Chris Anderson was the editor of Wired Magazine until 2012. Now he is cofounder and CEO of 3D Robotics, a company producing drones. His book The Long Tail: How Endless Choice is Creating Unlimited Demand (Updated and Expanded Edition, 2009) was shortlisted for the 2006 Financial Times and Goldman Sachs Business Book of the Year Award.
Before online retailing, there were the bricks and mortar stores such as Borders, Barnes & Noble and Circuit City. Take books specifically: The average Barnes & Noble superstore carried around 100,000 titles. Of these some were hits (the top thousand maybe) whereas the rest could be categorized as misses. So such superstores had to be very selective about what they displayed in their shelves.
But an online store like Amazon can carry 5 million book titles! Here it is found that "more than a quarter of Amazon's book sales come from outside its top 100,000 titles". This is the long tail.
As Anderson writes: "If the Amazon statistics are any guide, the market for books that are not even sold in the average bookstore is already a third the size of the existing market - and what's more, it's growing quickly. If these growth trends continue, the potential book market may actually be half again as big as it appears to be, if only we can get over the economics of scarcity....
"The same is true for other Long Tail markets we've looked at:...Google, for instance, makes most of its money not from huge corporate advertisers, but from small ones (the Long Tail of advertising). EBay is mostly Tail as well - niche products from collector cars to tricked-out golf clubs."
The long tail which has become dominant in the last decade, replaces the "hits and misses" concept with the "hits and niches" theme. These hits are in the short head of the distribution but the niches in the long tail can be equally important. What makes this so?
The forces that make things so are the following:
1) The cost of production of music, videos, books etc are coming down (being democratized). An important cause for this has been the PC - along with digital video cameras, editing software and blogging tools.
2) The cost of distribution of niche products has also come down. As Anderson says, "The PC made everyone a producer or publisher, but it was the Internet that made everyone a distributor." Companies such as Amazon, eBay and Netflix have democratized distribution.
3) Supply can be efficiently connected with demand especially due to Google search, iTunes recommendations, blogs, customer reviews, etc.
The contributors to the long tail all are not always motivated by monetary rewards. Some do it for fun, some for experimentation, some for respect and reputation in the eyes of their peers. Academics, for example, do not mind free downloads of their papers since they increase their long term impact.
As an example Anderson analyzes the Wikipedia phenomenon. Started in 2001 by Jimmy Wales, by 2005 Wikipedia was the largest encyclopedia on earth. While Encyclopaedia Britannica offered 65,000 articles in the print edition and Encarta offered 60,000 articles, Wikipedia offered over 2 million articles in English alone written by 75,000 contributors (2009 statistics).
Anderson asks, "Is Wikipedia 'authoritative'? Well, no. But what really is? Britannica is reviewed by a smaller group of reviewers with higher academic degrees on average. There are, to be sure, fewer (if any) total clunkers or fabrications than in Wikipedia. But it's not infallible either; indeed a 2005 study by Nature, the scientific journal, reported that in forty-two entries on science topics there were an average of four errors per entry in Wikipedia and three in Britannica. And shortly after the report came out, the Wikipedia entries were corrected, while Britannica had to wait for its next reprinting."
Wikipedia offers all the expected entries of standard references but then hundreds of thousands of unexpected ones too. This long tail is easily searchable and the niches accessible. (Note: The last printed version of Britannica was in 2010. Now its online edition is available).
In a similar way, none of the Long Tail amateur efforts like blogs and recorded performances are authoritative. But collectively they are proving more than equal to mainstream media. Some blogs like Boing Boing and PostSecret have successfully competed with mainstream media in terms of popularity. Anderson gives several examples of music, movies, TV shows and blogs.
Anderson says that the world of scarcity (for which conventional economics with its allocation of resources has been constructed) is now replaced by the world of plentitude. He predicts that the digital marketplace is not a short-term fad but is going to stay because of the attractive economics of online selling.
An interesting thesis which has huge implications in the coming decades, especially in a country like India which is seeing its conversion to online at a fast pace.
Before online retailing, there were the bricks and mortar stores such as Borders, Barnes & Noble and Circuit City. Take books specifically: The average Barnes & Noble superstore carried around 100,000 titles. Of these some were hits (the top thousand maybe) whereas the rest could be categorized as misses. So such superstores had to be very selective about what they displayed in their shelves.
But an online store like Amazon can carry 5 million book titles! Here it is found that "more than a quarter of Amazon's book sales come from outside its top 100,000 titles". This is the long tail.
As Anderson writes: "If the Amazon statistics are any guide, the market for books that are not even sold in the average bookstore is already a third the size of the existing market - and what's more, it's growing quickly. If these growth trends continue, the potential book market may actually be half again as big as it appears to be, if only we can get over the economics of scarcity....
"The same is true for other Long Tail markets we've looked at:...Google, for instance, makes most of its money not from huge corporate advertisers, but from small ones (the Long Tail of advertising). EBay is mostly Tail as well - niche products from collector cars to tricked-out golf clubs."
The long tail which has become dominant in the last decade, replaces the "hits and misses" concept with the "hits and niches" theme. These hits are in the short head of the distribution but the niches in the long tail can be equally important. What makes this so?
The forces that make things so are the following:
1) The cost of production of music, videos, books etc are coming down (being democratized). An important cause for this has been the PC - along with digital video cameras, editing software and blogging tools.
2) The cost of distribution of niche products has also come down. As Anderson says, "The PC made everyone a producer or publisher, but it was the Internet that made everyone a distributor." Companies such as Amazon, eBay and Netflix have democratized distribution.
3) Supply can be efficiently connected with demand especially due to Google search, iTunes recommendations, blogs, customer reviews, etc.
The contributors to the long tail all are not always motivated by monetary rewards. Some do it for fun, some for experimentation, some for respect and reputation in the eyes of their peers. Academics, for example, do not mind free downloads of their papers since they increase their long term impact.
As an example Anderson analyzes the Wikipedia phenomenon. Started in 2001 by Jimmy Wales, by 2005 Wikipedia was the largest encyclopedia on earth. While Encyclopaedia Britannica offered 65,000 articles in the print edition and Encarta offered 60,000 articles, Wikipedia offered over 2 million articles in English alone written by 75,000 contributors (2009 statistics).
Anderson asks, "Is Wikipedia 'authoritative'? Well, no. But what really is? Britannica is reviewed by a smaller group of reviewers with higher academic degrees on average. There are, to be sure, fewer (if any) total clunkers or fabrications than in Wikipedia. But it's not infallible either; indeed a 2005 study by Nature, the scientific journal, reported that in forty-two entries on science topics there were an average of four errors per entry in Wikipedia and three in Britannica. And shortly after the report came out, the Wikipedia entries were corrected, while Britannica had to wait for its next reprinting."
Wikipedia offers all the expected entries of standard references but then hundreds of thousands of unexpected ones too. This long tail is easily searchable and the niches accessible. (Note: The last printed version of Britannica was in 2010. Now its online edition is available).
In a similar way, none of the Long Tail amateur efforts like blogs and recorded performances are authoritative. But collectively they are proving more than equal to mainstream media. Some blogs like Boing Boing and PostSecret have successfully competed with mainstream media in terms of popularity. Anderson gives several examples of music, movies, TV shows and blogs.
Anderson says that the world of scarcity (for which conventional economics with its allocation of resources has been constructed) is now replaced by the world of plentitude. He predicts that the digital marketplace is not a short-term fad but is going to stay because of the attractive economics of online selling.
An interesting thesis which has huge implications in the coming decades, especially in a country like India which is seeing its conversion to online at a fast pace.
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