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the Long Tail and Beyond
 

the Long Tail and Beyond

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Summary and Analysis of the Long Tail Book and how to implement it to businesses

Summary and Analysis of the Long Tail Book and how to implement it to businesses

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    the Long Tail and Beyond the Long Tail and Beyond Presentation Transcript

    • The Long Tail
      2008-11-05
      1
      Written by Jennifer Ahn soojin.jennifer@gmail.com
    • hit driven economics
      What is Log Tail
      Death of the Hits
      Examples,
      Environment
      what is the breakthrough characteristics ?
      why?
      ( driving force)
      On line businesses
      Social ( internet ) environment
      Attribute to realize Long Tail business
      Essential component
      Recommendations
      2008-11-05
      2
      Written by Jennifer Ahn soojin.jennifer@gmail.com
    • What is Long Tail?
      The world has been driven by the hit. Now, the niches cannot be negligible
      The demand of niches never fell to zero
      The tail of available variety is far longer than we realize
      It’s now within reach economically
      All those niches, when aggregate, can make up a significant market
      The probability of hit is getting lower,
      the abundance is getting bigger !
      Getting thinner
      Getting longer
      “The biggest money is in the smallest sales” – venture capitalist Kevin Laws
      Never zero
      2008-11-05
      3
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
      source : The long Tail
    • 2008-11-05
      4
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
      source : The long Tail
    • Hit Driven Economies
      “ This is world of scarcity. Now with online distribution and retail, we are entering a world of abundance. The difference are profound!
      “We are turning from a mass market back into a niche nation, defined now not by our geography but by our interests.”
      The rise and all of the hit
      Scarcity of
      information
      Development of transportation
      Mass Media
      Era of
      net & share
      Death of
      the Hit !
      Enjoy the same experiences
      Crisis in variety & abundance
      The myth of the Hit Driven Economies
      • If it is not hit, it is a miss ! : Because of massive investment for the hits
      • With this hit driven mind set, history is written by blockbusters.
      • If it is good enough, it will be hit. The niches are worse than hits.
      • And more myth
      2008-11-05
      5
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
      • Everyone wants to be a star
      • Everyone’s in it for the money,
      • The only success is mass success
      • “Direct to video” = bad,
      • “ Self Publish” = bad
      • “Independent” = “They couldn’t get a deal”
      • Amateur = amateurish
      • Low-selling = Low quality
    • The Death of Hits
      Evidence in 2005
      Hollywood box office fell 7% continuing a decline in attendance that started in 2001 and appears to be accelerating
      Newspaper readership, fell by 3% ( it’s largest single year drop) and is now at levels not seen since the sixties
      Network TV ratings continue to fall as viewers scatter to cable channels; since 1985
      • Who killed the hit recording?
      (1) piracy (but it also offered massive and unprecedented choice)
      (2) Mashups : playing a track from one artist over a track from another artist
      It's not that people aren't watching films and listening to music, it's that they're watching different films and different music
      - The Long Tail. Chris Anderson
      “Now people want to control over their media, instead of being controlled by it.”
      – News Corp. chairman Rupert Murdoch 2005
      2008-11-05
      6
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
    • Why? – The Driving Forces of The Long Tail I
      Six Themes of the Long Tail
      There are far more niche goods than hits
      The cost of reaching those niches is no falling dramatically
      Consumers have the ways to find niches that suit their particular needs and interest.  filters. : recommendation, ranking
      The demand curve flattens
      There are so many niche products that collectively they can comprise a market rivaling the hits.
      The natural shape of demand is far less hit-driven than we have led to believe
      • Three Forces
      2008-11-05
      7
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
    • Why? – The Driving Forces of The Long Tail II
      Democratize the tools of production
      Democratize the tools of distribution
      Connect supply and demand
      Result : More access to niches which fattens the Tail
      Result : Drive business from hits to niches
      Result : More Stuff, which lengthens the Tail
      source : The long Tail
      source : The long Tail
      source : The long Tail
      Everyone is able to make their own content
      The traditional line between producers and consumers has blurred.
