the Long Tail and Beyond

The Long Tail

04/11/2023 1Written by Jennifer Ahn soojin.jen-

[email protected]

04/11/2023 Written by Jennifer Ahn [email protected]

2

What is Log Tail

Examples, Environment

what is the breakthrough

characteristics ?

why? ( driving force)

hit driven eco-nomics

Death of the Hits

Attribute to realize Long Tail business

On line busi-

nesses

Social ( internet ) environment

Essential componentRecommenda-

tions

04/11/2023 3

What is Long Tail?

• The world has been driven by the hit. Now, the niches cannot be negligible

• The demand of niches never fell to zero1) The tail of available variety is far longer than we realize2) It’s now within reach economically3) All those niches, when aggregate, can make up a significant market

“The biggest money is in the smallest sales” – venture capitalist Kevin Laws

Getting longer

Never zero

Getting thinner

The probability of hit is getting lower,the abundance is getting bigger !

Written by Jennifer Ahn [email protected]

source : The long Tail

04/11/2023 4Written by Jennifer Ahn [email protected]

com


04/11/2023 5

Hit Driven Economies

• “ This is world of scarcity. Now with online distribution and retail, we are entering a world of abundance. The difference are profound!

• “We are turning from a mass market back into a niche nation, de-fined now not by our geography but by our interests.”

The rise and all of the hit

Scarcity of information

Development of transporta-

tion

Mass Me-dia

Era of net & share

Enjoy the same experiencesCrisis in variety & abundance

Death of the Hit !

The myth of the Hit Driven Economies

If it is not hit, it is a miss ! : Because of massive investment for the hits

With this hit driven mind set, history is written by blockbusters.

If it is good enough, it will be hit. The niches are worse than hits.

And more myth Written by Jennifer Ahn [email protected]

com

Everyone wants to be a starEveryone’s in it for the money, The only success is mass success“Direct to video” = bad,“ Self Publish” = bad

“Independent” = “They couldn’t get a deal” Amateur = amateurishLow-selling = Low quality

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The Death of Hits

• Evidence in 2005– Hollywood box office fell 7% continuing a decline in attendance that started in

2001 and appears to be accelerating

– Newspaper readership, fell by 3% ( it’s largest single year drop) and is now at

levels not seen since the sixties

– Network TV ratings continue to fall as viewers scatter to cable channels; since

1985 • Who killed the hit recording? (1) piracy (but it also offered massive and unprecedented choice) (2) Mashups : playing a track from one artist over a track from another artist

It's not that people aren't watching films and listen-ing to music, it's that they're watching different films and different music

- The Long Tail. Chris Anderson

“Now people want to con-trol over their media, in-stead of being controlled by it.” – News Corp. chairman Rupert Murdoch 2005


04/11/2023 7

Why? – The Driving Forces of The Long Tail I

• Six Themes of the Long Tail

1. There are far more niche goods than hits

2. The cost of reaching those niches is no falling dramatically

3. Consumers have the ways to find niches that suit their particu-

lar needs and interest. filters. : recommendation, ranking

4. The demand curve flattens

5. There are so many niche products that collectively they can

comprise a market rivaling the hits.

6. The natural shape of demand is far less hit-driven than we have

led to believe • Three Forces


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Why? – The Driving Forces of The Long Tail II

• Everyone is able to make their own content

• The traditional line be-tween producers and consumers has blurred.

• Examples Personal Computer Apples Garage band, Astronomy’s Pro-Am

movement Wikipedia peer produc-

tion

Democratize the tools of production

Democratize the tools of distribution

Connect supply and de-mand

Result : More Stuff, which lengthens the Tail

Result : More access to niches which fattens the Tail

Result : Drive busi-ness from hits to niches

• Every one can distrib-ute their own content

• Examples Internet newspaper Lulu.com ->Self distri-

bution site CNN i-report

• Directly connect supply and demand efficiently

• Lower the search cost, minimize hassle, wrong turns

• Explore unknown to-gether

• Examples Google wisdom-of-crowds Amazon recommenda-

tions customer review


source : The long Tail source : The long Tail source : The long Tail

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Examples (Democratize the tools of production )

• Astronomy’s Pro-Am movement– GalaxyZoo.org : Cosmologist Kate Land of the University of Oxford and her team are ask-

ing for help in classifying galaxies from the Sloan Digital Sky Survey, the largest digital map of the universe

– SETI@Home : search for extraterrestrial intelligence at home, using the spare computing power of more than half million home computers

– Astronomy has a natural place for volunteer manpower

The Wikipedia : Peer production – mass volunteerism and ama-teurism– In 2001, a software application Wiki allows anybody with Web access to go to a site and

edit, delete of add to digital encyclopedia. – Wikipedia offers more than 1million articles in English ( Britannica’s 80,000, Encarta’s

4,500)– Non-authoritative, But self-repairing, up-to-date, substantive and accurate


In 42 entries on sci-ence topics 4 errors in Wikipedia, 3 errors in Britannica. Shortly after this re-port, the Wikipedia en-tries were corrected, while Britannica had to wait for next reprinting- 2005 by nature

04/11/2023 10

Examples

• Lulu.com : DIY publisher – Not for the money, but for distributing your message. Use it for reputation. – The traditional line between producers and consumers has blurred

• Amazon. com : Inventory on Demand – Virtually connect centralized supply with scattered demand – Print-on-demand : The idealized form books staying as digital files until customers are

purchase Near-zero inventory cost


(Democratize the tools of distribution )

( Connect supply and demand )

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What are breakthrough characteristics ?

