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The Long Tail: Why the Future of Business is Selling Less of More
DIAMOND
RATING
RATING
Chris Anderson, Hyperion, 2006
Senteo’s Review 
This book argues traditional retail is governed by the 80/20 rule, with 20 percent of products accounting for 80 percent of the revenue. In the online world, the author argues that the “98 percent rule” applies, where 98 percent of all possible choices are chosen by someone, and where the 90% that is available only online accounts for half the revenue and two-thirds of the profits.
The author argues that mass culture is disappearing and will be replaced by a series of niches. There are 3 forces of the long tail: democratization of the tools of production; cutting the costs of and democratization of the tools of distribution; and connection of supply and demand, introducing consumers to these newly available goods and driving demand down the “tail.” Before the Internet, physical space constrained retailers to offering ony the most popular 20 percent of items because they represented 80 percent of the purchasing power. Examples such as Google, eBay, iTunes and Netflix underscore how such companies have used the Long Tail theory by having unlimited “shelf space,” able to provide many products and services through modern technology and low-cost distribution options. The author also gives 9 rules of success for Long Tail aggregators:
The Long Tail provides a visionary account of business and modern culture. Its analysis and lessons are instructive for anyone looking for an understanding of how to compete profitably as technology is transforming markets and businesses into niche providers. It provides good examples of companies which emerged according to this theory (consciously or unconsciously), validating the author’s paradigm. This is an essential work for anyone in E-business.
The author’s theory, while providing a sound analysis of the forces at play in the market, has its limitations. It is not clear how some more traditional types of business will follow this model, or whether the market will ever evolve to the 98 percent rule, even in the Internet-based trade. More likely, there will always be mass market segments along with this model. For more on this subject, see Mass Customization (Senteo review).
What happens when the bottlenecks that stand between supply and demand in our culture go away and everything becomes available to everyone?
“The Long Tail” is a powerful new force in our economy: the rise of the niche. As the cost of reaching consumers drops dramatically, our markets are shifting from a one-size-fits-all model of mass appeal to one of unlimited variety for unique tastes. From supermarket shelves to advertising agencies, the ability to offer vast choice is changing everything, and causing us to rethink where our markets lie and how to get to them. Unlimited selection is revealing truths about what consumers want and how they want to get it, from DVDs at Netflix to songs on iTunes to advertising on Google.
However, this is not just a virtue of online marketplaces; it is an example of an entirely new economic model for business, one that is just beginning to show its power. After a century of obsessing over the few products at the head of the demand curve, the new economics of distribution allow us to turn our focus to the many more products in the tail, which collectively can create a new market as big as the one we already know.
The Long Tail is really about the economics of abundance. New efficiencies in distribution, manufacturing, and marketing are essentially resetting the definition of what’s commercially viable across the board. If the 20th century was about hits, the 21st will be equally about niches.
This is essential reading for anyone involved in E-business. The author’s analysis provides thought-provoking material for designing a modern business model or distribution.
Senteo Subject Category
This book provides a theoretical and strategic understanding of the Long Tail model, along with some examples and frameworks (“9 rules”) for design and implementation of this model.
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