      Examples
      • Personal Computer
      • Apples Garage band,
      • Astronomy’s Pro-Am movement
      • Wikipedia peer production
      • Every one can distribute their own content
      • Examples
      • Internet newspaper
      • Lulu.com ->Self distribution site
      • CNN i-report
      • Directly connect supply and demand efficiently
      • Lower the search cost, minimize hassle, wrong turns
      • Explore unknown together
      • Examples
      • Google wisdom-of-crowds
      • Amazon recommendations
      • customer review
      2008-11-05
      8
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
    • Examples (Democratize the tools of production )
      Astronomy’s Pro-Am movement
      GalaxyZoo.org : Cosmologist Kate Land of the University of Oxford and her team are asking for help in classifying galaxies from the Sloan Digital Sky Survey, the largest digital map of the universe
      SETI@Home : search for extraterrestrial intelligence at home, using the spare computing power of more than half million home computers
      Astronomy has a natural place for volunteer manpower
      • The Wikipedia : Peer production – mass volunteerism and amateurism
      In 2001, a software application Wiki allows anybody with Web access to go to a site and edit, delete of add to digital encyclopedia.
      Wikipedia offers more than 1million articles in English ( Britannica’s 80,000, Encarta’s 4,500)
      Non-authoritative, But self-repairing, up-to-date, substantive and accurate
      2008-11-05
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
      9
      In 42 entries on science topics 4 errors in Wikipedia, 3 errors in Britannica.
      Shortly after this report, the Wikipedia entries were corrected, while Britannica had to wait for next reprinting
      - 2005 by nature
    • Examples
      Lulu.com : DIY publisher
      Not for the money, but for distributing your message. Use it for reputation.
      The traditional line between producers and consumers has blurred
      Amazon. com : Inventory on Demand
      Virtually connect centralized supply with scattered demand
      Print-on-demand : The idealized form books staying as digital files until customers are purchase  Near-zero inventory cost
      2008-11-05
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
      10
      (Democratize the tools of distribution )
      ( Connect supply and demand )
    • What are breakthrough characteristics ?
      Why do they do it?
      In the hit-driven economy, the business model is based only on money, but, in the log-tail economy, there are other reasons like “reputation”
      They take advantage of internet to achieve reputation and gain the money in other way
      “Reputation economy” , “Gift economy”, “Exposure culture”
      “ The big sin in exposure culture is not copying” – Tim Wu, a Columbia University law professor
      Copyright is essential
      Different objectives, motives, methods
      Gray area about copyright
      (independent labels, academic presses)
      Give up some of their copyright
      2008-11-05
      11
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
    • What are the breakthrough characteristics ?
      Infinite number of goods
      • Unlimited shelf
      : What the internet presented was a way to eliminate most of the physical barriers to unlimited selection.
      : It allow web retailers to offer their customers more variety and convenience, cementing brand loyalty with existing customers and extending it to new ones who may or may not be near physical store
      • Efficiency leads infinite number of goods
       Wal Mart, Amazon (offer million different books)
      2008-11-05
      12
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
      Three steps to infinite variety
      1. Physical Retailers
      Profit threshold for physical stores
      (ex Tower Records
      2. Hybrid Retailers
      Profit threshold for physical stores with no overheads
      (ex. Amazon )
      3. Pure Digital Retailers
      Profit threshold for physical stores with no physical goods
      (ex. Rhapsody)
      source : The long Tail
    • What are the breakthrough characteristics?
      Nearly zero marginal inventory and distribution cost
      • Pure digital model
      : Each product is simply a database entry, costing effectively nothing !
      : But really? Internet retailers have to invest to their infra and operating even small amount of inventory?
       We have to devise the way how to deal with virtual inventory with nearly-zero cost!
      “The ants have megaphones, what are they saying?”
