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The Long Tail: Why the Future of Business Is Selling Less of More (Hardcover)
by Chris Anderson
| Category:
Marketing, Innovation, Change management, Business |
| Market price: ¥ 258.00
MSL price:
¥ 218.00
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MSL rating:
 Good for Gifts |
| MSL Pointer Review:
Interesting and insightful book with fascinating competitive implications for your business in the new-economy context. |
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Author: Chris Anderson
Publisher: Hyperion
Pub. in: July, 2006
ISBN: 1401302378
Pages: 256
Measurements: 9.4 x 6.8 x 0.8 inches
Origin of product: USA
Order code: BA00579
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- Awards & Credential -
A popular business book that has received lots of positive reviews since its release in July 2006. It ranked #527 in books on Amazon.com. |
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- MSL Picks -
98 Rule: Netflix reckoned that 95 percent of its 25,000 DVDs rented at least once a quarter. Amazon using an independent academic research on its book sales suggested that 98 percent of its top 100,000 books sold at least once a quarter. Digital space cost per DVD is very cheap and represent almost no physical inventory space excepting magnetic medium storage. In the sale of one or two DVDs, the traditional retail runs out of steam because it can turn inventory fast enough to pay for physical space, but the economics of online retail keep going. Eventually, Amazon will localize and print digital media using high-speed printers producing a book in seconds from an electronic catalog, the birth of a book replication. DVDs will be replaced by wireless iPods, who are paying subscribers to iTunes, will increase the speed of distribution and volume of sales of the media they prefer. The 80/20 rules are changing.
Twenty-first Century economics: Here are the conclusions about the long tail: 1. the tail of available variety is far longer than realized 2. building the long tail of products is now economically feasible 3. all those niches, when aggregated can make up a significant market-seemed undisputable, especially backed up with heretofore unseen data. "Our growing affluence has allowed us to shift from being bargain shoppers buying branded commodities to becoming mini-connoisseurs, flexing our taste with thousand little indulgences that set us apart from others."
Markets without end: RealNetworks, Rhapsody offers more than 1.5 million tracks. Rhapsody carries 4,500 unique CD titles and the top 4,500 albums account for the top 25,000 tracks. The downloads area under the long tail curve consisting of songs downloaded an average of 250 times a month quickly add up, totaling 22 million downloads a month, nearly a quarter of Rhapsody's total business. The amazing fact is demand exists for almost every track in Rhapsody's infinite-shelf-spaced inventory. The internet has created a seemingly infinite abundance of digital medium, commodity access, and diversity of products. A very big number multiplied by a small number is still a relatively big number. For companies like Netflix, Amazon, and Rhapsody the fastest growing part of their businesses is sales of products that aren't available in traditional physical retail stores. Over 99 percent of musical albums on the market are not available at Wal-mart. Out of the more than 200,000 films, TV shows, documentaries, and other videos that have been released commercially, Blockbuster only carries 3,000. However, Blockbuster could transform its business taking advantage of the long tail by implementing digital downloads equipment to CD or iPod, in its stores.
The Ultimate Catalog: "The rise of ecommerce on the Web in the early 1990s started by simply building on the catalog model with convenient ordering". The internet provided a way to offer a catalogue to everyone. Bezos came up with the idea: "picking a category where you could substantially improve the customer experience along a dimension that could only be done on the Web." Amazon works because 1. large selection is important in the customer experience 2. a big catalogue on paper is impractical 3. there are more than 100,000 books a year published 4. Amazon was the first site where a customer could buy from over a million books. Today, online shopping has passed up catalogue shopping and represents 5 percent of the retail business and growing at 25 percent a year. If Amazon reaches 15 percent of retail that would equate to $12 trillion of the American economy. Demand must follow new supply otherwise the long tail would wither and die.
The six themes of the long tail are: 1. there are far more niche goods than hits 2. the cost of reaching those niches is falling dramatically 3. Consumers must be given ways to find niches that suit their particular needs and interests 4. Once there's massively expanded variety and the filter to sort through it, the demand curve flattens. The hits are relatively less popular and the niches more relevant. 5. There are so many niche products that collectively they can comprise a market rivaling the hits. 6. Once all this is put in place, the natural shape of the demand is revealed.
Scarcity is not a function of limited natural resources, but it is having enough people. "Give enough people the capacity to create, and inevitably gems will emerge." People through creativity increase the population of available goods manifold. The second force is cutting the cost of consumption by democratizing distribution. The internet makes the average person a distributor. The third force is connect supply with demand. The internet lowers consumer search costs of find niche content.
