A Graphical Example of 'The Long Tail'
In 2004 Wired Magazine writer Chris Anderson defined the economic model/concept of the ‘Long Tail‘. He later went on to write a book about it. “The Long Tail: Why the Future of Business Is Selling Less of More” was published in 2006. At the end of this post is a video giving an introduction to it. The basis of his strategy is that:
“Small sites make up the bulk of the Internets’ content: narrow niches make up the bulk of the Internets’ possible applications.”
Using the full reach of the internet you can make money out of very small nice markets that without the internet their profitability would be too small. The internet is like a bookshelf without limits. There is very low cost of production & distribution. Teamed with infinite shelf space online stores can now provide to niche markets.
The long tail model above can be explained in two sections. The section on left represents the most popular products – the hits and mass market items at the head of the demand curve. These limited number of items sell in large volumes. The steep slope leads into a much broader part of the market, the ‘Long Tail’. Each of these items sell far fewer units than the current hits and popular products, but the total number of niches in the tail represents significant market opportunities. Learning about how to leverage the long tail in your marketing has many benefits. This practical guide to leveraging the long tail could help you turn your online store/service into one as successful as my next example.
The two sites that people think of when talking about Leveraging the Long Tail are Amazon.com and Netflix.com. These two sites both sell a large number of products, more then the average book store or dvd store.
Netflix
For example, Netflix rents over 60,000 unique DVD titles every day. This is over 60% of its entire inventory of 100,000 selections. The average Blockbuster store stocks less than 3,000 DVDs. This means that Netflix can cater to a wider range of tastes and niches in the DVD world. For those of you love documentaries Amazon.com has around 17,000 documentaries in stock, Netflix has around 1,100 and your local Blockbuster has around 75. A fifth of Netflix rentals are outside its top 3,000 titles. Your average Blockbuster has only around 3,000 titles. This means people are renting DVDs from Netflix that aren’t commonly found at a local DVD store, they are ‘niche’ markets.
Amazon.com is the giant of online shopping. You can purchase just about anything from Amazon. You would never find a physical store that stocked as many items as Amazon online. Take this into consideration: 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 (see the anatomy of the long tail image below). A substantial amount of the book sales for Amazon comes from obscure books. Amazon itself could afford to stock up on rare books as well as offer these via numerous online partners. The net effect is that a lot of book sales occurred in the long tail. This phenomenon is captured nicely in a quote from an Amazon employee: “We sold more books today that didn’t sell at all yesterday than we sold today of all the books that did sell yesterday.“
The Anatomy of the Long Tail
The Bad Side
The more products retailers make available, the harder it is for consumers to locate the product they are interested in. In fact, consumers can become overwhelmed when choices are poorly organized and actually reduce their purchases as a result.
Thus, the Long Tail makes it critically important that retailers provide tools to facilitate the discovery of products through both active and passive search. Amazon has done this by using recommendations, top sellers, sample pages/tracks, ‘what other people bought’ etc. These active search tools can also help consumers identify products they weren’t previously aware of.
References/Links
- Amazon. (2010). Amazon Homepage. Retrieved April 28, 2o10 from http://www.amazon.com/
- Amazon. (2010) The Long Tail: Why the Future of Business is selling less of more!. Retrieved April 28, 2010 from http://www.amazon.com/Long-Tail-Future-Business-Selling/dp/1401302378
- Anderson, C. (2004). The Long Tail. Retrieved April 28, 2010 from http://www.wired.com/wired/archive/12.10/tail.html
- Brynjolfsson, E. (2006) From Niches to Riches. Retrieved April 28, 2010 from http://www.heinz.cmu.edu/~mds/smr.pdf
- Dreller, J. (2008) A Practical Guide to leveraging the Long Tail for SEM. Retrieved April 28, 2010 from http://searchengineland.com/a-practial-guide-to-leveraging-the-long-tail-for-sem-14998
- Iskold, A. (2007). There’s No Money In The Long Tail. Retrieved April 28, 2010 from http://www.readwriteweb.com/archives/blogosphere_long_tail.php
- Kaw, P. (2009) 6 ways to Leverage the Long Tail in your marketing. Retrieved April 28, 2010 from http://blog.hubspot.com/blog/tabid/6307/bid/4723/6-Ways-to-Leverage-the-Long-Tail-in-Your-Marketing.aspx
- Netflix. (2010) Netflix Homepage. Retrieved April 28, 2010 from http://www.netflix.com/
- O’Reilly Media. (2005). What is Web 2.0?. Retrieved April 28, 2010 from http://oreilly.com/pub/a/web2/archive/what-is-web-20.html
- Wikipedia. (2010). Long Tail. Retrieved April 28, 2010 from http://en.wikipedia.org/wiki/Long_Tail
- Wikipedia. (2010). Chris Anderson (writer). Retrieved April 28, 2010 from http://en.wikipedia.org/wiki/Chris_Anderson_%28writer%29
- Youtube. (2006) Official Long Tail Book Promo. Retrieved April 28, 2010 from http://www.youtube.com/watch?v=LlAZ9t2m7-E
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