      • Shorten the channel between supply and demand
      : Birdmonster , new rock band , using Myspace.com, free marketing, free distribution
       A DIY age, where technology has shifted the balance of the power from label to band. Who will lose money ? It might be new opportunity for small content makers, ants!
      2008-11-05
      13
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
      Amazon connect centralized supply with scattered demand : ! the store and the customers don’t have to be in the same place  Virtual connection btw supply and demand
      The genius of Amazon’s model is!
    • What the breakthrough characteristics?
      Good Filters
      • Recommendation Age
      : Information gathering is no longer issue. Recommendation( & rating ) serve as shortcuts through the ticket of information
      : In a world of infinite choice, context –not content – is king !
      • Filters Rule
      • Main effect
      • Helping people move from the world they know ( hit) to the world they don’t know ( niches) ,
      • Driving demand down the tail by revealing goods and services that appeal more than the lowest-common-denominator fare
      2008-11-05
      14
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
      The world of scarcity
      The world of Information
      The world of
      abundant
      (Recommendation age)
      How to gather the information
      How to hunt the information
      How to use the filters
      Niches
      comfortable
      Filter the noises for me
      Just Fit my needs
      Tailored
      Good filters
    • What the breakthrough characteristics?
      • The misunderstandings about infinite choices
      Tend to run out of suggestions pretty quickly and the advice stays the same over time : Only genre recommendations is not a good filter.  Collaborative filters is needed ( peer judgment , wisdom of crowds!)
      The long tail is full of crap
      : “The most frequent mistakes people make about the long tail is to assume that things that don’t sell well are “not as good” as things that do sell well”
      : In the Long Tail, a wide dynamic range of quality  awful to great
      ( That’s because they are not pre-filtered by makers )
      : Niche products are not for everyone = one person’s noise is another’s signal ( different and subjective taste)
       That’s why the filters are so important. for narrow set of taste, filter will work. ex) Google is the winner about filter technology
      2008-11-05
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
      15
      Require Filter Power
      Signal to Noise Ratio
      Consumer Acceptance Threshold
      source : The long Tail
    • What the breakthrough characteristics ?
      • Pre-filters and Post filters
      • Pre-filters is trying to predict what will fit for customers needs  predicting tastes
      • Post-filters is collaborative filtering based on wisdom of crowds, coming after publication  measure the tastes of customers
       self-correct the errors and never disappear entirely
      2008-11-05
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
      16
    • What the breakthrough characteristics ?
      The death of the 80/20 rule
      • The misunderstood in the 80/20 Rule
      It’s almost never exactly 80/20 : in research 80/10 or even less
      The 80 and the 20 are percentages of different things ( don’t need to be 100) – 80 is a percentage of products, 20 is a percentage of sales
      Original definition is about products and revenues, but Rule can just as equally be applied to products and profits
       The Long Tail offers, even if 20% of the products account for 80% of the revenue, that’s not reason not to carry the other 80% of the products.
      2008-11-05
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
      17
      Bricks-and-mortar retailer
      Long Tail retailer
      online only inventory
      = Niches
      Offline only inventory = Hits
    • What is breakthrough characteristics ?
      Shorten head : the hits and niches
      • The Cause of shifting demand
      Availability of greater variety : choice of one of the ten vs. choice of one of the thousand  less concentrated in the top ten
      Lower “search costs”  recommendation and filters.
      There is sampling  trial of a song : reducing the risk of purchasing
      • Successful Long Tail aggregators need to have both hits and niches !
      • Although the demand has shifted to the Tail, The Long tail theory doesn’t mean the abandon of the hit economy
      • Conventional view is that more choice is better, but there is TheParadox of Choice – 2004, Barry Schwartz
      “Why Choice Is De-motivating” : The more choice, the more negative of aspect of having a multiple of options begin to appear.
