For years, we've believed that the Internet would allow obscure films like The Peanut Butter Solution to find their audience, no matter where the fans lived or what language they spoke.
It's been the inspiration for countless Internet companies.
But what if we've been looking at it the wrong way?
Erick Schonfeld over at TechCrunch writes an interesting review of a Harvard Business School article whose basic premise is that just because the Internet makes it possible to offer more goods does not mean that consumers will start buying in significant numbers.
Erick dissects the HBR article and argues that while demand is being pushed down the tail, simply aggregating non-blockbuster items is no guarantee of success. (If you haven't already, I urge you to read it as well as Long Tail author Chris Anderson's comments before continuing.) Erick acknowledges that the market has changed, but concludes,
"...but to say there is no money in the Long Tail is nonsense. It is just more finely distributed and harder to find. True, there are not many businesses that have figured out how to collect it. Google is one with AdSense and search ads. Each search ad is insignificant in and of itself, but all of those obscure terms add up to billions of dollars."
What is amazing is that people take the Long Tail as gospel without really considering what it means. As an example, one of the conclusions of the Wikipedia entry for the Long Tail is that it has changed the proverbial "80-20" rule into the "72-28" rule. It doesn't mean that the Long Tail has somehow marginalized blockbusters: instead it describes how much product discovery efficiency has increased.
Likewise, this definition does mean
- "...Important profits from the long tail will be largely be made (by) those able to aggregate niche products" - Consumers want variety, and a hyperefficient market as Zappos.com proves, retailers are able to make greater margins from less popular products
However, it does not mean:
- "...Everything is going to be a hit at some time...the next Brit Spears or Kanye is out there in the (Long Tail)...if they can only get 1) monies and 2) traction." - I got two words: Heaven's Gate. They spent $5 million marketing it and it only made $3.4 million in the US. Sometimes, you really can't polish a turd and make people believe it's an apple.
Given some of the recent court rulings won by luxury goods companies like Louis Vuitton against both eBay and Google, it appears the Long Tail is working harder for fraudulent knockoffs than the original couture brands. The New York Times reports that Tiffany & Company argues that 83% of the products sold on eBay are fraudulent. (And I mainstain that the luxury goods companies should get into social networking, if only to publish an API that lets third parties know who is and who isn't an authorized dealer. But I digress.)
So let's consider a couple of other real world experiments.
In the early 90s a major cable company that I worked for ran a pair of trials at the same time: a dozen hit movies scheduled at convenient times, and a much larger library of films that included both hits and films that were popular with smaller groups. The trial using the much larger library had a lot of initial interest, but usage dropped off after a short period of time. On the other hand, the hit movie channel had moderate interest at first but traffic grew over time. Our conclusion was simple: the hits drive the revenue.
That example is 15 years old, and Chris Anderson rightly points out that heavy DVD renters are more likely to venture into the Long Tail. But there is another example that is much more current and possibly much more persuasive.
Early insiders at both AOL and Prodigy tell the same story, at
different times: early adopters did a lot of exploration at first, but
after time, they would spend more time online at fewer sites. If the Long Tail applied, wouldn't smaller websites be seeing strong growth in both new site launches and recurring traffic? When Techcrunch suggests that people are benefitting from the "billions of dollars" generated by AdSense, and then I read that VC Fred Wilson's popular blog is only making $500 a year, it makes me wonder.
At the same time, the average search query is growing in both number of terms and complexity. Does it mean that people are getting better at finding niche sites? Or does it mean that people are simply getting better at sampling new experiences? I somehow doubt that most people that visit a new site go on to become a frequent visitor at that site, even with the assistance of RSS, social bookmarking and widgets.
The Long Tail is a way to describe how web services and other innovations make it easier to find and buy things. I'm not sure that it helps stores like The Gap find a better way than outlet stores to get rid of unsold inventory, nor does it help a music label improve its ability to find the next hot act. But for people interested in other models that describe how technology influences our relationships with brands, I'd encourage you to explore Dunbar's number. Marketers know there is a limit to how many brands can possibly have top-of-mind awareness; Dunbar's number gives you insights into why McDonalds makes more money by featuring only 8 items or why the average Facebook user only has 164 friends.