Book Review 26: An important idea

The theory of the Long Tail can be boiled down to this: Our culture and economy are increasingly shifting away from a focus on a relatively small number of hits (mainstream products and markets) at the head of the demand curve, and moving toward a huge number of niches in the tail. In an era without the constraints of physical shelf space, and other bottlenecks of distribution, narrowly targeted goods and services can be as economically attractive as mainstream fare.

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How does a store's business change when it has unlimited shelf space?

Chris Anderson answers that questions in "The Long Tail: Why the Future Is Selling Less of More." This is one of the hottest business books of the past couple years and its title has moved into the main stream.

In this book, he discusses the impact of the internet not just how people by products, but on what it means for content producers.

In recent history, the most successful products are the big hits. If you chart product sales from most popular to least popular, you get a chart that's tall on the left and tapers off towards nothing on the right. That section of the chart to the right is what is meant by the long tail.

Hits have dominated music, movies, TV shows, and books for decades, simply because stores had limited space to show stuff, and as a result, they carried only the products likely to generate significant sales. With the advent of ecommerce now, that changes. Amazon does not have a limit to their shelf space. They can offer all products.

When that happens, people start buying the less successful products. They're not choosing inferior ones, but they are choosing products that only appeal to a small niche.

For the content producer, that means it's not as important to make hits -- they can appeal to the niche. There are millions of dollars and livelihoods now being made in the niche markets in a way that simply wasn't possible with ecommerce.

That’s the root of the calculus of the Long Tail: The lower the costs for selling, the more you can sell.

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Chris Anderson explores these issues in depth in his book, and does a better job describing the phenomenon than I do.

There is great content in the book and it is an important read for anyone interested in how ecommerce and the internet are transforming traditional retail.

I'm not thrilled with the execution of the book, however. There seems to be a lot of stuffing. It's only 230 pages long, but Anderson could have made his point just as effectively, if not more so, in 50%-60% of the pages. I'm not sure how well a shorter book would have sold though. More pages makes people think they are getting more for their money.

I'm also not thrilled with how he structured the book. It comes across as inefficient. He introduces concepts in different ways and then talks about some examples , whether it's Amazon, Google, or Rhapsody, then seems to throw in more concepts.

I would have preferred it if he introduced all the major concepts up front, and then dedicated each chapter to analyzing a different company in detail, while explaining how it demonstrates each of the concepts he discussed earlier.

The company stories he tells are the best parts of the book, but they don't get the focus they deserve.

There are some fascinating stories in here. Early on, he talks about the rise of catalog shopping, by telling us how Sears got started.

Railway cars delivered this new variety on a network of iron tracks that were transforming the country's economy and culture.

The man who first showed the American consumer just what all this could mean was a railway agent in North Redwood, Minnesota. His name was Richard Sears. In 1886, a box of watches was mistakenly sent from a chicago jeweler to a local dealer in North Redwood who didn't want them. Buying them up for himself, Sears sold the watches for a nice profit to other railway agents up and down the line. He then bought more and started a watch distribution company.

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When people could easily shop by catalog, you could have the rise of a mass consumer culture. People were no longer limited to local products. Thousands of people around the country could have the exact same product.

Over the decades this evolved into the modern retail business model -- it's all about efficiency.

Today's retail display shelf is the human interface to a highly evolved supply chain designed to make the most of time and space. Standing as much as seven feet high and four feet wide and extending up to two feet deep, the average supermarket shelf module has the cubic capacity of a minivan.

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Again, it's ironic, this paradox of plenty: Walk into a Wal-Mart and you're overwhelmed by the abundance and choice. Yet look closer and the utter thinness of this cornucopia is revealed. Wal-Mart's shelves are a display case that may look like everything , but in a world that's actually a mile wide and a mile deep, a veneer of variety just isn't enough.

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This wasn't just the case with physical goods. As radio consolidated throughout the nineties, the record companies cracked the formula for creating a hit.

The industry had cracked the commercial code. They had found the elusive formula to the hit, and in retrospect it was so obvious: Sell virile young men to young women. What worked fro Elvis could now be replicated on an industrial scale. It was all about looks and scripted personalities. The music itself, which was outsourced to a small army of professionals (there are fifty two people credited with creating No Strings Attached), hardly mattered.

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The industry is facing challenges today in that their core demographic is changing.

Every year network TV loses more of its audience to hundreds of niche cable channels. Males age eighteen to thirty-four, the most desireable audience for advertisers, are starting to turn off the TV altogether, shifting more and more of their screen time to the Internet and video games. The ratings of top TV shows have been falling for decades, and the number one show today wouldn't have made the top ten in 1970.

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It's more than just not watching TV though. It's using the Internet to both find niche products and to create them.

