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Harvard Study Questions "Long Tail" Theory
mjasay writes "Remember 'the long tail?' That was the idea that there was gobs of money to be made in the more obscure tastes of any given market, enabled by the web. In recent research highlighted in the Harvard Business Review, however, the long tail theory comes under withering criticism. Not only is a hits-based business more profitable for vendors according to the new research, but the research suggests that consumers also derive more enjoyment from the hits, rather than the tail. In short, the researchers find that 'the tail is long and flat, and therefore that content providers will find it hard to profit much from it.'" Long Tail advocate Chris Anderson defends his theory, and it seems that most of the debate centers around how you define "head" and "tail."
Correct me if I am wrong, but the basic gist I got was that the 'long tail' theory states there is a lot of money to be made in 'niche' or 'subculture' elements, and the critics say this is wrong. I can wholeheartedly disagree. It's not easy to extract the profit from niche markets, and the long tail probably doesn't add up to the 'head' so to speak, in most cases, but there is certainly a lot of money to be made.
Take TV for instance. Your 'Heads' there may be ABC, CBS, NBC, and you could call things like The Discovery Channel, The History Channel, Comedy Central, Sci-Fi Network, etc the 'tail', as I understand it. And there is quite the potential for the 'tails', in this instance, to make even more than the 'heads'.
This is just as far as I understand it, mind you.
Porn. People do pay much higher sums for rather obscure or taboo things.
The problem with the "long tail" is that companies assumed it scaled. By definition it will only apply to a fringe. There is only space in such fringe areas for one or two dominant players; these players may make gobs of cash, but only in relation to their market size.
Of course large vendors aren't going to find it profitable to appeal to multiple fringe markets. The level of effort involved to support each individual small market is high and then combined with a number of markets means you end up burning through more manpower per dollar than a smaller dedicated company. It's the same problem of having too many products/SKUs/whatever, see DEC/Apple pre Jobs for an example of failing this way.
--- I do not moderate.
Precisely: their study is flawed, because they're basically saying that by dropping the obscure content that only 1% of their customers want, they're losing only 1% of their customer base (or less).
If they were examining a service that caters _specifically_ to that 1% niche, things would be much different. If your business involves selling purple spikey beanie babies, and you stop carrying the purple spikies, you go out of business. If your business involves selling ALL beanie babies, then you only lose the few weirdos who wanted *ONLY* the spikey ones, if and only if there is a competitor to fill in the void.
-Billco, Fnarg.com
If they sell 100 titles and 10 of them constitute 90% of revenue, then if they ONLY sell those items, they will make 90% of the money they made when they sold all 100.
Now if what they are on about is that 90 of the titles make no profit because it's wiped out by the need of inventory control, then why is it P2P is counted to be taking trillions worldwide from the systems (you'd presume 90% of this would be the non-profitable works)? Surely only 10% of the titles are commercially worth anything, so only 10% of the tracks should be sued for.
Yes?
As Anderson notes, the defintion of "head" and "tail" are important; Anderson was initially basing his information off of the result of switching away from retail space. If less than 1% of the items of a market can make it into the inventory of a Wal-Mart, then even if the top 1% is 32% of sales, the Long Tail is pretty powerful.
Around the "research suggests that consumers also derive more enjoyment from the hits, rather than the tail." From the article -
Popularity and quality are not completely divorced from one another; I'd expect the more popular titles to better, just not nearly to the same extent as their sales would indicate.
I'd be interested in "in-genre vs out-of-genre" ratings for the heavy users as well; while the article indicates that heavy users rate popular titles disproportionately highly, this may be a result of the heavy users (who consume a lot of obscure stuff) working primarily within their genre as opposed to across genres. If you like action movies more than romantic comedies, you're more likely to give the action movie the higher rating if you both of them and they're of equal quality. I think it's likely (though not certain) that heavier consumers stick more to their genre/tastes even among the popular items, which would result in them having a disproportionately high rating for popular stuff compared to lighter consumers. (The article does note the disparity is true for products as a whole - heavier/obscure consumers are more likely to stick to a single genre - but doesn't run the comparison among the popular subset of their tastes).
As for the business suggestions, some of them seem ok, but others -
There's a difference between knowing something isn't actually any good and the amount you'd pay for it, especially for obscure products. Consumer ratings are not directly analogous to the price premium someone would willingly pay for something, and not simply in the people buying things because they suck market; things like completionism and other impulses that aren't connected to a work's quality will lead to obscure works being worth high price premiums regardless of quality.
While you shouldn't radically alter things, this is ignoring the issue of what the "head" is in the first place. If the "head" of an online store is bigger than the entirely inventory of a typical Wal-Mart, there's going to be a shift in marketing tactics.