Long tail rules: 1. Use virtual inventories where physical products are stored in a partner's warehouse but display on the business website. 2. Let the customers do the work, self-service maintenance of their data and preferences. 3. One distribution method does not fit all. 4. One product does not fit all 5. One price does not fit all 6. Share information. (From quoting D. Nishimoto, USA)
Target readers:
Executives, managers, entrepreneurs, consultants, advertising agents, professionals, and MBAs.
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Chris Anderson is editor in chief of Wired magazine, a position he has held since 2001. He has worked at The Economist, where he served as U.S. business editor. His career began at the two premier science journals, Science and Nature, where he served in several editorial capacities. He holds a Bachelor of Science degree in Physics from George Washington University and studied Quantum Mechanics and Science Journalism at the University of California at Berkeley. He lives in Berkeley, California.
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From the Publisher:
"The Long Tail" is a powerful new force in our economy: the rise of the niche. As the cost of reaching consumers drops dramatically, our markets are shifting from a one-size-fits-all model of mass appeal to one of unlimited variety for unique tastes. From supermarket shelves to advertising agencies, the ability to offer vast choice is changing everything, and causing us to rethink where our markets lie and how to get to them. Unlimited selection is revealing truths about what consumers want and how they want to get it, from DVDs at Netflix to songs on iTunes to advertising on Google. However, this is not just a virtue of online marketplaces; it is an example of an entirely new economic model for business, one that is just beginning to show its power. After a century of obsessing over the few products at the head of the demand curve, the new economics of distribution allow us to turn our focus to the many more products in the tail, which collectively can create a new market as big as the one we already know. The Long Tail is really about the economics of abundance. New efficiencies in distribution, manufacturing, and marketing are essentially resetting the definition of what’s commercially viable across the board. If the 20th century was about hits, the 21st will be equally about niches.
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| View all 10 comments |
Houston Chronicle (MSL quote), USA
<2006-12-31 00:00>
In The Long Tail, Chris Anderson offers a visionary look at the future of business and common culture. The long-tail phenomenon, he argues, will "re-shape our understanding of what people actually want to watch" (or read, etc.). While Anderson presents a fascinating idea backed by thoughtful (if repetitive) analysis, many critics questioned just how greatly the niche market will rework our common popular culture. Anderson convinced most reviewers in his discussion of Internet media sales, but his KitchenAid and Lego examples fell flat. A few pointed out that online markets constitute just 10 percent of U.S. retail, and brick-and-mortar stores will never disappear. Anderson's thesis came under a separate attack by Lee Gomes in his Wall Street Journal column. Anderson had defined the "98 Percent Rule" in his book to mean that no matter how much inventory is made available online, 98 percent of the items will sell at least once. Yet Gomes cited statistics that could indicate that, as the Web and Web services become more mainstream, the 98 Percent Rule may no longer apply: "Ecast [a music-streaming company] told me that now, with a much bigger inventory than when Mr. Anderson spoke to them two years ago, the quarterly no-play rate has risen from 2% to 12%. March data for the 1.1 million songs of Rhapsody, another streamer, shows a 22% no-play rate; another 19% got just one or two plays." If Anderson overreaches in his thesis, he has nonetheless written "one of those business books that, ironically, deserves more than a niche readership" |
Shawn Sullivan (MSL quote), USA
<2006-12-31 00:00>
Chris Anderson has written a thought-provoking book in The Long Tail. It's about the new economics of culture and commerce. While I enjoyed thinking about the main premise - that the Internet has dramatically changed the interplay between supply and demand - I once again concluded that the book could have been a lot shorter (possibly a result of my taking the book Blink to heart).
The title refers to the shape of a classic downward-sloping demand curve if you graphed popularity (x-axis) vs. demand (y-axis). Think about book industry where the demand for a few titles (bestsellers or even top 100) is very high, but demand for the 200,000th most popular book is sporadic at best. Consequently, Barnes & Noble stores can only carry books with a certain level of demand and will miss a lot of the niche topics that are out there.
But, because of the Internet, the demand captured in the 'long tail' of this curve, comprised of thousands of niche businesses, represents a vibrant business. For example, while the typical Barnes & Noble will carry 100,000 titles, Amazon offers 3.7 million and says that 25% of their sales come from books outside of the top 100,000 titles. They claim, and the premise of the book is, that as companies offer increased supply (because in the new Internet economy, they can), demand seems to follow supply and, in fact, increases.
Another related trend is the transition across business lines from 'hit' to 'niche', which is exemplified by the popularity of myspace.com, eBay, iTunes and Google (representing the long tail of advertising).
The six main themes of the book are:
1. In virtually all markets, there are far more niche goods than hits, as a result of improvements in the basic tools of production (i.e. Internet).
2. The costs of reaching these niches is now falling dramatically thanks to digital distribution, search and a critical mass of broadband technology.
