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The Long Tail

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The phrase The Long Tail (as a proper noun with capitalized letters) was first coined by Chris Anderson in an October 2004 Wired magazine article<ref>"The Long Tail" by Chris Anderson, Wired, Oct. 2004</ref> to describe certain business and economic models such as Amazon.com or Netflix. The term long tail is also generally used in statistics, often applied in relation to wealth distributions or vocabulary use.

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[edit] The long tail in statistics

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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." Such distributions resemble the accompanying graph.

In these distributions a high-frequency or high-amplitude population is followed by a low-frequency or low-amplitude population which gradually "tails off." In many cases the infrequent or low-amplitude events—the long tail, represented here by the yellow portion of the graph—can cumulatively outnumber or outweigh the initial portion of the graph, such that in aggregate they comprise the majority.

Such distributions are surprisingly common. For example in standard English, the word "the" is the most common word and other short words such as "of," "is," and "have" are also quite common. These common words are vastly more common than most other words. For example, about 12% of all words in a given text are "the," while "barracks" occurs in less than 1 out of 60,000 words, but cumulatively, words roughly as rare as "barracks" make up about a third of all text. These rare words are the long tail in English vocabulary. <ref>Wordcount: Tracking the way we use language.</ref>

[edit] The Long Tail by Chris Anderson

The phrase The Long Tail was first coined<ref>See The origins of "The Long Tail" by Chris Anderson</ref> by Chris Anderson. The concept drew in part from an influential February 2003 essay by Clay Shirky, "Power Laws, Weblogs and Inequality"<ref>"Power Laws, Weblogs and Inequality", by Clay Shirky. February 8, 2003.</ref> that noted that a relative handful of weblogs have many links going into them but "the long tail" of millions of weblogs may have only a handful of links going into them. Beginning in a series of speeches in early 2004 and culminating with the publication of 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).

Anderson argued that products that are in low demand or have low sales volume can collectively make up a market share that rivals or exceeds the relatively few current bestsellers and blockbusters, if the store or distribution channel is large enough. Examples of such mega-stores include the online retailer Amazon.com and the online video rental service Netflix. The Long Tail is a potential market and, as the examples illustrate, the distribution and sales channel opportunities created by the Internet often enable businesses to tap into that market successfully.

An Amazon employee described the Long Tail as follows: "We sold more books today that didn't sell at all yesterday than we sold today of all the books that did sell yesterday."<ref>[1]</ref> In the same sense, the user-edited internet encyclopedia Wikipedia has many low popularity articles that, collectively, create a higher quantity of demand than a limited number of mainstream articles found in a conventional encyclopedia such as the Encyclopædia Britannica.

The term is derived from the XY graph that is created when charting popularity to inventory. For example, in the graph shown above the total inventory of Wikipedia articles is along the bottom line, while the popularity rating (web page hit statistics) is along the vertical axis. So, for example, the Wikipedia homepage would receive the most views and be on the far left in the red, while this page might be on the far right in the yellow, as would most of Wikipedia's articles. The same could be said for Amazon's book inventory or Netflix's movie inventory. The total volume of low popularity items exceeds the volume of high popularity items.

[edit] Relationship with storage and distribution costs

The key factor that determines whether a sales distribution has a Long Tail is the cost of inventory storage and distribution.4 Where inventory storage and distribution costs are insignificant, it becomes economically viable to sell relatively unpopular products; however when storage and distribution costs are high only the most popular products can be sold. Take movie rentals as an example: A traditional movie rental store has limited shelf space, which it pays for in the form of building overhead; to maximize its profits, it must stock only the most popular movies to ensure that no shelf space is wasted. Because Netflix stocks movies in centralized warehouses, its storage costs are far lower and its distribution costs are the same for a popular or unpopular movie. Netflix is therefore able to build a viable business stocking a far wider range of movies than a traditional movie rental store. Those economics of storage and distribution then enable the advantageous use of the Long Tail: Netflix finds that in aggregate "unpopular" movies are rented more than popular movies.

