Transcript The Long Tail

The Long Tail
Paul Fox
October, 2006
The Long Tail: Index
Index
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Introduction
The Long Tail and the Internet
The Three Forces of the Long Tail
How to Get Found
The Paradox of Choice
The Long Tail: Introduction
Long Tail Video
Long Tail Video Promo
The Long Tail: Introduction
What is the Long Tail?
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The long tail is the colloquial name for a long-known feature
of statistical distributions (Zipf, Power laws, Pareto
distributions and/or general Lévy distributions ). The feature
is also known as "heavy tails," "power-law tails," or "Pareto
tails."
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A high-frequency population is followed by a low-frequency
population which gradually "tails off." In many cases the
infrequent events—the long tail, can cumulatively outnumber
the initial portion of the graph, such that in aggregate they
comprise the majority.
--Wikipedia, “The Long Tail”
The Long Tail: Introduction
The Long Tail applied to business
In Mathematics
The name for a statistical
distribution curve based on a high
amplitude population followed by
a low frequency population which
gradually tails off.
- Wikipedia
In Business
Products that are in low demand that
can collectively make up a market
share that rivals the relatively few
current bestsellers when distributed
over such a big channel as the Internet.
- Chris Anderson
The Long Tail: Introduction
Origin of the Long Tail concept
 Coined by Chris Anderson, Editor-in-Chief of Wired
magazine
 The concept drew in part from an influential February
2003 essay by Clay Shirky, "Power Laws, Weblogs and
Inequality”.
 In a Wired magazine article in October 2004,
Anderson described the effects of the long tail on
current and future business models.
 Anderson later extended it into the book The Long
Tail: Why the Future of Business is Selling Less of
More (2006).
--Wikipedia, “The Long Tail”
The Long Tail: Introduction
A brief history of the hit
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New Technologies in the mid- to late 19th century laid the
ground work for pop culture
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Commercial printing technology
“Wet plate” technique for photography
1877 – Edison invents the phonograph
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Newspapers and magazines
Novels
Printed sheet music
Records
Children’s books
Result: the first wave of pop culture
Newspapers bring the latest fashions from New York,
London and Paris
At the end of the 19th century, the moving picture gave the
stars of stage a way to play many towns simultaneously and
reach a much wider audience.
Source: Anderson, C. (2006) “The Rise and Fall of the Hit”,
Wired Magazine
The Long Tail: Introduction
A brief history of the hit
(continued)
 The arrival of broadcast media homogenized society
even more - they were essentially free!
 From 1935 through the 1950s, the Golden Age of
Radio led to the rise of national broadcast celebrities
like Edward R. Murrow.
 Then television took over. By 1953, an astounding 72
percent of TV households watched I Love Lucy on
Monday night!
 Throughout the ’60s, ’70s, ’80s, and ’90s, even as
more channels arrived, television continued to be the
great American unifier.
 Nearly every year, TV advertising set a new record as
companies paid more and more for prime time.
The Long Tail: Introduction
A brief history of the hit
(continued)
 Such potent carriers of culture had the
effect of linking people across time and
space, effectively synchronizing society.
 Not only did your neighbors read the same
news you read in the morning and know
the same music and movies, people across
the country did too.
 In other words, while culture was
synchronized, it was also homogenized.
Source: Anderson, C. (2006) “The Rise and Fall of the Hit”,
Wired Magazine
The Long Tail: Introduction
Measuring the hit
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Blockbuster movies
Billboard magazine Hot 100 songs
New York Times bestsellers in books
Forbes lists
The Long Tail: Introduction
Driver of the hit culture:
the economics of scarcity
 An average movie theater needs at least
1,500 people over a 2-week run; that's the
rent for a screen.
 An average record store needs to sell at
least 2 copies of a CD per year; that's the
rent for a half inch of shelf space.
 The same applies to DVD rental shops,
videogame stores, booksellers, and
newsstands.
Source: Anderson, C. (2004) “The Long Tail”, Wired Magazine
The Long Tail: Introduction
The economics of scarcity
(continued)
 Retailers will carry only content with
sufficient demand to earn its keep.
 But each can pull only from a limited local
population - a 10-mile radius for a movie
theater, less for music and bookstores, and
even less (just a mile or two) for video
rental shops.
