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'Long Tail' May Not Wag the Web Just Yet
Carl Bialik from WSJ writes "Expanding on an article he wrote in 2004 (and discussed on Slashdot), Wired magazine editor Chris Anderson argues in his best-seller 'The Long Tail' that the web is changing commerce from a hit-driven business to one focused on niches. But Wall Street Journal columnist Lee Gomes questions Anderson's data, and adds, 'I don't think things are changing as much as he does.' Gomes writes, 'At Apple's iTunes, one person who has seen the data -- which Apple doesn't disclose -- said sales "closely track Billboard. It's a hits business. The data tend to refute 'The Long Tail.' " ' On his blog, Anderson responds that Gomes 'stumbles over statistics and more, and in the end simply makes a muddle of what might have been an interesting debate over the magnitude of the Long Tail effect.'"
Amazon doesn't keep their sales rankings private. There is clearly an element of hits ("best sellers") and long tail (everything else that isn't new). I've seen books from the 90s go from the 500,000s sales rank to the 1,000,000s range and back over the course of a year.
> [...] sales "closely track Billboard."
Right, but isn't that the point of the long tail? If Dan Brown sells a bazillion copies of "Da Vinci Code" and I sell 500 copies of PMD Applied, we're both happy since we're meeting the expectations that we budgeted for. Of course, he's then a billionaire, whereas I've still got my office in the laundry room, but, er, anyhow.
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If you don't understand profit, you probably shouldn't write at the Wall Street Journal. Profit = revenue - cost.
It seems that Mr. Anderson's book (I RTFA, but not the book) claims that higher sales in the tail will increase the profit of the tail and this will change the economics of the web. This doesn't make much sense to me, and the article rightly points out that there is not that much interest in the tail.
But that's not the point. The point is that to stock "tail items" (niche items) in a brick-and-mortar store COSTS a lot of money. It costs money in terms of the hit-items you can't stock because you've got limited inventory space (opportunity cost at work). But the cost of stocking niche items digitally is far, far less. The promise of profit from the tail is not based on increased revenue as much as it is on decreased cost.
Take the example of Apple's iTunes sales. Even if they do closely track Billboard sales, this doesn't change the fact that Apple is profiting MORE from their tail items than a brick-and-mortar store would be.
It seems as though both of these guys are missing the point: the promise of the tail is not in increased revenue, but in decreased cost.
-stormin
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A couple of years back, I was telling a friend about a great book I had as a kid, called "Who Needs Donuts" by Mark Alan Stamaty. My friend had just had a kid, and I was thinking it would be cool to get a copy for him, but it was long out of print. I shelved the idea for a few months, and then decided to try again, and if that didn't work, scan my old copy, which I had saved, and print a new one. In the intervening months, the book came back for a reprint, 30 years after its first printing.
My feeling is that it shouldn't have been that much work, and there's no reason the publisher should have to print up a whole multi-thousand book run. The occasional nostalgia buyer would do really well for publishers and authors who have low-volume books.
So if I want to find old editions of the Book of Knowledge from 1944, where the commentary following the story of "the first men on the moon" indicates that "maybe your children's children's children will walk on the moon", I should be able to.
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An excellent point -- there might not seem to be any way to advertise the other 90% of apparent "non hits," but that's only when you consider advertising in the traditional, fixed billboard and shelf-end type of way.
Advertising can take a lot of different forms, and I think Amazon is just scratching the surface with their recommendations. As advertising companies become less obsessed with just shotgunning a "message" out to as many eyes and ears as they can, and hoping they hit the right audience in the process, and instead catch on that you can get a lot more bang for your buck when you don't try to sell the same product to everyone, I think the "recommendation engines" type of ad-delivery will play a bigger role. (Because, when you get right down to it, the difference between a "recommendation" and an "advertisement" is just the context.)
There are always going to be hits, because people always want new stuff. Even if everyone had access to the entire back catalog of human civilization, for free and on demand, there would still be 'new hits.' Not as big, probably, because right now there are a lot of people who only listen to hits because they can't find the stuff from the back catalog that they want, but they would still happen.
What has to happen is that the music/movie companies have to realize that "hey, we make just as much money if you buy a song from 1994 than if you buy a song from 2006." That's the key thing that I don't think they've really understood yet, as evidenced by their seeming refusal to advertise anything but the newest stuff. A sale is a sale -- particularly when selling a back-catalog song doesn't mean that it's been sitting in a warehouse for 10 years, doing nothing but tying up capital.
What I see happening is more individually-targeted advertising that takes into account consumer preferences and offers up stuff from the catalogs for them to buy. Once you've accepted that it doesn't matter whether the consumer buys "MI:3" or "Dr. No," as long as they're both your products, you can advertise whichever one they're more likely to buy. In fact, it's stupid not to advertise whichever one you think they'll buy, because to do otherwise risks losing a possible sale. It just makes good marketing sense.
This requires that you have a lot of information on the purchasing patterns and preferences of each customer, but that's not hard to get (and a lot of people will give that up freely, if it means they get good recommendations).
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Citing the iTunes store as representative of anything but a "Hits Business" is flawed. I think consumers who represent the statistics in the long tail don't shop at the iTunes store. While I know it's not a vaild argument to cite what my own purchasing practices are, I for one spend a lot less on music at iTunes and more at places like Om Records, Defected, and other independent label online stores. In fact, if I do purchase at iTunes, it's usually a very popular song which is consistent with iTunes being in the "Hits Business". The arguer is right about that, but wrong about who it accurately represents.
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But did you read the blog post?
Gomes is refuting Andersons thesis by saying that 20% of the items still make up 80% of the sales (percentages of the old 80/20 rule used for illustration)
Anderson's response though is that with essentially *unlimited* inventory percentages aren't always the best or only way to measure the "tail". Anderson's definition has to do with the absolute numbers that used to get cut off. So Gomes is counting a bunch of sales as "head" which Anderson is counting as "Tail".
For example: Imagine a market in which the old brick and mortar stores could stock only the 100 most popular items and that only 20 of those items made up 80% of the sales. In the new world of unlimited inventory there is an ecommerce store has a 100,000 items in stock and the top 20,000 account for 90% of the sales. So before the web the top 20% of items accounted for 80% of the sales but afterwards the top 20% accounts for a full 90% of the sales. Gomes says this means that Anderson is wrong and that the web made things even *more* hit centric. Anderson's "tail" includes items 101 through 20,000 which Gomes is including in the "head". This overlap between Anderson's "Tail" and Gomes's "head" used to be unmarketable "misses" but are now able to find a market & have even increased sales individually and also now make up a significant percentage of total sales to the retailer. Sales that previously didn't exist because the old brick & mortar store didn't have space for the product
As Anderson said. If Gomes had been a little more intellectually honest about his argument there could have been an interesting debate over how long the long tail is & what the limits of the phenomena are etc. Gomes does have a good point which he simply overstated. 20% of the products *are* still accounting for 80% of the sales, which Anderson's thesis *seemed* to undermine. To be fair Anderson (at least in the original article, I haven't read the book) doesn't dispute that 80/20 rule. Instead I think he could be summed up as saying that with unlimited inventory the 20% of inventory is a much bigger absolute number and also that retailers can profitably capture the 20% of sales that come from the 80% of the inventory that they used to have to forego for reasons of limited physical space.