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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."
But then try to explain porn websites. There is a lot of tail to be hit there.
it seems that most of the debate centers around how you define "head" and "tail"."
I'd help but I'd need to link to some pages that I shouldn't browse at work...
"When information is power, privacy is freedom" - Jah-Wren Ryel
A lot of the bubble wasn't due to the theory. It's failure was do to bad business. The We Sell Each Product under cost's we make it up by selling more of them. Or lets do it over the web it is only 3 times as harder to do it there then a person can do at home. And the concept a CS degree will help the company more then an MBA. SCREW PROFITS WE WANT COOL TECH!
After the bubble pop the net matured a bit. People didn't jump in thinking they will be rich, just enough to get by. The moderating approach is what saved the net echonomy. the 1990's everyone was trying to get Rich! Rich!! Rich!!!
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
I call bullshit on this. You mean to tell me that Amazon.com and iTunes Store would be more successful if they only carried the most popular 1% of their stock? How about *ANY* bookstore, not even just the online ones.
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...it seems that most of the debate centers around how you define "head" and "tail".
Bill? Bill Clinton? Is that you?
"No fair, you changed the outcome by measuring it!" - Professor Hubert J. Farnsworth
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.
I know I "derive more enjoyment" from my definitions of "head" and "tail".
stuff |
When you see anything being hyped on the cover of "Wired" magazine as the 'next big thing,' chances are it's a complete load of crap.
Pope's corallary to Sturgeon's Law. :)
It doesn't mean much now, it's built for the future.
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.
They'd have fewer sales, of course. But the fewer sales would be a tiny portion of the sales of their most popular items.
But a company that ignores the most popular items will have a very difficult time making a profit. That's the "tail" portion. Which was claimed to ... eventually ... be MORE profitable than the most popular items.
why are they concentrating on how *profitable* the long tail is?
As far as I see it, the long tail isn't about PROFIT, but about how much society wants the entertainment.
How many REALLY old songs would you like to hear again? Well, given that each year older adds another pile of songs, the profit in EACH TITLE is spread thinner and thinner. Because what I'd like to hear again from the 70's isn't what YOU'D like to hear from the 70's.
The long tail is showing that copyright lengths ARE damaging society. And it not being profitable enough to make a business on shows that there is NO BUSINESS LOSS in shortening copyright to a time where works are still wanted.
Really, copyright now is more about the accountants' abject fear that someone else is making money and not them.
Shit, if you're not SELLING a good, why not let someone else do it, or even just release it for free and forget about it? Because in that case, there's no money for you to make. That you don't want to spend the effort to MAKE the money in the first place seems irrelevant to your accounting brain.
So I don't understand the ribbing. It's arguing that it isn't profitable when that's not what the long tail is about. It's about demand continuing BEYOND the profitable age of entertainment goods.
So, for instance, you don't think people would mind if iTunes only carried the Top 40? Or netflix could flourish carrying offering only hit films? I don't think so.
For a brick and mortar store, concentrating on the sure hits makes a lot of sense. Funny story, my dad had to pick up a new alternator for a 30-year old truck. The local parts store had one in stock. The parts man looks the box over and says "Yep, had this one on the shelf for about 18 years." That's a bit longer on turnover than most businesses would shoot for. But when you're talking about cheap warehouses in the bad part of town doing all of their selling and shipping online... this whole argument could probably be solved with access to Netflix's database and a few queries. My hypothesis:
1. A huge percentage (35%?) of their business will be new releases.
2. The next biggest percentage would fall into the "perennial classics" category, i.e. the kind of movies that aren't new releases that a Blockbuster would have, movies that do a steady, dependable business.
3. Everything else would fall into the "obscure shit" category, the stuff that Blockbuster does not carry because it's too infrequently rented.
I will wager that the revenue from #3 more than pays for itself AND serves as a draw for customers who rent across all three categories. Joe Customer chose Netflix because they carry obscure Asian chop-chop flicks but will also rent Cloverfield from them since hey, he has an account.
As another example, say I want to pick up some obscure, out of print book. I hit Amazon first out of force of habit. Good news, they have it. That makes it all the more likely for me to type in Amazon when I want to buy the next top-seller I saw on the Daily Show. If Amazon didn't have the obscure books I want, I might go to some other site by default, and then they'll be getting all of my New York Times Bestseller business.
If we're talking about a brick and mortar store, the carrying cost of the truly obscure could well be too high to justify itself. With online stores, there's no excuse not to carry the obscure.
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In the "blockbuster" model you don't concentrate on "the top 10000" or even "the top 1000", you push very very few products... a dozen at most (the example they use of book publishing... they only pushed *two* blockbuster titles at a time).
The article is turning that over, and interpreting "the long tail" as being only the "anti blockbusters", the products selling a few copies a year. But once you have the product in your digital inventory you're paying virtually nothing to keep it alive, so instead of trying to figure out what the top forty next month is going to be so you can stock your stores with it, and shoveling albums out into the cold after six months on the shelves, you *can* keep it all available.
It's not a matter of "this end vs that end", it's "you don't need to worry about the ends".
Long Tail advocate Chris Anderson defends his theory...
You mean, this Chris Anderson? The "science is now useless because we have teh cloudz" guy? Yeah, after that gem of scientific insight, lemme rush right over and see what he's prattling on about in the world of finance...
[b.belong('us') for b in bases if b.owner() == 'you']
The success of the long tail theory completely depends on the transient nature or durability of the product mix.
Amazon makes the long tail work because Amazon is still a big fat book store (and sells other things): books have a shelf life measured in years. Books do not decay, they do not fall out of fashion, they do not get replaced by next year's model (mostly). As such, Amazon can build up a long tail of obscure books and build a brand of a bookstore where you can find anything.
Zappos is trying this with shoes. The problem here is that Shoes fall out of fashion, so I am not sure that works. I used to work for a company that sold outdoor gear-- it kinda worked as some things were durable, but even then most equipment (and especially apparel) have a shelf-life of one season (one year).
Music may work-- someone's always searching for some Captain Beefheart or TSOL-- but certainly the biggest profit (because production costs are so low for massed produced copies) are in the big-hit ranges.
It all depends on the seasonal and long-term durability of the product.
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But then try to explain porn websites. There is a lot of tail to be hit there.
And lots of head too...
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Porn. People do pay much higher sums for rather obscure or taboo things.
Are we talking porn, or prostitutes? I just can't see paying much, let alone much more for porn. It is mostly not to my tastes, but usually "good enough" to get the job done. Kinda like politicians, except the porn actually helps to get the job done, unlike politicians.
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.
Definitely count me in this category.
Serious subjective feelings get involved if you know they carry the large range, and that it's not just This Month's Selections.
I decided to spend a couple thousand on books I know I'll *eventually* want to read, but can't stand the Out Of Print process kicking in because they're headed right for the Long Tail.
Stocking Laterally is a huge part of this. If I go on a rampage, I'll tend to buy multiple titles from an author's spread right then, and no other time. Next Month is too late.
If a store carries all 16 titles of a saga, that's way better for sales than if they randomly found #'s 3,7,12 in their warehouse and stuck them out.
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