The Long Tail Model, Gwenaelle Doceul


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The Long Tail Model, Gwenaelle Doceul

  1. 1. The Long Tail Model: Abundance out of scarcity By Gwenaelle Doceul MBA
  2. 2. The Long Trail or « La longue traîne »: A brief introduction <ul><li>When Chris Anderson first used the expression « Long Trail » in 2004 in his online magasine Wired it was nothing of a breakthough in the world of economics. </li></ul><ul><li>His work was to rethought the theories of Clay Shirky ( Power Laws, Weblogs, and Inequality ) and to adapt them to the economy and distribution systems. </li></ul><ul><li>His conclusions were that the total demand for a non popular product is higher than the total demand for a product most sought after. The market opportunites were huge; </li></ul>
  3. 3. Chris Anderson, 2004 The Long Tail Model
  4. 4. Long Tail Model (con't) If you observe carefully this draw, you can see that as the tail gets longer, it accounts for more of the market. That is referred to as the « Long Tail » model. Knowing that, he applied this theory to ebusiness models. He tried to understand how he could make money out of such a model.
  5. 5. When should ebusiness use the L-Model <ul><li>According to the model, ebuisness should be rofitable and apply the Long Tail model only if the cost of </li></ul><ul><li>storage </li></ul><ul><li>distribution </li></ul><ul><li>are low. </li></ul>
  6. 6. The booming era of available « scare » products <ul><li>Thanks to the digital technology, scarcity explodes because of: </li></ul><ul><li>the virtually unlimited number of media </li></ul><ul><li>the virtually unlimited storage capacity </li></ul><ul><li>the virtually unlimited number of visitors/sellers </li></ul><ul><li>the incresed simplicity in matching the offer with the demand </li></ul><ul><li>the dematerialization of almost everything i.e physical shelves turned in to pages, space consuming album became available online at Rhapsodic or Itunes </li></ul><ul><li>With the booming of new technology, </li></ul><ul><li>scarcity gave birth to abundance. </li></ul>
  7. 7. Rules of the Entertainment industry <ul><li>Make everything available: </li></ul><ul><li>Dematerialization of products offers unlimited selection of hits and non hits product and gives space for more diversification of the offer, thus addressing a wider range of demand/tastes </li></ul>
  8. 8. Rules of the Entertainment industry (con't) <ul><li>At a lower cost: </li></ul><ul><li>Being online takes away the cost of retail channel (manufacturing, distributing and intermediaires) as well as storage costs </li></ul>
  9. 9. Rules of the Entertainment industry (con't) <ul><li>And help your customers find it: </li></ul><ul><li>Spot a popular item and associate a suggestion of a non hit product. </li></ul><ul><li>It creates demand by introducing a unwanted nonhit product. </li></ul>
  10. 10. Couple of websites allowing unlimited access to either popular and not-so-much demanded items: As of october 2007, Itune Music stored over 5 millions titles, so we can assume it is now between 6-7 millions titles available on line source: Dailymotion counts with hundreds of thousands of videos available, with an average of 15, 000 new videos uploaded on a daily basis (as of May 07). Source:
  11. 11. Couple of websites allowing unlimited access to either popular and not-so-much demanded items (con't) I believe Itunes understood rightly how to use the Long Tail model to make money. For instance, it made easier the search for new music by creating in the music store a window on the right, suggesting « songs we might like ». Thus, it helps us find unwanted songs and induces us to expand our demand
  12. 12. Conclusion <ul><li>Hits driven ebusiness characteristics </li></ul><ul><li>Limited space </li></ul><ul><li>limited offer due to physical limitations </li></ul><ul><li>Many intermediaires highering the end-consumer price (manufacturer, distributer, seller etc.) </li></ul><ul><li>Long tail driven ebusiness </li></ul><ul><li>Unlimited offer due to high dematerialization </li></ul><ul><li>Unlimited storage capacity </li></ul><ul><li>unlimited selection </li></ul><ul><li>real time information on trends and public opinion </li></ul><ul><li>flexibility thanks to less intermediaires involved </li></ul>
  13. 13. Conclusion (con't) <ul><li>Hits driven ebusiness characteristics (con't) </li></ul><ul><li>High focus on bestselling products </li></ul><ul><li>Sell large volume of small quantity of popular products </li></ul><ul><li>= niches are not explored </li></ul><ul><li>Long tail driven ebusiness (con't) </li></ul><ul><li>rapidity to adress a demand </li></ul><ul><li>High focus on not sought after products </li></ul><ul><li>Sell small volume of large quantity of non popular products </li></ul><ul><li>= niches are the source of profit </li></ul>