Right before Christmas break, I finished reading Chris Anderson‘s book The Long Tail: Why The Future of Business Is Selling Less of More. I’d heard about this book from various sources, such as my Wired Magazine subscription, and through related web-searches regarding concepts of non-gaussian distributions from Nassin Nicholas Taleb’s Fooled By Randomness and Benoît Mandelbrot’s The Mis-Behavior of Markets such as power-law distributions. Suffice to say, this book held up to my expectations, and is still challenging the way I think.
The Long Tail is about how information technologies are transforming many markets, and about the true shape and character of market these technologies reveal.
Information technologies are transforming many markets, notably media and consumer goods. The technologies are:
- efficient inventory storage and retrieval, providing vast, near infinite inventory
- search and filtering technologies to navigate these huge inventories
- increased availability of production tools for the population
Such markets include:
- books ( Amazon )
- music ( iTunes, Rhapsody )
- movies ( Netflix, YouTube )
- consumer goods ( Amazon, eBay )
For example, let’s take books and Amazon:
- Amazon has huge centralized warehouses where it stores all the goods it sells. It must be able to receive and ship orders quickly. Also, through it’s Marketplace program, resellers use their storefront, but have their own warehouses and shipment systems. Thus, Amazon doesn’t even store these items. Thus, Amazon can store millions of items. The largest brick&mortar super-bookstore can only have about 175,000 books. With 6.1 million books available in the world, and 100,000 being published per year in recent history, traditional stores cannot cater to everyone’s desires. Amazon can offer nearly 350 times the variety.
- Amazon tracks user’s ratings, stores useful customer reviews, tracks what other customers have bought, based on usage history, and utilize this information to help you search and filter the vast catalogue to your current interest. Traditional stores can only choose one presentation of their goods, and every person must search within that specific constraint. You will find things through the Amazon website that you’d never know about in a normal store.
- While not specific to Amazon’s operations, book publications have sky-rocketed, as tools for production, such as desktop publishing software and reduced costs of printing, such as print-on-demand services, mean that more of the populous can produce books. This increases the number of books to catalogue, search and recommend.
The shape of markets, when sorting items based on popularity, follow a “power-law” long-tail distribution. In short, this means that, while the popularity of any one item out on the tail is small, there is just so-much in the tail that, if made available to customers, it would comprise a significant part of one’s business. For example, 90% of the products on Rhapsody or Netflix is not available in any stores, but this 90% make up roughly 25% of their profits.
Another interesting feature of long-tailed markets is that, as one moves into the tail, one is more satisfied with the goods, compared to the the goods at the head of the tail. A few factors here are:
- everything in the head has broad appear to the whole audience. Therefore, it is a bit mediocre compared to each individual’s tastes.
- everything in the tail has very specific niche audiences. A gem item for one individual will be utter rubbish to 10,000 others.
To capitalize on the tail, one must connect each user with the content they value.
There any many more points in the book than I can outline here. Many transformative businesses and websites are discussed, such as Google, Wikipedia, etc.
For anyone who’s exerienced these technologies and recognizes something fundamentally different’s going on, this is a great read. For anyone who’s heard about the buzz, but doesn’t feel they understand it, this should be a great exposee. And for anyone who works in any IT industry, you should really read how our world is transforming many aspects of human business and activity.
4 of 4 possible stars, without hesitation.