Why Companies Can’t Profit from the Long Tail

As a long-time evangelist for findability, the rise of search engines as a fundamental change in how we consume information, and the inherent implication that as the Internet grows you’ll be able to find more and more obscure information online, I have been very interested in Chris Anderson’s writings in WIRED, the resultant business book The Long Tail and its inevitable book blog.
Something about Anderson’s basic premise that best sellers and truly popular items were basically a thing of the past as we all “spread out” into our larger and larger information space always seemed incongruent with what I’ve observed, however, as I dig through the reams of information out there on Web usage, product sales and similar.
Finally, Lee Gomes of the Wall Street Journal pegged it with his superb rebuttal of “The Long Tail” in It May Be a Long Time Before the Long Tail Is Wagging the Web, in which he provocatively writes “… you can make the case that the Internet is amplifying the role of hits, even in relation to misses, not diminishing them.”


There’s much more of value in Gomes’ article, and I’d like to quote a couple of pithy paragraphs, adding my own thoughts and amplifications:
“By Mr. Anderson’s calculation, 25% of Amazon’s sales are from its tail, as they involve books you can’t find at a traditional retailer. But using another analysis of those numbers — an analysis that Mr. Anderson argues isn’t meaningful — you can show that 2.7% of Amazon’s titles produce a whopping 75% of its revenues. Not quite as impressive.”
It’s surprising that Anderson discounts this important data point, and indeed, the very infrastructure of Amazon, the “Amazon Rank” of its products, shows just how much hits and popularity continue to be relevant in what sells. For example, Robert Scoble and Shel Israel explained a few weeks ago how having their book associated with “The Long Tail” increased their Amazon Rank and, by implication, book sales. The irony is that this phenomenon is much more “best seller” related than “long tail” related.
On his book blog Anderson rebuts these statistics, implying that these two figures are consistent, just the same data represented different ways. I don’t see how that’s possible, though. If 2.7% of inventory generate 75% of sales, then it therefore is safe to conclude that the remaining 25% of sales are generated by the remaining 97.3% of inventory, not the “long tail” 25% as Anderson suggests.
The observation that 75% of revenue comes from the top 2.7% of inventory is one that makes sense, especially in the trendy “word of mouth marketing” circles: as something becomes more popular, it can become a lot more popular, and that can feed on itself in what Malcolm Gladwell describes (much more interestingly, in my opinion) as The Tipping Point.
In terms of “The Long Tail”, I interpret this to mean that while the most odd and obscure — the ‘tail’ in the popularity equation that defines the epynonymous long tail — might have traffic, it’s the smallest subset of that tail that can actually generate any revenue or profit.
The way to have the long tail be profitable might just be to figure out how to make the obscure popular rather than trying catering to more and more obscure and offbeat tastes.
Back to Gomes, however. Here’s another terrific paragraph (well, two paragraphs) he writes:
“Another theme of the book is that “hits are starting to rule less.” But when I looked online, I was surprised to see what seemed like the opposite. Ecast says 10% of its songs account for roughly 90% of its streams; monthly data from Rhapsody showed the top 10% songs getting 86% of streams.
“Bloglines, the widely used blog-reading tool, lists 1.2 million blogs; real ones, not computer-generated “spam blogs.” The top 10% of feeds grab 88% of all subscriptions. And 35% have no current subscribers at all — there’s clearly no 98 Percent Rule in the blogosphere.”
Hmmm….
(The referenced 98-percent rule is one that Anderson puts forward in the book, that 98% of selections are requested at least once in a while, even for the broadest and most obscure of catalogs.)
Ultimately, I think that the concept of “The Long Tail” is one that makes intuitive sense to me and should make sense to you too. Heck, the log files for this very site demonstrate that even the most obscure and uninteresting writing is encountered via Google or some other search engine at least once a week.
The problem I have with the book is when it moves into business advice, starting with a premise that identifying, promoting and selling popular items will not remain a viable business.
Gomes touches on this, but only in passing, when he writes: “… while every singer-songwriter dreams from his bedroom of making a living off iTunes, few actually do, mostly because so many others have the very same idea. And to the extent that Apple is making money off iTunes, thanks go to Nelly Furtado and other hitmakers.”
And perhaps that’s the crux of the discussion: can you actually make money off the Long Tail?
I think that it might just be harder than Anderson and his Web 2.0 ilk believe, and that the rise of “citizen media” and “user generated content” and even the popularity of blogging is a demonstration of the importance of hits and our desparate collective need to find the next thought and opinion leaders and follow them. I don’t believe that Harry Potter, The da Vinci Code and Pirates of the Caribbean were flukes at all.
In fact, I believe we already see the opposite of what “The Long Tail” predicts. You see them all time time. For example, the last time you went to an airport I bet you saw “The Best Seller Bookstore” and “Only The Hits Video Rental Shop”. If you frequent truck stops, you’ve also seen “The Twenty Most Popular Audio Books Rental Kiosk” and just about every store still has “The Fifty Magazines People Actually Buy”, sometimes along with “The Naughty Dozen Magazines Behind the Counter”.
That’s not the Long Tail at all, is it?
One final observation: if Netflix opened up a partner rental site called, say, TopFlix, and the deal was $9.99/mo for as many rentals as you want, but only movies that had been rented from Netflix itself at least 100 times in the previous month were available, don’t you think a lot of people would happily switch and never even miss the obscure Bollywood films, Russian documentaries and Hong Kong martial arts movies?
Cut off the long tail and perhaps, just perhaps, most people wouldn’t even notice. After all, if you could identify the 2.7% of inventory that generated 75% of sales, that small bookstore could do pretty darn well for itself…