My favorite story from this book is that of The Lonely Island. They are a group of guys who made sketch videos, uploaded them to the Internet, and then got discovered by Saturday Night live.

The Lonely Island really is relevant to these cultural transitions in multiple ways. First, they couldn't get hired as writers because that was a highly competitive field, which left them out in the niche space, apart from the hit makers.

Second, the took the new technology of the Internet and inexpensive video production and editing software to create content that would have cost thousands of dollars to do a decade earlier.

Third, by setting up their own website the bypassed the restrictive nature of the retail shelves (or network TV time slots) and made their content available to whomever wanted to see it. They didn't have to compete with anyone for space.

Fourth, once they were discovered and hired on to Saturday Night Live, it was fans on the Internet posting their favorite Lonely Island bits on YouTube at no cost. Once the Chronicles of Narnia hit, through the Internet, SNL was suddenly relevant again.

It isn't easy for an individual comic to make it in TV -- even as a writer -- but it's even harder for a preassembled team. Sure enough, the threesome quickly ran up against all the usual barriers in their hunt for work in Hollywood. However, rather than subject them selves to endless rejection, the three took their act -- now named after their home -- online. Borrowing some video gear, the Lonely Island Crew started producing short-form comedy videos and songs. Schaffer's kid brother Micah -- a tech consultant and Internet agitpropster -- threw together their website, thelonelyisland.com, in 2001.

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Jeff Jarvis, a media commentator, described the impact like this: "I haven't heard anyone buzz aobut, recommend, or admit to watching SNL in, oh, a generation. But suddenly, I hear lots of buzz about the show. And it's not because millions happened to be watching when the show happened to actually be funny again. No the buzz is born because folks started distributing the Narnia bit, which, indeed, is funny, on the Internet, and people are linking to it. NBC is learning the power of the network that no one owns." And sure enough, links to the SNL site increased more than 200-fold in the two weeks after the video started circulating.

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The Lonely Island tale has come full circle. Misfits rejected by the entertainment industry go online and get popular. Entertainment industry wakes up to this phenomenon in the hard to reach demographic of influential twenty-somethings and hires the misfits. The kids do the same thing on broadcast TV, but since the influential demographic doesn't actually watch much TV, it isn't until the skit goes back online (now amplified by the net-kids-make-it-big appeal) that the skit gets really popular. Thus SNL , previously scorned by the online generation, suddenly gets cool again by tapping into the authentic underground spirit blossoming online. Once upon a time, the show used to handpick its talent pool from obscure regional theaters and improv troupes. Now they also find it online.

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What I find interesting, and which Anderson doesn’t go into much detail on is that by empowering the niches, and empowering people to create content, we are not creating and entirely new paradigm of cultural existence. In fact, we are simply reembracing the Professional/Amateur ethic of the 19th century.

Astronomical discoveries are not just the province of professionals. With access to data, the Internet, and high power amateur equipment, people who don't make a living in astronomy can contribute to break throughs.

This is how one of the greatest astronomical discoveries of the twentieth century unfolded. A key theory explaining how the universe works was confirmed thanks to amateurs in New Zealand and Australia, a former amateur trying to turn professional in Chile, and professional physicists in the United States and Japan. When a scientific paper finally announced the discovery to the world, all of them shared authorship.

Demos, a British think tank, described this in a 2004 report as a key moment in the arrival of a "Pro-Am" era, a time when professionals and amateurs work side by side: "Astronomy used to be done in 'big science' research institutes. Now it is also being done in Pro-Am collaboratives. Many amateurs continued to work on their own and many professionals were still ensconced in their academic institutions. But global research networks sprang up, linking professionals and amateurs with shared interests in flare stars, comets, and asteroids

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The 20th century saw the demise of the amateur scientist doing significant research. Invention, science, research, etc, became the realm of professionals. Silicon Valley, with the now cliché garage based company may seem to buck this trend, but the fact that people are astonished that large companies grew from such small enterprises further emphasizes how rare this has become.

All that is changing now. Astronomy can be worked by both amateurs and professionals. In recent years, writing for the public required a newspaper. Blogging changes that. Advanced photography required and expensive and big dark room. Photoshop and digital cameras changed that. Creating music required a full studio and advanced sound board. Audio software changed that. Broadcasting movies required a cable channel. YouTube changed that.

To do these things before you had to be a professional. You had to specialize. In the modern ear, that's simply not necessary. People can pursue and explore a variety of interest.

We are witnessing the rebirth of the Renaissance Man.

It's possible the 100% dominance of the hit over the niche was simply a historical aberration. It's like when take a giant bowl of water and dump more water into it. It ripples and splashes and sloshes. But eventually it all settles down at a higher level.

