Long Tail Review

The Long Tail Review
Review By: Troy Ronda

Physical retail stores have a physical space limitation. This causes them
to stock the X most popular hits where X is a function of package size and
physical space. Online stores can stock as many more titles because they
do not have a retail space limitation. Amazon, for example, stocks 2.3
million books but the typical Barnes and Noble only stocks 130,000 books.
Online stores, in effect, can stock misses (titles that never make to
retail) as well as hits. Hence, if the 20th century entertainment industry
was about hits, the 21st will be equally about misses. The article authors
show demand vs popularity as a long tailed curve (looking very Zipfy,
called a power-law curve in the article). They make the point that
physical retail stores effectively chop off the long tail due to the
tyranny of space limits. Online stores keep the tail, because misses make
money, too. There are also many more misses than hits so this can be a
huge new market. With online stores, popularity no longer has a monopoly
on profitability. The problem with retail stores is that they must
carefully choose their stock but they might not know their customers
taste. In a single geographical area, obscure tastes will be diluted
enough to be unworthy of stocking. On the Internet, however, these tastes
aggregate into a substantial market. The long tail is so long that its
market is bigger than the hits market. The biggest money is in the
smallest sales. Since, on the Internet, we no longer have geographic taste
constraints or physical retail space constraints, we should embrace
niches. If there is a buyer, it is worth offering. Just archive every
produced piece of work into some cheap package and offer it. This is rule
1: Make everything available. The second argument is that online prices
should be dropped due to cheaper distribution channels. The third argument
is that you need both ends of the long-tail curve. You need the hits to
bring people to your website. Many sites also recommend similar products
when you are viewing a page. This means you can recommend product down the
curve from a product at the top of the curve (and possibly modify
popularity doing so). They give an example from Rhapsody: Britney Spears
product recommends Pink which recommends No Doubt which recommends
Selecter. Hence, through recommendations you can find a product that
physical retailers do not offer. This ends the tyranny of a hit.

The Long Tail is a fun and light read but at the same time very
informative. I feel that it gave a strong case for online retailers
serving niche markets, in addition to the hits market. It is also
interesting to compare the curves to web-page demand. We could have
started by saying: Caches have a physical space limitation. (obviously
with some differences, but you get the point). The retail stores are
effectively cache hits on the Internet, while the niche markets served by
online stores are the analogous to the misses. The same arguments can
apply to both. Internet web pages are not constrained to physical retail
space nor diluted niche markets. This means that somebody, somewhere will
request an obscure page that will not be in the cache, a miss. Users
requesting obscure pages are probably spread across many cities and
effectively across many caches, hence many misses across caches. Another
strength of this article is the rules given. I think that they neatly
summarize the benefits of online distribution. I also like the discussion
about the music industry not wanting to adapt to the new market (despite,
"free has a cost"). The graphics were very helpful and well-done.

It is hard to give negative reactions to a well-written magazine article.
I would like to hear about industries other than entertainment. Can
retailers with large packaging, as well as less hits oriented retail, also
benefit in a similar way from online stores? For example, a Canadian Tire
or a Home Depot. It would have also been good to see some comparisons to
the other major form of digital entertainment: web pages. I made some
analogies in the previous paragraph that may have been interesting to
discuss in the article. What would the world be like without marketing?
Would we still have Zipf-like curves, due to word of mouth? Another
obvious point (due to magazine style) is the lack of references to source
material. How far should one trust this type of article? That is a whole
other can of worms that we dont need to discuss here. In the end, it is a
good article.
Received on Mon Nov 28 2005 - 10:32:20 EST