Friday, March 04, 2005
Whipped by the Long Tail
In the October issue of Wired Magazine (remember Wired?), Chris Anderson wrote a very interesting article on a new business theory called the Long Tail. The premise is that the Internet aggregates demand virtually in a way that makes possible an entirely new business model that cannot be duplicated in the physical world.
Essentially, freed of the constraints of shelf space, retailers of physical and digital products are discovering that Pareto’s 80/20 principle crumples under the huge catalog of potential SKUs beyond the “hits”. Everything beyond the 20% of what constitute “hits” or “best sellers” in the physical world can produce a profit at least equal to, if not greater than those hits that physical retailers rely for their profits.
This Tail Smells Familiar
I believe that this phenomenon is not entirely new. I’ve been told that when MTV launched in the Midwest, record retailers were entirely flummoxed by straight-laced teens marching into their local record store to demand their Kajagoogoo. “Kajagoogoo? Don’t you mean John Cougar?” said the retailers. Because that is what their demographic retailing models told them to stock in Ohio. They simply were not prepared to find (nor to market to) the potential Depeche Mode market in Akron. MTV threw a wrench into the traditional marketing models because no one had put much thought yet into marketing bands across American markets via music videos. Markets were labeled in a fairly limited psychographic manner and marketed to accordingly. MTV changed all that. Suddenly, there was new demand in unexpected places. (In fact, as long as we’re discussing the music industry, they NEVER seem ready for change. Direct mail in the form of Columbia House blew their minds back in the 50’s, and it’s happening to them yet again in their current MP3-driven muddle.)
Similarly, the Long Tail model posits that businesses can aggregate (what would otherwise be) niche demand into such volumes that it is profitable; especially because they don’t have to worry about shelf space. (Unless we’re talking about digital products, e.g., music, someone in the value chain does have to stock those items or they have to be easily manufacturable on demand. Anderson’s Long Tail article doesn’t address this issue, however.)
What’s most interesting is that sometimes a product that was way down “on the tail”, e.g., well below the status of a bestseller in a traditional model, can jump up to bestseller status based on the use of collaborative filtering where consumers can see what others with similar tastes are buying. Anderson gives the example of how “Touching the Void” returned from an almost out of print status to bestseller when Amazon recommendations suggested it to people who were buying “Into Thin Air”.
Who’s Wagging the Tail?
Thinking back to Gladwell’s seminal work, it seems appropriate to wonder how the demand for items that are on the tail is generated. Gladwell posited that there are three important roles in the phenomenon that makes up an unexpected hit: connectors, mavens and salesmen.
Connectors know astonishing amounts of people and are masters of the “weak tie”. In other words, they are good at maintaining many relationships on a weak level that they can leverage when they need someone else’s support. Mavens collect vast amounts of information on a particular topic or topics and share it compulsively. Salesmen…well, you don’t need me to tell you what they do. (They sell!)
On Amazon.com, collaborative filtering makes us all mavens by sharing what we like with others who like similar things. The user reviews turns the willing into salesmen. And the combination of the two makes Amazon.com into a very effective connector.
Getting the Long Tail in Your Face
What happens when the Long Tail aggregates demand for the unexpected and the unexpected is…YOU? That’s what seems to have happened to a hapless teen in New Jersey named Gary Brolsma.
Who is Gary Brolsma? If you’re reading this site, I’m pretty sure you know him. You just don’t know his name. You see Gary Brolsma uploaded a video of himself to the web. We don’t know why. Probably to amuse a few friends. But I’m guessing that somewhere there was a connector in the mix. And the next thing he new, Brolsma was famous in a way he really did not want to be. His “Numa Numa Dance” was forwarded lightning speed around the world and suddenly the Today Show wanted to know if this young Staples clerk wanted to meet the world.
You see in the physical world, a hard copy of Brolsma’s videotape would not have made it very far. It’s amusing sure, but would you take the time to duplicate it and mail it to ten of your friends? No way. But it seems that online the demand for silly and transient amusement is pretty high. And the cost to share those amusements is non-existent. And so websites that collect funny items collected Mr. Brolsma’s video (either as a file or via a link to another site) and suddenly that demand was a flood. SMACK. Hit in the face by the Long Tail.
