The Theory of the Long Tail

The Theory of the Long Tail – Chris Anderson (How endless choice is creating unlimited demand)

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.

1. In virtually all markets, there are far more niche goods than hits. That ratio is growing exponentially larger as the tools of production become cheaper and more ubiquitous.
2. The costs of reaching those niches is now falling dramatically. Thanks to a combination of forces including digital distribution, powerful search technologies and a critical mass of broadband penetration, online markets are resetting the economics of retail. Thus, in many markets, it is now possible to offer a massively expanded variety of products.
3. ……….Consumers must be given ways to find niches that suit their particular needs and interests. A range of tools and techniques – from recommendations to rankings – are effective at doing this. These “filters” can drive demand down the Tail.
4. Once there’s massively expanded variety and the filters to sort through it, the demand curve flattens. There are still hits and niches, but the hits are relatively less popular and the niches relatively more so
5. All those niches add up. Although none sell in huge numbers, there are so many niche products that collectively they can comprise a market rivaling the hits.
6. Once all this is in place, the natural shape of demand is revealed, undistorted by distribution bottlenecks, scarcity of information, and limited choice of shelf space. Whats more, that shape is far less hit-driven than we have been led to believe. Instead, it is as diverse as the population itself.

The first force is democratizing the tools of production………..Millions of people now have the capacity to make a short film or album, or publish their thoughts to the world ………..Give enough people the capacity to create, and inevitably gems will emerge.…………….. available universe of content is now growing faster then ever. This is what extends the tail to the right

The second force is cutting the costs of consumption by democratizing distribution……….it was the Internet that made everyone the distributor………the difference between fractions of pennies to deliver content online and the dollars it takes to do it with trucks, warehouses and shelves……..Internet has dramatically lowered the costs of reaching consumers.

The Internet simply makes it cheaper to reach more people, effectively increasing the liquidity of the market in the Tail. That, in turn, translates to more consumption, effectively raising the sales line and increasing the area under the curve.

The third force is connecting supply and demand, introducing consumers to these new and newly available goods and driving demand down the Tail……Google’s wisdom of crowds search….iTunes recommendations…….blogs…customer reviews