       The Hits let customers know where to start and the filters make selection process easier
      2008-11-05
      Shifting demand
      (because of 3 aspects)
      Both hits and niches should be co-exist
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
      18
    • The Secret of successful Long Tail business
      Two big imperatives
      9 rules of successful Long Tail aggregators
      2008-11-05
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
      19
      : infinite goods, clear the rights ( big barrier to growing the Long Tail)
      1. Make everything available
      2. Help me find it
      : collaborative filtering, creating larger market
      Rule 1. Move inventory way in…or way out
      Lower your cost
      • Virtual Inventory ( Amazon), Digital Inventory ( iTunes)  centralized (indirect ) inventory
      Rule 2. Let customers do the work
      • Peer-production ( eBay, Wikipedia, Craigslist, MySpace, Netflix, Google Adsense)
      • It’s not outsourcing, it’s crowd-sourcing
      Rule 3. One Distribution method doesn’t fit all
      Think Niche
      • Try to fulfill various consumption patterns.
      • Multiple distribution channels are the only way to reach the biggest potential market
      Rule 4. One Product doesn’t fit all
      • “micro-chunking” – ex) album, individual track, ringtone, free thirty-second sample, music video, remix, etc.  One size fits one; many size fits many
    • The Secret of successful Long Tail business
      2008-11-05
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
      20
      Think Niche
      Rule 5. One Price doesn’t fit all
      • About niche product, people more tend to be price inelastic
      • more flexible, price discrimination by various product
      Rule 6. Share Information
      • Providing transparent and various information can build trust at no cost
      • Information about buying patterns, when transformed into recommendations, can be a powerful marketing tool
      • Gathering information about buying pattern and user profile should be the shape of “opt-in” rather than “opt-out” -
      Loose control
      Rule 7. Think “And” not “or”
      • In hit economy ( scarcity thinking ), markets are zero-sum, namely, either/or choice
      • But in the market with infinite capacity, the right strategy is almost always to offer all the possible alternatives of product. ex) various language in DVD title
      Rule 8. Trust market to do your job
      • “Pre-filtering” vs. “Post-filtering”, Predict-oriented market vs. measure & respond market
      • Wisdom of crowds  ① People are information-rich, ② easy to compare goods, ③spread the word about what they like
      • Don’t predict the market ! : measure and respond (measuring is easier than offline market! )
    • The Secret of successful Long Tail business
      2008-11-05
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
      21
      Loose control
      Rule 9. Understand the power of free
      • Because their costs are near zero, their prices can be too . ex) Skype, Yahoo mail
      ex) in 2005, Universal released the first 9min. of Serenity (a sci-fi film) online, free & uncut
      • Take a grant of the fact that music or small content is free !
       Find various way fore revenue
    • Beyond the Long Tail ( out of the book of the Long Tail )
      What is the real brand in the Long Tail Business?
      If I expand the brand measurement according to “Brand relevance” concept in “BrandMatics (McKinsey) ”, online service aggregators’ service itself can be the brand, rather than individual products.
      In the online business, making high value of service brand is essential
      2008-11-05
      Written by Jennifer Ahnsoojin.jennifer@gmail.com
      22
      Secrete of Strong Brand
      Measuring Brand
      Making Brand
      Managing Brand
      The Brand Diamond
      The Brand purchase funnel
      Brand Relevance
      Market Segmentation
      Information efficiency
      ( as the time factor)
      Risk Reduction
      ( As the trust Factor)
      Image benefit
      ( as the expressive factor)
      Strong brand helps
      Reference : “Power Brands” HajoRiesenbeck/JeskoPerrey
      If online can help information efficiency and reduce risk better than offline,
      Brand Relevance lowered
      Because of the online
      service itself ,
      (Recommendation, Rate,
      Warrantee)
      people can reduce selecting risk,
      and get reliable information
      for quick decision
      Brand Relevance lowered
      Information Efficiency
      • make up by the filters
      Risk Reduction
      • make up by collective wisdom
      Service Brand Power
      > Product Brand Power