I think that's what we're seeing now. The growing success of the Long Tail is the settling of the water.

Chris Anderson's book covers a lot of these things in detail. It's an important book. I just wish it was a little shorter and organized differently.

Here are a few other passages I enjoyed:

"For many years American Airlines made more money from its Sabre electronic reservations system (essentially the travel industry's shared navigation layer for the bewildering world of routes and airfares in the seventies and eighties) than the entire airline industry made collectively from charging people money to ride on planes. From time to time, certain Baby Bells were bringing in more profits from their yellow pages -- essentially the navigation layer of all local business before the web came along -- than form their inherited monopolies. And at its peak, TV Guide famously rivaled the actual networks in profitability.

In a world on infinite choice context -- not content -- is king.

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When you look at a widely diverse three-dimensional market place through a one-dimensional lens, you get nonsense. It's a list, but it's a list without meaning. What matters is the rankings within a genre (or sub-genre), not across genres.

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What the Long Tail offers, however, is the encouragement to not be dominated by the [80/20] Rule. Even if 20% of the products account for 80% of the revenue, that's no reason not to carry the other 80%. In Long Tail markets, where the carrying costs of inventory are low, the incentive is there to carry everything, regardless of the volume of sales. Who knows -- with good search and recommendations, a bottom 80% product could turn into a top 20% product.

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Both hits and niches see their sales slow over time; hits may start higher, but they all end up down the tail eventually.

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This huge expansion in selection was accompanied by a major shift in movie access pricing. Where before, the standard was one person, one ticket, now there was one small price for as many people as you could cram into your house. This transition was loathed and resisted long before it was grudginly accepted and finally embraced by Holywood interests. (Recall the early attempts to sell movies at retail for $70 to $80 -- a price that was calculated based on the amount of money a typical family would pay at the box office to see their favorite movie two or three times.)

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Book Calendar said...

Hmm, I thought this was what niche marketing was about. I think it pretty much describes specialty stores. Unfortunately, for example in books, many of the specialty stores are folding.

Brian Kunath said...

Yes, but even a specialty book store has limited shelving space, which forces the proprietor to chose which books he will sell. Niche stores simply swap the realities of the mass market with the personal tastes of the owner.

True long tail as described in the book removes such limitations to offer maximum choice.

I agree Bill that, while the book presents a fascinating concept, it belabors the point unnecessarily.

Pretty good companion book to this is "Everything is Miscellaneous." It talks about how the Internet has created a third order of organization that obliterates traditional ways of accessing information.

Here's a completely random but interesting idea that the author Weinberger paraphrases from another social philosopher: The industrial revolution offered the masses something previously only enjoyed by aristocracy: free time. Bewildered by this sudden surplus of downtime, people responded by voluntarily numbing themselves in front of the TV. The Internet is, in a sense, rescuing us from our stupor by getting us to (as Jobs would put it) lean forward instead of leaning back.

Cromely said...

I'll have to check out Everything is Misc.

It's interesting, on my own computers now I worry less about organizing data, files, and email. Instead I rely on search tools, like Windows Desktop Search. For other stuff, I rely on Google. If everything is misc, why worry about filing? Search is a great solution. One of the other key aspects of the Long Tail that I didn't go into detail about is the importance of filters. That ties right into a search ecosystem as opposed to a filing one.

I would question whether people had more free time after the industrial revolution. It seems in a an agrarian economy, or even light industrial economy of the early and mid 19th century people had more free time because work was limited by the sun. After sundown, you likely couldn't do work outside the home due to the lack of light.

Brian Kunath said...

You're first thought is right about the effect of the IR on leisure time. Industrialization did initially create more work, but...all hell, this is from WIKI:

"The notions of leisure and leisure time are thought to have emerged in Victorian Britain in the late nineteenth century, late in the Industrial Revolution. Early factories required workers to perform long shifts, often up to eighteen hours per day, with only Sundays off work. By the 1870s though, more efficient machinery and the emergence of trade unions resulted in decreases in working hours per day, and allowed industrialists to give their workers Saturdays as well as Sundays off work.

"Affordable and reliable transport in the form of railways allowed urban workers to travel on their days off, with the first package holidays to seaside resorts appearing in the 1870s, a trend which spread to industrial nations in Europe and North America. As workers channeled their wages into leisure activities, the modern entertainment industry emerged in industrialized nations, catering to entertain workers on their days off. This Victorian concept—the weekend—heralded the beginning of leisure time as it is known today."

Interesting the effect that Google and Wiki have upon us. They're obliterating the concept of "I don't know." Maybe the Internet will begin to take the strain off of our need to retain facts. After all, most everything now or is becoming attainable with just a few searches.

Personally, I think we're being set up for takeover by giant, Google-powered robots.