7 comments on “Why Companies Can’t Profit from the Long Tail

  1. Dave, it IS possible to make money down here in the long tail and without becoming one of the 2.7% that make up the hits.
    The obstacle for the small business has always been distribution. For example, in the publishing business you can not get into book stores without a distributor. Book stores do not want to cut checks to 100,000 small presses every month, preferring to deal with a few distributors and wholesalers instead.
    Amazon.com has no such rules. As part of their quest to be the world’s largest book store (going beyond the hits), they opened the doors and let books from small presses in, right alongside the latest from Stephen King, John Grisham and J. K. Rowling.
    Over the last few years, I have sold thousands of copies of “The Mystery Shopper’s Manual” through Amazon, in additiona to the thousands sold through my own web site. The popularity of the book has led to additional opportunities for me. While sales of my books have not made a huge difference to Amazon’s bottom line, they have done wonders for mine.
    “Popular” is a relative term. A small business, without the overhead of an Amazon.com, can be profitable on a smaller number of sales.
    Although going vertical seems to be the opposite of the long tail concept, it is possible to go vertical within the long tail and essentially own that segment.
    Own a piece of the tail, Dave. ;o)

  2. It’s the End of Stardom.
    From “They Media” to “Me Media” to, coming faster and sooner than prophesied, “We Media”, where the distinctions between consumer and producer and distributor vanish, forever.
    We make our own books, movies, music, art, photography…and share it, generally free of charge, with other consumer-producers.
    Some products, like food, will continue to mass market and mass produce. Most other items will disappear into niches and selective, consumer chosen and orchestrated channels.
    We will get exactly what we want, when we want it, as much as we want, as frequently as we want it. Without advertising agencies telling us what we must want and buy.
    Buy? Most of the stuff we share, give and receive, is free.
    There is a Universal Democracy and Everything Free All The Time revolution going on. Long tail, head of snake, all this is nice theorizing, but the bigger picture is the real reality.
    It’s the end of psycho-capitalism and domination systems.

  3. It seems to be me that it’s not really an either/or choice, not for the business that wants to do more than survive.
    What makes Amazon’s popular sellers so popular is that they have the goods from the end of the long tail to the wet nose.
    I often wonder about sites and businesses catering to just the end of that tail and think they may be sending their customers elsewhere for the ‘wet nose.’
    That is, an obscure search might bring someone to the site, but if that is the only content, or the only kind of content, wouldn’t the user then go where they can get both the long tail and the wet nose, so to speak?
    Dave, your site is a prime example. If you didn’t have a plethora of ‘the stuff that most people want’ the rest would make you seem insignificant.
    And people like Cathy are also a good part of the reason at Amazon that the other 2.7% can and does turn the majority of the profits. Her promotions of her own book help her, but help Amazon as well, even on the 2.7%. I doubt very seriously if those people who are ordering her book end up with only it in the cart…
    Or, it’s too late and I’m not seeing this as clearly as I should.

