaining how markets behave when there are no bottlenecks choking supply and demand, when there is no scarcity, and, importantly, when there are large numbers of consumers exercising almost unlimited choice. The long tail is a model to describe the economics of abundance – an area of study that has been “tragically neglected” up to now, Anderson believes, because traditionally almost all markets are constrained by scarcity.
In traditional markets, scarcity is always present, imposed by a number of factors on both the supply and the demand side. In bricks-and-mortar stores, for example, shelf space is limited; in cinemas, there are only so many seats and screens; in newspapers, only so many column inches; in high streets, there are only so many shoppers, drawn from a limited geography, with only so much time. The result: film distributors, TV schedulers, record companies, magazine editors or supermarket planners almost always pick the products that will boost profits, and discard the rest – regardless of niche interests, quality or intrinsic value.
This creates a hit-and-miss culture, where choice is cut off by financial decree. On the graph, the short, high volume head, consisting of block buster products and big brands, and often targeting lowest common denominator tastes, dominates. After this, the tail is cut, either because revenues of the less popular products do not cover the costs of production and distribution, or, more likely, because they are simply less profitable than the more popular products.
The Internet is in the process of turning all this upside down. Amazon can offer unlimited ‘shelf space’ for books and other products; eBay, for second hand and other products; blogs for articles and ‘reporting’; open source for software; iTunes for music. All of these defy the old models by offering a long tail of choices. And the public are taking up the choices, very often eschewing the blockbuster hits in favour of specialist, niche products. The graph itself is flattening.
Anderson sees long tails, and long tails within long tails, everywhere. In fact, the long tail comes close to being a universal model that explains the success of practically every highly successful Internet company, whether it is Google, or MySpace, or Wikipedia, or YouTube. And he explains, for good measure, how this is nothing new: vast choice, coupled with excellent distribution and low costs, helped established Sears and Roebuck, the US catalogue retailer, back in the early 20th Century; similarly, cities are able to support long tails of niche shops because of their vast populations.
Why Google, in particular? Partly, because it provides a long tail of advertising, where even small companies with niche products can promote their wares alongside obscure search terms. But it also provides one of the essential ingredients of a successful long-tail business model: a recommendation or navigational system that enables people to find what they are looking for. Without this, consumers are overwhelmed by choice and the markets do not function. eBay, Amazon, MySpace and the ‘blogosphere’ are all rich in aids to help people decide what they want.
Since it was published in the US in July, The Long Tail has been compared to Malcolm Gladwell’s bestseller, The Tipping Point, in its importance and persuasive power. It is not quite as engaging, and is perhaps a little repetitive. But it is essential reading for all those whose markets are being disrupted by the Internet, and for all those who want to understand its effect. The Long Tail is thought provoking, original, and largely convincing.