In his book Good to Great, Jim Collins writes of foxes and hedgehogs: the fox knows many small things, but the hedgehog knows one bighting. If we were to apply this concept to books, Chris Anderson’s The Long Tail would be a hedgehog. It has essentially one big idea—that the nature of demand has changed fundamentally in the modern world. Today, in many product categories, a substantial proportion of the total demand comes from items that individually sell in very small numbers, rather than mostly from the hit products which sell in huge numbers. Tomorrow’s markets will be much less homogeneous than today’s markets. Instead, they will have innumerable small and vibrant niches.
The term “long tail” comes from long tail distributions or power law curves, the most familiar of which is the Pareto curve—commonly described by the Pareto principle or the 80/20 rule. For example, 20% of a country’s population possesses 80% of its wealth; or 80% of a company’s profits come from 20% of its products; and so on. An example of a long tail distribution is the sales of music on a digital music download site, which has, say, a million tracks in its inventory. There will be a few tracks that are hits, and will be downloaded hundreds of thousands of times. However, a vast majority will see very few (some, even one or two) downloads. This vast majority constitutes the “long tail” in music distribution—tracks which when taken individually are downloaded infrequently, but when considered together account for a substantial proportion of sales. And, even more importantly, given the digital nature of storage and delivery, add substantially to the music site’s profits.
There were businesses that learnt to profit from the “long tail”, even much before the advent of the Internet. One example is Sears, which lateen the 19th century overcame the stocking limitations of traditional general stores with its mail order catalog and the services of US Mail. However, in most cases, the growth of the “long tail” was hampered by constraints of locality, production, storage and distribution. Given these limitations, businesses tended to pay attention only two hits—products that had a wide appeal, and the potential to generate huge sales. According to Anderson, the “long tail” has increased manifold in length and importance in the past couple of decades, with developments in information technology, and the widespread broadband access to the Internet.
How do “long tails” emerge? According to the author, three forces contribute to this. The first is the democratization of production. Today, we can see this in the innumerable blogs that compete with mainstream media; in the amateur videos uploaded in their thousands to YouTube; in small bands recording albums and making their work available online; and, in the growth of self-publishing, among other things.
The second force driving the emergence of longer tails is the reduction in the cost of consumption, with the democratization of distribution. Using the pervasiveness of the Internet, with a listing on a site like eBay or with their own websites, anyone can reach out to potential buyers for even the most esoteric product. And, if the product is in the digital form, the costs of storage and distribution of the product are almost nil.
The third force is connecting supply and demand, done by search engines like Google, by “customers who bought this also bought…” recommendations on Amazon, or even by the recommendations and lists of favorites from other buyers. These reduce the time and cost required to search for and find niche products, and even more importantly, help potential buyers separate worthwhile buys from the inevitable profusion of crud that is a by-product of the first force that drives the growth of “long tails”—the democratization of production.
With all these forces working together, the author sees a future where customers have infinite choice, and where hits will co-exist with hundreds of thriving—or at least, surviving—niche products.
The book, as mentioned earlier, has just one big idea. This is not to say that it is not worth reading. It is well-written, and the big idea is one that has made several people like Jeff Bezos, Sergey Brin and Larry Page enormously wealthy—and, given the buy recommendations and congratulatory blurbs on the book’s cover, Chris Anderson is not likely to do too badly with it either