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The Long Tail and Niche Marketing
Business in the Internet Age
The concept of the Long Tail was first highlighted by Chris Anderson in a 2004 Wired magazine article. Anderson later expanded the idea into the 2006 book The Long Tail: Why the Future of Business is Selling Less of More.
The Long Tail describes a business model made possible by the Internet. In this model the range of choice available to consumers is not limited by physical constraints such as shelf space. Instead, sites such as Amazon, Netflix and many others are able to offer an inventory of millions.
Amazon, dealing with a physical product line achieves this through centralized warehousing, highly efficient distribution networks, and print-on-demand technology. For businesses offering a digital product the process is even simpler as disk storage costs have fallen to virtually zero.
If we imagine a graph with products arranged along the horizontal axis in order of popularity (with the most popular to the right), and sales shown on the vertical axis, the resulting graph would resemble an ‘L’ shape. As expected the most popular items claim a high value and volume of sales. However, when millions of products are made available, the curve doesn’t drop to zero after the top 100, or even the top 1000 items. Instead, when consumers are offered a wide choice they take advantage of it with items picking up sales way along the curve. Together, the combined sales of items in the “long tail” come to a significant amount. The age of the hit has been replaced by the age of the niche.
In the pre-Internet days consumers were restricted to items in the “short head”, ie the hits due to finite sales space and executive decisions of what ought to sell best (ie return most profit). Once the ‘net broke that mould consumers like the range of choice and are actively taking advantage of it. The boundary between producer and consumer is becoming blurred as it’s becoming easier for “ordinary” guys to not only create digital content but also make it available to the world (eg blogging, myspace, youtube...), ie the world of Web 2.0. Wikipedia is cited as an example of user participation creating a valuable, self-correcting resource of enormous depth.
Anderson suggests that the second component necessary (after availability) for the success of the long tail is effective filtering, ie enabling people to find what is both relevant and of sufficient quality among the mass of dross. Google’s success stems from its ability to do this exceptionally well and it seems likely that filtering will play a significant role in the next phase of Web evolution.
Whether you're involved in Internet business, business in general, or just curious, Chris Anderson's The Long Tail is a must read.