• Why do they do it?– In the hit-driven economy, the business model is based only on money, but,

in the log-tail economy, there are other reasons like “reputation”– They take advantage of internet to achieve reputation and gain the money in

other way– “Reputation economy” , “Gift economy”, “Exposure culture” – “ The big sin in exposure culture is not copying” – Tim Wu, a Columbia University law

professor

Different objectives, motives, methods

Copy-right is

essential

Gray area about copy-

right(independent

labels, academic presses)

Give up some of

their copy-right Written by Jennifer Ahn [email protected]

com

04/11/2023 12

What are the breakthrough characteristics ?

1. Infinite number of goods

Unlimited shelf : What the internet presented was a way to eliminate most of the phys-ical barriers to unlimited selection. : It allow web retailers to offer their customers more variety and con-venience, cementing brand loyalty with existing customers and extend-ing it to new ones who may or may not be near physical store

Efficiency leads infinite number of goods

Wal Mart, Amazon (offer million different books)


1. Physical Re-

tailersProfit threshold for physical stores (ex Tower Records

2. Hybrid Retail-

ersProfit threshold for physical stores with no overheads(ex. Amazon )

3. Pure Digital Re-

tailersProfit threshold for physical stores with no physical goods(ex. Rhapsody)

Three steps to infinite vari-ety


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What are the breakthrough characteristics?

2. Nearly zero marginal inventory and distribution cost

Pure digital model : Each product is simply a database entry, costing effectively nothing ! : But really? Internet retailers have to invest to their infra and operat-ing even small amount of inventory?

We have to devise the way how to deal with virtual inventory with nearly-zero cost!

3. “The ants have megaphones, what are they saying?” Shorten the channel between supply and demand

: Birdmonster , new rock band , using Myspace.com, free marketing, free distribution

A DIY age, where technology has shifted the balance of the power from label to band. Who will lose money ? It might be new opportunity for small content makers, ants!


Amazon connect centralized supply with scattered demand : ! the store and the customers don’t have to be in the same place Vir-tual connection btw supply and demand

The genius of Amazon’s model is!

04/11/2023 14

What the breakthrough characteristics?

4. Good Filters Recommendation Age

: Information gathering is no longer issue. Recommendation( & rat-ing ) serve as shortcuts through the ticket of information : In a world of infinite choice, context –not content – is king !

Filters Rule Main effect

• Helping people move from the world they know ( hit) to the world they don’t know ( niches) , • Driving demand down the tail by revealing goods and ser-vices that appeal more than the lowest-common-denominator fare


The world of scarcity

The world of In-formation

The world of abundant

(Recommendation age)

How to gather the information

How to hunt the information

How to use the fil-ters

Nich

es

Good filters

comfortable

TailoredFilter the noises for me Just Fit my needs

04/11/2023 15

What the breakthrough characteristics? The misunderstandings about infinite choices

① Tend to run out of suggestions pretty quickly and the advice stays the same over time : Only genre recommenda-tions is not a good filter. Collaborative filters is needed ( peer judgment , wisdom of crowds!)

② The long tail is full of crap : “The most frequent mistakes people make about the long tail is to assume that things that don’t sell well are “not as good” as things that do sell well” : In the Long Tail, a wide dynamic range of quality awful to great( That’s because they are not pre-filtered by makers ) : Niche products are not for everyone = one person’s noise is another’s signal ( different and subjective taste)

That’s why the filters are so important. for narrow set of taste, filter will work. ex) Google is the winner about filter technol-ogy


Require Filter PowerSignal to Noise Ratio

Consumer Acceptance Threshold


04/11/2023 16

What the breakthrough characteristics ?

Pre-filters and Post filters Pre-filters is trying to predict what will fit for customers needs

predicting tastes Post-filters is collaborative filtering based on wisdom of crowds,

coming after publication measure the tastes of customers self-correct the errors and never disappear entirely


Pre-filters Post-filters

Filter place Editors Blogs

Screening tool

Record label scouts Playlist

Checker Studio executives Reviews

Judger Department store buyers Customers

Predictors Marketers Recommendations

End-users Advertisers consumers

04/11/2023 17

What the breakthrough characteristics ?