 It's not enough for a great documentary to
have a potential national audience of half a
million; it needs to attract a local audience.
Source: Anderson, C. (2004) “The Long Tail”, Wired Magazine
The Long Tail: Introduction
Physical distribution constraints
The other constraint of the physical world is
physics itself.
 The radio spectrum can carry only so many
stations, and a coaxial cable so many TV
channels.
 There are only 24 hours a day of
programming.
 The curse of broadcast technologies is that
they are profligate users of limited
resources.
 The result is another high bar, above which
only a fraction of potential content rises.
Source: Anderson, C. (2004) “The Long Tail”, Wired Magazine
The Long Tail: Introduction
Example: Cinema
 In 2004, nearly 6,000 movies were
submitted to the Sundance Film
Festival.
 255 were accepted.
 24 were picked up for distribution.
 The other 231 may never be seen.
Source: Anderson, C. (2004) “The Long Tail”, Wired Magazine
The Long Tail: Introduction
The peak of the hit culture
 Between 1990 and 2000, album sales
had doubled, the fastest growth rate
in the history of the industry.
 Half of the top-grossing 100 albums
ever were sold during that decade.
Source: Anderson, C. (2006) “The Rise and Fall of the Hit”,
Wired Magazine
The Long Tail: Introduction
Decline of the hit
 Total music sales fell during 2000, for
only the second time in a decade.
 Sales fell 2.5 percent in 2001, 6.8
percent in 2002, and just kept
dropping.
 By the end of 2005 (down another
8.3 percent), album sales in the US
had declined 20 percent from their
1999 peak.
Source: Anderson, C. (2006) “The Rise and Fall of the Hit”,
Wired Magazine
The Long Tail: Introduction
Not enough blockbusters
Source: BoxOfficeMojo.com as posted 17/09/2006 on the Long
Tail blog
The Long Tail: The Long Tail and the Internet
What happened? The Internet
 Record labels blame it on Napster and
piracy, but it’s not that simple.
 The Internet’s peer-to-peer architecture is
optimized for a symmetrical traffic load,
with as many senders as receivers and data
transmissions spread out over geography
and time.
 In other words, it’s the opposite of
broadcast.
Source: Anderson, C. (2006) “The Rise and Fall of the Hit”,
Wired Magazine
The Long Tail: The Long Tail and the Internet
From scarcity to abundance
 The Internet has altered industry
economics from an economics of
scarcity to an economics of
abundance.
 The future is increasingly
heterogeneous, not homogeneous.
 One size doesn't fit all.
 We have gone from a culture of hits
to a culture of niches.
Source: Anderson, C. (2006) “The Rise and Fall of the Hit”,
Wired Magazine
The Long Tail: The Long Tail and the Internet
Any Industry where there is demand / availability
for specialized products can and will be influenced
by the long tail as accessible selection increases
and transaction friction decreases
Books
Independent Seller
Borders
Amazon
Abebooks
British Library
Source: Abe Books
The Long Tail: The Long Tail and the Internet
The question
 "What percentage of the top 10,000
titles in any online media store
(Netflix, iTunes, Amazon, or any
other) will rent or sell at least once a
month?"
The Long Tail: The Long Tail and the Internet
The 80/20 rule
 The 80-20 rule, also known as Pareto's
principle (after Vilfredo Pareto, an Italian
economist who devised the concept in
1906), is all around us.
 Only 20 percent of major studio films will
be hits.
 Same for TV shows, games, and massmarket books.
 For major-label CDs, fewer than 10 percent
are profitable (Recording Industry
Association of America).