The article is basically attacking a misconception about the Long Tail. It's a misconception that goes all the way back to Chris Anderson's book.
It is possible to get rich from the Long Tail. Amazon does it. ITunes Music Store does it.
What's lacking in the book is pointing out that the *content creators* don't get rich. The Net means you can now eke out a tiny amount of cash by delivering your content to people. And in aggregate, that's a lot of money. But for each individual artist, it's not much.
It doesn't mean the end of blockbusters, because people LIKE blockbusters. It means that you have more alternatives, so you can see something else, but in general, you won't. Most people like what most people like. Duh. The additional cash that goes to the "long tail" artists does make them a bit less profitable, but there's still plenty of profit in them.
So the Long Tail doesn't mean that your rock band is going to be as rich as Van Halen. It means that you can make a few hundred bucks, but it's not going to make you a living, much less a superstar.
Anderson completely missed this fact. He was all rah-rah about what it meant for consumers (who have more options) and big retailers (who make big money on small margins) but paid zero attention to the artists, who get tiny wins but not big wins.
Redbox is a vending-machine movie rental system. I walk into the Wal-Mart a mile from my house, and there's this big, well, red box sitting there. It operates on the opposite of the "long tail": it only has a couple dozen of the very latest movies, has many (but not infinite) copies of each, costs $1 per night (just swipe your credit card), keep 'em as long as you want (after a month, just keep it - for $29 you've already paid for it), rental & return is rediculously simple with none of the "video store" hassle.
Instead of having everything anyone might be looking for (the "long tail" model), it has a few things that most people will probably want (say, the "dirt cheap blockbuster" model). Turnover of content is very high, so there is most likely something sufficiently interesting (for a buck a night, that's a lot) there at any time. Content range is very narrow, so customers can browse very quickly; covers of most movies available are shown on the front of the vending machine, so one can review what's available in just a few seconds (a thourough list is available by touchscreen) even while someone else is actually using the machine. And with rentals being just a buck a night, getting something or keeping something a few days is trivially cheap.
It complements Netflix/Amazon thus: instead of getting exactly what I want in a few days, I get something satisfactory right now. My "long tail" providers can find anything I specifically want within a few days, but if I simply want a couple hours' entertainment now I can get something suitable, dirt cheap, in a few minutes. And when I take a rental back, it's just too easy to pick up another. It also fills the gap between "long tail" services and TV's "you'll watch what we want when we want" model.
That the box is located at the entrance to a store which thousands of people frequent with great regularity, rather than being a special trip, completes the winning business model.
Can we get a "-1 Wrong" moderation option?
But In-N-Out is successful not because they offer limited choices, but because they do such a good job with the choices they offer. I'm not sure if not offering chicken, salads, etc makes their burgers better, but I know they do what they do better.
Then why not make those people/companies pay imaginary property tax on those imaginary properties?
Modding Trolls +1 inciteful since 1999
If I may so bold is to agree with you and take it a slightly different direction, there is some theory out there (if I can dig up the books I read, I'll post a link) about how this "long tail" theory works (besides the actual "Long Tail" book).
Basically, the role of critics is increasing in importance. "Obscurity" in the context of popular culture just means that the consumers are too lazy to find stuff and the creators are too poor or too lazy or simply not interested in mass marketing their stuff. A "critic" (for lack of a better word) would essentially become the middle man. S/he will use her particular taste/expertise to bring together a collection of great, albeit obscure, things. At this scale, there is sufficient content to gather a niche audience and therefore money to be made for all parties involved.
It's way too soon to dismiss the long tail theory, because online/cheap distribution is simply an immature medium. Example: As a musician, I see lots of sites that will help me distribute my stuff to an audience willing to pay for it; but it doesn't take much to see that I will be along side of others who are just simply not that talented, or who produce music in a genre whose audience wouldn't like my stuff. In other words, the online music world is still fascinated with a brick and mortar record store approach of loading up with as much crap as possible, assuming that people will wander in and find what they like. My product is lost in such a chaotic set up.
Rather, once this long tail theory plays out more, I assume that there will be larger (read easier to find) ways to get to your favorite folk-rock site, or your favorite 1950s rockabilly site, or your favorite left-handed midget dentist techno site, to find what you are looking for.
Pandora is an interesting approach to finding obscure music, where an individual IS the critic. However, I would argue that it still requires too much work for Joe Sixpack to find new stuff. In essence, Pandora represents the niche of die hard music fans who are willing to take the time to let themselves be guided through a musical experience to find new stuff.
For all intents and purposes, this is just a long-winded way to say that niche marketing will rule, given that people require guidance through the many choices of where to get stuff that they like. The notion of "competition" will always exist; but, once the notion that Hanna Montana is competing with Metallica disappears, it will slowly give way to the synergy that is created and grown among products that gel into a well-defined niche.