3. There are a range of tools - from recommendations to rankings (think search) that help to shift demand down the long tail, and help people find useful/relevant niches.
4. The effect of all of this is that the demand curve will eventually flatten, with the hits becoming relatively less popular and the niches growing in popularity.
5. All of the niches add up to comprise a market that rivals the hits.
6. The internet can reveal a natural shape of demand, undistorted by distribution bottlenecks, scarcity of information and limited choice of shelf space.
I would recommend this book to all those interested in a well thought out premise on how the internet has radically altered many business models due to various supply and demand characteristics and the ability to exploit demand that would previously not have been profitable. |
Craig Matteson (MSL quote), USA
<2006-12-31 00:00>
While some try to dismiss the message of this book as merely an article about a statistical graph, I found the ideas in the book interesting and some of them powerful. There are many books on the Internet and what it can do to open mass customization, how it impacts the economic doctrine of the allocation of scarce resources (although the concept is almost universally misunderstood in these discussions), the need to open a digital front to your customers, and so forth. This book could be lumped into this group and stuck on the shelf next to them, but I think that would be a mistake.
This book deals in specifics about what is happening with real businesses rather than with what could happen. Chris Anderson shows us how the small volume items can generate significant aggregate sales. Even the seemingly vast selection offered by the big box stores and Wal-Mart ends up being only the surface of what is actually available when one is not limited by shelf space and transportation costs.
I think the great examples the book offers are Wal-Mart and Rhapsody. Wal-Mart sells something like 20% of all music sales in America, yet it carries only 4,500 titles (Amazon.com offers 800,000 music titles). Of the 30,000 new albums released each year, Wal-Mart carries only 750 (pages 155-156). Yet 40% of Rhapsody's sales come from titles not available in retail stores. These are titles that individually only sell a few times each, but in aggregate become a huge revenue generator. In the digital world, it costs almost nothing to keep these titles in inventory, but providing them a physical presence in thousands of stores cannot be justified.
Some retailers are tapping into this effect by offering a much wider variety of products online than are available in even their largest stores. Manufacturers are also offering products online that are not available through any retailer. Anderson reminds us that when you go to your local store to buy a Kitchen Aid mixer you will likely find only three colors - white, black, and something else (he also shares why retailers choose this selection). If you go to the Kitchen Aid website you can choose among fifty colors. Similarly, Lego has a specialized set of offerings for its hobbyist force that are not available anywhere else.
The author also discusses the varying studies that seem to say contrary things about customers and choice. It turns out that customers show their preference for lots of choice over and over again. But successful offerings of choice also have to provide help for the consumer to find what he or she is looking for. It involves search, product information, even samples.
The last chapter offers nine rules for functioning in the world of the Long Tail. I think the book is quite interesting and appropriately sized for the insights it offers. There are some helpful charts and graphs, as well. The hard part is thinking through the implications of this reality for your business and for your competitive situation.
Good strategizing! |
Mike Banks (MSL quote), USA
<2006-12-31 00:00>
What a wonderful lot of comment and argument The Long Tail is generating. Thus far I've seen the book analyzed, amplified, scrutinized, and vilified. There's argument and nay-saying, but never mind all that: the important thing is that the book has people talking. Why is this important? Because The Long Tail (both concept and book) is a tipping point.
A strong statement for a book - for this book - you say? I think not, because in The Long Tail Chris Anderson finally shows the Internet for what it is: a market in search of products. (Of course it's more than that, but in marketing terms, Internet users are consumers searching for choices.)
For twenty-five years (yes, there was an online before the Web) entrepreneurs and analysts have tried to sum up the online world from a marketing perspective, searching for some magical approach or model that would make modem users sit up and buy. They've made it a billboard; they've tried value-adding and cost-cutting and endless other practices from the brick-and-mortar world. But nothing that one could point to and say, "This is unique to Internet."
All the while the real secret of Internet marketing has been right in front of us, waiting for someone (Anderson) to recognize it: The Internet can give buyers what they truly want - something traditional retailers cannot do. This fact alone is a powerful marketing tool, but there is much more to The Long Tail than that, as its readers already know. If you're interested in the Internet as a market, you need to know what they know.
With regards to The Long Tail as a tipping point… this book is going to inspire more than a few new businesses as readers work on ways to implement its concepts. Businesses already doing what The Long Tail describes will grow. Some businesses will modify themselves to better serve niche markets. And the aggregators will move in. At this very moment The Long Tail sits atop a stack of business books on the desk of a certain marketing executive at one of the world's largest corporations, and the owner of that desk is already considering how best to follow the long tail to profit. Can you get there first? Read The Long Tail and see. |
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