  4. Dave,
    I think the long tail much more applies to content producers like you than to a bookstore or a music store.
    On your “Ask Dave Taylor” site, the top pages up front may get the most traffic, but with good keywording and optimization, you’re getting your other answers in Google, and well placed too.
    I recall looking for information about how to place a background on a myspace.com page. Your page on that came up as the 8th or 9th result and was the first one that was really useful.
    How long ago did you write that? Could that be considered “back catalog”, “long tail”?
    The hot books or songs fade from memory quickly. But people always need computer help, web help, car help, house help, and though a few fads may rise and fall like a hit single, many of the common and not-so-common questions persist.
    For a site like “Ask Dave Taylor”, I’d bet a big enough percentage of your daily traffic comes in through search engines linking into your back catalog to make the long tail VERY profitable for you.

  5. Hi Dave, I blogged on you this morning. I really believe in the long tail as a function of what we call the backlist or the back catalogue, and I know from experience, even without the internet, that the backlist can be a profit center, and is the backbone of any large publisher. What’s great about the backlist is that the margin (beyond the slightly higher cost short print runs) is better, the investment is already made, the advance has likely earned out, and there are few sales and marketing costs. For instance Modern Library knows that every month 1000 people will buy a particular classic (and even better for the publisher if it’s out of copyright and the publisher keeps the entire profit). Publishing is the ultimate long tail business. What I have an issue with is the slightly longer tail that Anderson promises. The provider at the end of the tail may not really experience the additional 10, 20 or 30 sales a year as a huge benefit, but Amazon can make a business out of that when they multiply it by many thousands. The long tail is best for content providers that keep a bigger piece of the profit, so self-publishers may do better than other authors. I am really excited about the ideas behind Google Search and Amazon Search and all of the other long tail tools that we’re talking about these days, but I think the biggest benefit will go to the folks who can bundle many streams of income (such as literary agencies, for one).

  6. Dave,
    I am about 2\3rds through “The Long Tail” right now. Somehow, my perception is different then yours. Perhaps latter chapters, in the book, will bring me to your camp.
    Having said that, I am very much enjoying the book. Here is why:
    I am a 20 year veteran of the mortgage industry. I have been a good boy and have saved my pennies over the years, have worked very hard to build a referral driven mortgage practice and was recently rewarded for that effort by a large financial planning firm buying my company.
    Now I stand here at 49 years of age and am asking myself, “What do you want to do when you grow up?” The answer is, “give back”.
    My little blog, which is WAY down the tail is allowing me to do just that. I will continue to work on my content, building a larger base of readers and learning this medium. Currently I have 600 subscribers and about 120 people per day visiting my blog.
    As I continue to build my readership, and other bloggers do the same, isn’t the tail going to be just a little bit thicker? Couldn’t I have, perhaps 10 years from now, 100,000 readers? Arn’t those readers ultimately going to come from the head?
    I didn’t take his point to be that the head is dead. Isn’t he just saying that there is a lot of potential in the tail?
    I will finish the book and perhaps I will feel like an idiot for this post. But I just fundamentally feel in my bones that there is growth opportunity in the tail. There will always be a head, but I think the tail gets thicker.
    Just my two cents!
    David Porter
    Founder
    Pacesetter Mortgage

  7. Hi Dave,
    Good piece on the “Long Tail” and some apt comments too.
    The very fact that the Internet keeps a lot (but not all) history means the long tail is simply growing all the time.
    That means our choice grows too. People as a mass will continue to buy the popular products because it’s less risky.
    Every now and then an indivdual will pop out of the woodwork and find something that they wouldn’t normally come across and just buy it.
    So the long tail concept is simply giving people a better chance of finding even the most esoteric things they’re searching the Internet for.
    Jim

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