Source: Anderson, C. (2004) “The Long Tail”, Wired Magazine
The Long Tail: The Long Tail and the Internet
“Popularity no longer has a
monopoly on profitability”
 The real answer: 99 percent! (Robbie
Vann-Adib, CEO of Ecast)
 The 80/20 rule applies only to hits
 But “misses” make money too
 Why? Digital products have:
 No physical shelf space
 Minimal distribution costs
 No manufacturing costs
Source: Anderson, C. (2004) “The Long Tail”, Wired Magazine
The Long Tail: The Long Tail and the Internet
Inventories: physical retail vs. Internet
retail
Total Inventory (books)
Total Inventory (songs)
2,300,000
735,000
Total Inventory (movies)
130,000
39,000
Rhapsody
Walmart
25,000
Amazon
3,000
Netflix
Blockbuster
Source: Anderson, C. (2006) “The Long Tail: Why the Future
of Business is Selling Less of More”
Barnes & Noble
The Long Tail: The Long Tail and the Internet
Sales distribution: Head vs. Tail
Rhapsody
% Sales from Long Tail
Amazon
% Sales from Long Tail
22%
57%
78%
43%
Netflix
% Sales from Long Tail
20%
80%
Source: Anderson, C. (2006) “The Long Tail: Why the Future
of Business is Selling Less of More”
The Long Tail: The Long Tail and the Internet
Range of Quality/Satisfaction
Search quality
High
Low
Source: Anderson, C. (2006) “The Long Tail: Why the Future
of Business is Selling Less of More”
The Long Tail: Three Forces
The Three Forces of the Long Tail
 The Three Forces of the Long Tail
 Six Themes
 Force 1: Democratize the tools of
production
 Force 2: Democratize the tools of
distribution
 Force 3: Connect supply and demand
The Long Tail: Three Forces: The Six Themes
The Six Themes
1. In virtually all markets, there are far more
niche goods than hits.
2. The cost of reaching those niches is now
falling dramatically
3. Simply offering more variety, however,
does not shift demand by itself. Consumers
must be given ways to find niches that suit
their particular needs and interests. A
range of tools and techniques – from
recommendations to rankings – are
effective at doing this.
Source: Anderson, C. (2006) “The Long Tail: Why the Future
of Business is Selling Less of More”
The Long Tail: Three Forces: The Six Themes
The Six Themes (continued)
4. Once there’s massively expanded variety and the
filters to sort through it, the demand curve flattens.
There are still hits and niches, but the hits are
relatively less popular and the niches relatively
more so.
Source: Post from 02/08/2006 on the Long Tail blog
The Long Tail: Three Forces: The Six Themes
The Six Themes (continued)
4. All the niches add up. Although none sell in
huge numbers, there are so many niche
products that collectively they can
comprise a market rivaling the hits.
5. Once all of this is in place, the natural
shape of demand is revealed…that shape is
far less hit-driven than we have been led
to believe.
Source: Anderson, C. (2006) “The Long Tail: Why the Future
of Business is Selling Less of More”
The Long Tail: Three Forces: Tools of Production
Force 1: Democratize the tools of
production
 Especially using affordable digital
technology that makes it
economically feasible to make
products, even in small quantities.
 This results in “more stuff, which
lengthens the Tail”.
Source: Anderson, C. (2006) “The Long Tail: Why the Future
of Business is Selling Less of More”
The Long Tail: Three Forces: Tools of Production
Examples of tools of production
 Blogs – short for Weblog - free technology
for creating an online journal to comment
on topics like food, politics, technology or
any other topic you can think of.
 Photoblog – driven by cheap digital photography
 Vlog – driven by cheap video recording
technology
 Podcast – driven by cheap audio and video
recording technology
 Example: Affiliate Blog by Shawn Collins
 Open Source software.
 e.g. Linux, Joomla, Simple Machines Forum
The Long Tail: Three Forces: Tools of Distribution
Force 2: Democratize the tools of
distribution
 Internet aggregators create “infinite
shelf space” businesses where
virtually every product in a category
can be economically accessed.
 This creates “more access to niches,
which fattens the Tail”.
Source: Anderson, C. (2006) “The Long Tail: Why the Future
of Business is Selling Less of More”
The Long Tail: Three Forces: Tools of Distribution
Examples of tools of distribution
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Amazon
NetFlix
Rhapsody
iTunes
But also: If you build it, they will come
 Froogle
 MySpace
 YouTube
 Flickr
The Long Tail: Three Forces: Tools of Distribution
Examples of tools of distribution
 Youtube – upload amateur videos.
 Driver: cheap video recording technology
 MySpace – social networking site
focused on entertainment.
 Driver: cheap audio and video recording
technology, dynamic user interfaces
 Wikipedia – Internet encyclopedia
that allows users to freely edit its
content.
The Long Tail: Three Forces: Connect Supply and Demand
Force 3: Connect supply and demand
 Emergence of businesses and taste
makers that act as filters, helping to
cost-effectively and flexibly connect
people with available goods, no
matter how narrow the interest or
specialized the product.