5. The death of the 80/20 rule The misunderstood in the 80/20 Rule

① It’s almost never exactly 80/20 : in research 80/10 or even less

② The 80 and the 20 are percentages of different things ( don’t need to be 100) – 80 is a percentage of products, 20 is a percentage of sales

③ Original definition is about products and revenues, but Rule can just as equally be applied to products and profits

The Long Tail offers, even if 20% of the products account for 80% of the revenue, that’s not reason not to carry the other 80% of the products.


Products Revenues Profits

20%

80%

100%

80%

20%

0%

Bricks-and-mortar retailer

Products Revenues Profits2%

25%33%

8%

25%

33%90%

50%33%

Long Tail retailer

online only in-ventory= Niches

Offline only inventory = Hits

04/11/2023

What is breakthrough characteristics ?

6. Shorten head : the hits and niches The Cause of shifting demand

① Availability of greater variety : choice of one of the ten vs. choice of one of the thousand less concentrated in the top ten

② Lower “search costs” recommendation and filters. ③ There is sampling trial of a song : reducing the risk of purchasing

Successful Long Tail aggregators need to have both hits and niches !

- Although the demand has shifted to the Tail, The Long tail theory doesn’t mean the abandon of the hit economy

- Conventional view is that more choice is better, but there is The Paradox of Choice – 2004, Barry Schwartz

① “Why Choice Is De-motivating” : The more choice, the more negative of aspect of having a multiple of options begin to appear.

The Hits let customers know where to start and the filters make se-lection process easier


Shifting demand(because of 3 as-pects)

Both hits and niches should be co-exist

04/11/2023 19

The Secret of successful Long Tail business

• Two big imperatives

• 9 rules of successful Long Tail aggregators


1. Make everything avail-able

2. Help me find it

Rule 1. Move inventory way in…or way out

: infinite goods, clear the rights ( big barrier to growing the Long Tail)

: collaborative filtering, creating larger market

Virtual Inventory ( Amazon), Digital Inventory ( iTunes) centralized (indirect ) in-ventory Rule 2. Let customers do the work

Peer-production ( eBay, Wikipedia, Craigslist, MySpace, Netflix, Google Adsense) It’s not outsourcing, it’s crowd-sourcing

Rule 3. One Distribution method doesn’t fit all

Try to fulfill various consumption patterns. Multiple distribution channels are the only way to reach the biggest potential market

Lower your cost

Rule 4. One Product doesn’t fit all

“micro-chunking” – ex) album, individual track, ringtone, free thirty-second sample, music video, remix, etc. One size fits one; many size fits many

Think Niche

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Rule 5. One Price doesn’t fit all About niche product, people more tend to be price inelastic more flexible, price discrimination by various product

Think Niche

Rule 6. Share Information

Providing transparent and various information can build trust at no cost Information about buying patterns, when transformed into recommendations, can be a powerful marketing tool Gathering information about buying pattern and user profile should be the shape of “opt-in” rather than “opt-out” -

Rule 7. Think “And” not “or”

In hit economy ( scarcity thinking ), markets are zero-sum, namely, either/or choice But in the market with infinite capacity, the right strategy is almost always to offer all the possible alternatives of product. ex) various language in DVD title

Rule 8. Trust market to do your job

“Pre-filtering” vs. “Post-filtering”, Predict-oriented market vs. measure & respond market Wisdom of crowds ① People are information-rich, ② easy to compare goods, ③spread the word about what they like Don’t predict the market ! : measure and respond (measuring is easier than offline market! )

Loose con-trol

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Rule 9. Understand the power of free Because their costs are near zero, their prices can be too . ex) Skype, Yahoo mail ex) in 2005, Universal released the first 9min. of Serenity (a sci-fi film) online, free & uncut Take a grant of the fact that music or small content is free ! Find various way fore revenue

Loose con-trol

04/11/2023 22

Strong brand helps

Beyond the Long Tail ( out of the book of the Long Tail )

• What is the real brand in the Long Tail Business?– If I expand the brand measurement according to “Brand relevance”

concept in “BrandMatics (McKinsey) ”, online service aggregators’ ser-vice itself can be the brand, rather than individual products.

– In the online business, making high value of service brand is essential


Secrete of Strong Brand

Measuring Brand Making Brand Managing Brand

Information effi-ciency

( as the time fac-tor)

Risk Reduction( As the trust Fac-

tor)

Image benefit( as the expressive

factor)

Brand RelevanceMarket Segmenta-

tionThe Brand Diamond

If online can help in-formation efficiency and reduce risk better than offline, Brand Relevance low-ered

Because of the online service itself ,(Recommendation, Rate, Warrantee) people can reduce selecting risk, and get reliable information for quick decision Brand Relevance lowered

Information Efficiency make up by the filtersRisk Reductionmake up by collective wisdomService Brand Power > Product Brand Power

Reference : “Power Brands” Hajo Riesenbeck/Jesko Perrey

The Brand purchase fun-

nel

the Long Tail and Beyond

Education