The Long Tail

cover_1I don’t normally read books on economic theory or explanations of statistical distributions. In graduate work, I opted for the “diplomatic history” side of political science rather than the “scientific” side–mainly because I did so poorly in calculus in college and never could understand how statistics works nor explain the supply-demand curve to anyone. But for some strange reason, I loved the “The Long Tail” by Chris Anderson.

Like An Army of Davids, it seems to explain so much….particularly about the music industry. I’m interested in understanding how the music industry works, mainly because I’ve got two son-in-laws who are highly talented musicians. I believe in them and want them to make an impact thru their creative endeavors. I’ve embraced Tolkien’s notion that we are all “sub-creators” created in God’s image to be creators. I just love being around Andy and Nathan and watching how they express this “making” ability.

Anyway, Anderson writes beautifully. He proved that the axiom that almost always the “writing that isn’t fun to read doesn’t get read.” By explaining a hard to understand “statistical” phenomenon in “fun to read” prose, Chris has help popularize a difficult concept. Everyone is talking about the “Long Tail.” Writing well opens a whole new world. I’ll give you some examples below…but for sake of on contrast, read the following “technical, encyclopedic” definition of the Long Tail.

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.

Using Amazon, Rhapsody, iTunes, Google and other examples, Chris defines and illustrates the Long Tail as follows:

conceptualThe theory of the Long Tail is that our culture and economy is increasingly shifting away from a focus on a relatively small number of “hits” (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail. As the costs of production and distribution fall, especially online, there is now less need to lump products and consumers into one-size-fits-all containers. In an era without the constraints of physical shelf space and other bottlenecks of distribution, narrowly-target goods and services can be as economically attractive as mainstream fare.

One example of this is the theory’s prediction that demand for products not available in traditional bricks and mortar stores is potentially as big as for those that are. But the same is true for video not available on broadcast TV on any given day, and songs not played on radio. In other words, the potential aggregate size of the many small markets in goods that don’t individually sell well enough for traditional retail and broadcast distribution may someday rival that of the existing large market in goods that do cross that economic bar.

The term refers specifically to the orange part of the sales chart above, which shows a standard demand curve that could apply to any industry, from entertainment to hard goods. The vertical axis is sales; the horizontal is products. The red part of the curve is the hits, which have dominated our markets and culture for most of the last century. The orange part is the non-hits, or niches, which is where the new growth is coming from now and in the future.

Traditional retail economics dictate that stores only stock the likely hits, because shelf space is expensive. But online retailers (from Amazon to iTunes) can stock virtually everything, and the number of available niche products outnumber the hits by several orders of magnitude. Those millions of niches are the Long Tail, which had been largely neglected until recently in favor of the Short Head of hits.

When consumers are offered infinite choice, the true shape of demand is revealed. And it turns out to be less hit-centric than we thought. People gravitate towards niches because they satisfy narrow interests better, and in one aspect of our life or another we all have some narrow interest (whether we think of it that way or not).

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.