[edit] Cultural and political impact

The Long Tail has possible implications for culture and politics. Where the opportunity cost of inventory storage and distribution is high, only the most popular products are sold. But where the Long Tail works, minority tastes are catered to, and individuals are offered greater choice. In situations where popularity is currently determined by the lowest common denominator, a Long Tail model may lead to improvement in a society's level of culture. Television is a good example of this: TV stations have limited time slots, so the opportunity cost of each time slot is high; stations therefore choose programs that have the broadest appeal. But as the number of TV stations grows or TV programming is distributed through other digital channels, the choice of TV programs grows and the cultural diversity rises.

Some of the most successful Internet businesses have leveraged the Long Tail as part of their businesses. Examples include eBay (auctions), Yahoo! and Google (web search), and Amazon (retail) amongst the majors along with smaller Internet companies like Audible (audio books) and Netflix (video rental).

Often presented as a phenomenon of interest primarily to mass market retailers and web-based businesses, the Long Tail also has implications for the producers of content, especially those whose products could not - for economic reasons - find a place in pre-Internet information distribution channels controlled by book publishers, record companies, movie studios, and television networks. Looked at from the producers' side, the Long Tail has made possible a flowering of creativity across all fields of human endeavour.

At a meeting held in the fall of 1994, attended by Marc Andreessen, members of Wired Magazine's staff, and others, Internet commercialization pioneer and media historian Ken McCarthy, addressed this phenomenon in detail from the producers' point of view. Explaining that the pre-Internet media industry made its distribution and promotion decisions based on what he called "lifeboat economics" and not on quality or even potential lifetime demand, he laid out a detailed vision of the impact he expected the Internet would have on the structure of the media industry with what has turned out to be a remarkable degree of accuracy, foreshadowing many of the ideas that appeared in Anderson's popular book.<ref>"Lifeboat Economics", Publishing and the Future of the Internet Ken McCarthy. Video (1994)</ref>

[edit] Competition and the Long Tail

The Long Tail may threaten established businesses.<ref>"Competition and The Long Tail" by David Jackson.</ref> Before a Long Tail works, only the most popular products are generally offered. When the cost of inventory storage and distribution fall, a wide range of products become available. This can, in turn, have the effect of reducing demand for the most popular products. For example, Web content businesses with broad coverage like Yahoo! or CNET may be threatened by the rise of smaller Web sites that focus on niches of content, and cover that content better than the larger sites. The competitive threat from these niche sites is reduced by the cost of establishing and maintaining them and the bother required for readers to track multiple small Web sites. These factors have been transformed by easy and cheap Web site software and the spread of RSS.

[edit] Brynjolfsson, Hu, and Smith

In his Wired article, Anderson cites earlier research by Brynjolfsson, Hu, and Smith, who quantified the potential value of the long tail to consumers. In an article published in 2003<ref>See Brynjolfsson, Erik, Yu (Jeffrey) Hu, and Michael D. Smith, "Consumer Surplus in the Digital Economy: Estimating the Value of Increased Product Variety at Online Booksellers" Management Science, Vol. 49, No. 11, November 2003, and the April 2003 working paper version available via the Social Science Research Network.</ref> these authors show that, while most of the discussion about the value of the internet to consumers has revolved around lower prices, consumer benefit (a.k.a. consumer surplus) from access to increased product variety in online book stores is ten times larger than their benefit from access to lower prices online. Thus, the primary value of the internet to consumers comes from releasing new sources of value by providing access to products in the long tail.

[edit] See also

[edit] Probability distributions with "long tails"

[edit] Notes

<references/>

[edit] References

Anderson, Chris (2006). The Long Tail: Why the Future of Business is Selling Less of More. Hyperion. ISBN 1-4013-0237-8.

[edit] External links

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