 This “drives business from hits to
niches”.
Source: Anderson, C. (2006) “The Long Tail: Why the Future
of Business is Selling Less of More”
The Long Tail: Three Forces: Connect Supply and Demand
Examples of filters
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Search engines (Google, Yahoo!, etc.)
Sorting (e.g. Froogle)
Ratings (e.g. Ciao)
Reviews/Editor Recommendations (e.g.
Zdnet)
Peer recommendations (e.g. digg)
Customer Reviews (TripAdvisor.com)
Community (e.g. The Lonely Planet Forum)
RSS content syndication (e.g. NetVibes)
Tagging
The Long Tail: Three Forces: Connect Supply and Demand
Tagging
 Attach one-word descriptors to web
sites or other items“tags”.
 Locate these sites or items through a
search or browse of the tags.
 Key innovation: tags are created by
users, not by intermediaries – users
decide what’s relevant.
 e.g. Flickr
 e.g. del.icio.us
Source: Leigh Dodds, Engineering Manager, IngentaConnect
The Long Tail: How to Get Found
How do you get found?
 The focus of filters is about how users
find the content they’re looking for.
 But, creators of content also need to
be found.
 Many of the filters can help, but the
process of finding is often easier than
being found.
The Long Tail: How to Get Found
Early Internet advertising: banner
ads
 In the early days of the Internet, banner
ads placed on popular Web portals ruled.
 Pricing was designed to mirror advertising
in the offline world:
pay-per impression (also called pay-perview or pay-per-mil)
 Problem: advertisers were charged for the
amount of advertising delivered, but how
much was being consumed?
The Long Tail: How to Get Found
Solution: Pay per Performance
 One solution to this issue is pay per
performance pricing
 Advertisers only pay when the user
performs an action
 Clicks on a link
 Registers
 Makes a purchase
The Long Tail: How to Get Found
The Long Tail: How to Get Found
 Search Engine Optimization
 A set of methods aimed at improving the
ranking of a Web site in organic search engine
listings for specific keywords
 Primarily based on content quality and the
number and quality of links to your site
 Keyword Marketing
 Auction-based system where advertisers bid on
certain keywords in order to place
advertisements
 Pricing is pay-per-click - advertisers only pay if
the user clicks on their link
Paid search
Organic
search
The Long Tail: How to Get Found
Organic SEO vs. Pay-per-click
 Consumers tend to trust organic results
more than paid results, and many see them
as more relevant.
 Plus, many users simply ignore paid
results.
 However, SEO takes longer (up to six
months or longer) and usually requires
hiring expensive outside help.
 Paid search is practically instantaneous,
and Google and Yahoo! provide userfriendly interfaces, tools and tutorials.
The Long Tail: How to Get Found
Affiliate Marketing
 Another way for advertisers to drive visitors
to their sites is affiliate marketing.
 Advertisers pay affiliate sites for sending
them customers.
 Pricing is pay per performance: affiliates
only get paid when the customer performs
a specific action (click on a link, register,
make a purchase).
 Result is increased reach for the advertiser
while passing some or all of advertising
costs to the affiliates
The Long Tail: How to Get Found
The Long Tail: How to Get Found
Affiliates use various business
models…
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Niche/content sites (44.5%)
Coupon/discount shopping sites (26.9%)
PPC advertisers (17.5%)
Miscellaneous (11.1%)
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Sweepstakes/contest sites
Shopping malls
Incentive/loyalty sites
Personal websites
Blog/ezine
Source: Partnercentric (2006) survey of 1,041 affiliates
The Long Tail: How to Get Found
…and various promotion tools
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Text links (19.88%)
Banners (18.8%)
Content (18.4%)
Search engine optimization (11.51%)
Email (9.42%)
PPC (7.51%)
Coupons (6.83%)
Datafeeds (4.09%)
Source: Partnercentric (2006) survey of 1,041 affiliates
The Long Tail: The Paradox of Choice
The Paradox of Choice
The Paradox of Choice Video
The Long Tail: The Paradox of Choice
Questions
 Are you a maximizer or a satisficer
 Which vision do you agree with – the
long tail or the paradox of choice?
 Are the filters enough to deal with the
increasing number of choices
available?
END