Tuesday, January 8, 2013

The Long Tail - Chris Anderson

In this book "The Long Tail" Chris Anderson expands on his article written in October 2004 on Wired called "The Long Tail"

Basically Chris Anderson is talking about an economic phenomena currently being created in the present world where we have almost unlimited choice because of the Internet. He talks of a future which is not "Hit-centric" but a future where "minorities" and "niches" thrive and everybody can find something to their taste. 

Anderson explains, "The theory of the Long Tail can be boiled down to this: Our culture and economy are 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 moving toward a huge number of niches in the tail."

He mostly talks about the phenomena in Entertainment but the same can be observed in all walks of life. Take this case If you could watch Movies only at the Cinema hall near your house you would get a very limited choice and more-so your choice would be limited by the "HITS" or what is liked by majority of the customers of the Cinema Hall. But if you order movie DVDs from Netflix your choices explode by a factor of millions. Log in to YouTube your choices explode further. 

Long Tail can be explained by considering the figure on the Right. 

In most industries (films, music, books, etc.) a few hits make most of the money, and demand drops off quickly thereafter. But the Demand, however, doesn't drop to zero. 
The products in the Long Tail are less popular in a mass sense, but still popular in a niche sense. 
Basically the Demand never drops down to Zero.   What that means is that some businesses, like Amazon, Google Apple iTunes can make money not just on big hits, but by serving the long Tail. 

Anderson identifies three 'forces' that drives this Long Tail and the niches that populate it?

  1. More stuff is being produced. Technology and the internet make it cheaper and easier to record and distribute your own songs, publish your own writings and so on. This lengthens the tail.
  2. There is better access to niches, again thanks to the reach and economies on the net. This fattens the tail.
  3. Search and recommendations connect supply and demand. This drives business from hits to niches.
Anderson explains these 3 forces further in the book and further explains how the abundance of choice is both good for the customer and the marketer. He tries to take us beyond the entertainment industry where he explores how EBay, Lego,  Kitchenmaid etc also have explored and exploited the power of the long tail. This is where I feel Anderson loses the plot If I may say, he goes to explore "Long Tail" everywhere. 

He writes "there are now Long Tail markets practically everywhere you look," He calls offshoring the "Long Tail of labor," and online universities "the Long Tail of education." He quotes that there's a "Long Tail of national security" in which al-Qaida is a "supercharged niche supplier." At times, it feels he is just going around looking for examples to suit the theory.

I would further like to argue that their are many industries that don't rely on the economics of information products.  For E.g. Take the Steel Industry, which Anderson doesn't discuss, —The Long Tail doesn't seem to tell us much about the future of the steel industry. It's not really clear how Tata Steel or any other still company might benefit from expanding the types of steel it makes available. (There are different types of steel - Mild Steel, Hard Steel, Automotive Grade Steel etc). It would cost Tata Steel a lot to produce them, and few customers would require a very different type of steel. So basically no Long Tail in steel Biz. Same can be said for other industries dealing with physical products like Oil, Diamond etc

The other disappointment is that Anderson doesn't do a very good job of describing strategy choices for product producers. After the first 6 chapters you have understood the entire book, the rest of the book is just repetition. My advice would be don't read the book either. Read his 2004 article and you are all set.  

I will give the book a rating of 2/5. Anderson explores a phenomena successfully,  The reading of the sociological and physiological factors affecting the current world is interesting. But like I said the article is more than enough for it.

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