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the Long Tail and Beyond


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

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the Long Tail and Beyond

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