So while the Long Tail is very interesting when one is considering a retail business model, it should also be a cautionary phrase to those who think “I’ll just share this with a few of my friends” because once we’re in the digital world, the Long Tail can strike rather unexpectedly. Just ask Gary. Or Pamela. Or Paris.
0 comments
Essentially, freed of the constraints of shelf space, retailers of physical and digital products are discovering that Pareto’s 80/20 principle crumples under the huge catalog of potential SKUs beyond the “hits”. Everything beyond the 20% of what constitute “hits” or “best sellers” in the physical world can produce a profit at least equal to, if not greater than those hits that physical retailers rely for their profits.
This Tail Smells Familiar
I believe that this phenomenon is not entirely new. I’ve been told that when MTV launched in the Midwest, record retailers were entirely flummoxed by straight-laced teens marching into their local record store to demand their Kajagoogoo. “Kajagoogoo? Don’t you mean John Cougar?” said the retailers. Because that is what their demographic retailing models told them to stock in Ohio. They simply were not prepared to find (nor to market to) the potential Depeche Mode market in Akron. MTV threw a wrench into the traditional marketing models because no one had put much thought yet into marketing bands across American markets via music videos. Markets were labeled in a fairly limited psychographic manner and marketed to accordingly. MTV changed all that. Suddenly, there was new demand in unexpected places. (In fact, as long as we’re discussing the music industry, they NEVER seem ready for change. Direct mail in the form of Columbia House blew their minds back in the 50’s, and it’s happening to them yet again in their current MP3-driven muddle.)
Similarly, the Long Tail model posits that businesses can aggregate (what would otherwise be) niche demand into such volumes that it is profitable; especially because they don’t have to worry about shelf space. (Unless we’re talking about digital products, e.g., music, someone in the value chain does have to stock those items or they have to be easily manufacturable on demand. Anderson’s Long Tail article doesn’t address this issue, however.)
What’s most interesting is that sometimes a product that was way down “on the tail”, e.g., well below the status of a bestseller in a traditional model, can jump up to bestseller status based on the use of collaborative filtering where consumers can see what others with similar tastes are buying. Anderson gives the example of how “Touching the Void” returned from an almost out of print status to bestseller when Amazon recommendations suggested it to people who were buying “Into Thin Air”.
Who’s Wagging the Tail?
Thinking back to Gladwell’s seminal work, it seems appropriate to wonder how the demand for items that are on the tail is generated. Gladwell posited that there are three important roles in the phenomenon that makes up an unexpected hit: connectors, mavens and salesmen.
Connectors know astonishing amounts of people and are masters of the “weak tie”. In other words, they are good at maintaining many relationships on a weak level that they can leverage when they need someone else’s support. Mavens collect vast amounts of information on a particular topic or topics and share it compulsively. Salesmen…well, you don’t need me to tell you what they do. (They sell!)
On Amazon.com, collaborative filtering makes us all mavens by sharing what we like with others who like similar things. The user reviews turns the willing into salesmen. And the combination of the two makes Amazon.com into a very effective connector.
Getting the Long Tail in Your Face
What happens when the Long Tail aggregates demand for the unexpected and the unexpected is…YOU? That’s what seems to have happened to a hapless teen in New Jersey named Gary Brolsma.
Who is Gary Brolsma? If you’re reading this site, I’m pretty sure you know him. You just don’t know his name. You see Gary Brolsma uploaded a video of himself to the web. We don’t know why. Probably to amuse a few friends. But I’m guessing that somewhere there was a connector in the mix. And the next thing he new, Brolsma was famous in a way he really did not want to be. His “Numa Numa Dance” was forwarded lightning speed around the world and suddenly the Today Show wanted to know if this young Staples clerk wanted to meet the world.
You see in the physical world, a hard copy of Brolsma’s videotape would not have made it very far. It’s amusing sure, but would you take the time to duplicate it and mail it to ten of your friends? No way. But it seems that online the demand for silly and transient amusement is pretty high. And the cost to share those amusements is non-existent. And so websites that collect funny items collected Mr. Brolsma’s video (either as a file or via a link to another site) and suddenly that demand was a flood. SMACK. Hit in the face by the Long Tail.
So while the Long Tail is very interesting when one is considering a retail business model, it should also be a cautionary phrase to those who think “I’ll just share this with a few of my friends” because once we’re in the digital world, the Long Tail can strike rather unexpectedly. Just ask Gary. Or Pamela. Or Paris.
Comments:
Post a Comment
