This document discusses the concept of the "long tail" and the characteristics of successful long tail businesses. The long tail refers to the large number of niche products that collectively can make up a significant market. Key points: - With online distribution and retail, businesses can now offer unlimited selection and reach many niche markets profitably. - Successful long tail businesses lower costs through virtual inventory, user contributions, and multiple distribution channels. - Recommendations and filters are important to help consumers find products in the long tail. - Both hits and niches are important; demand has shifted from just hits to also include the long tail.

1. The Long Tail2008-11-051Written by Jennifer Ahn soojin.jennifer@gmail.com

2. hit driven economicsWhat is Log TailDeath of the HitsExamples, Environmentwhat is the breakthrough characteristics ?why? ( driving force)On line businessesSocial ( internet ) environmentAttribute to realize Long Tail businessEssential componentRecommendations2008-11-052Written by Jennifer Ahn soojin.jennifer@gmail.com

3. What is Long Tail?The world has been driven by the hit. Now, the niches cannot be negligibleThe demand of niches never fell to zeroThe tail of available variety is far longer than we realizeIt’s now within reach economicallyAll those niches, when aggregate, can make up a significant marketThe probability of hit is getting lower,the abundance is getting bigger !Getting thinnerGetting longer“The biggest money is in the smallest sales” – venture capitalist Kevin LawsNever zero2008-11-053Written by Jennifer Ahnsoojin.jennifer@gmail.comsource : The long Tail

4. 2008-11-054Written by Jennifer Ahnsoojin.jennifer@gmail.comsource : The long Tail

5. 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 hitScarcity of information Development of transportation Mass MediaEra of net & shareDeath of the Hit !Enjoy the same experiencesCrisis 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

6. With this hit driven mind set, history is written by blockbusters.

7. If it is good enough, it will be hit. The niches are worse than hits.

8. And more myth 2008-11-055Written by Jennifer Ahnsoojin.jennifer@gmail.comEveryone wants to be a star

9. Everyone’s in it for the money,

10. The only success is mass success

11. “Direct to video” = bad,

12. “ Self Publish” = bad

13. “Independent” = “They couldn’t get a deal”

14. Amateur = amateurish

15. Low-selling = Low qualityThe Death of Hits Evidence in 2005Hollywood box office fell 7% continuing a decline in attendance that started in 2001 and appears to be acceleratingNewspaper readership, fell by 3% ( it’s largest single year drop) and is now at levels not seen since the sixtiesNetwork 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 artistIt'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 20052008-11-056Written by Jennifer Ahnsoojin.jennifer@gmail.com

16. Why? – The Driving Forces of The Long Tail ISix Themes of the Long TailThere are far more niche goods than hitsThe 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, rankingThe 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 2008-11-057Written by Jennifer Ahnsoojin.jennifer@gmail.com

17. Why? – The Driving Forces of The Long Tail IIDemocratize the tools of productionDemocratize the tools of distributionConnect supply and demandResult : More access to niches which fattens the TailResult : Drive business from hits to nichesResult : More Stuff, which lengthens the Tailsource : 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.ExamplesPersonal Computer

18. Apples Garage band,

19. Astronomy’s Pro-Am movement

20. Wikipedia peer production

21. Every one can distribute their own content

22. Examples

23. Internet newspaper

24. Lulu.com ->Self distribution site

25. CNN i-report

26. Directly connect supply and demand efficiently

27. Lower the search cost, minimize hassle, wrong turns

28. Explore unknown together

29. Examples

30. Google wisdom-of-crowds

31. Amazon recommendations

32. customer review 2008-11-058Written by Jennifer Ahnsoojin.jennifer@gmail.com

33. Examples (Democratize the tools of production ) Astronomy’s Pro-Am movementGalaxyZoo.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 universeSETI@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 manpowerThe Wikipedia : Peer production – mass volunteerism and amateurismIn 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 accurate2008-11-05Written by Jennifer Ahnsoojin.jennifer@gmail.com9In 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

34. ExamplesLulu.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 cost2008-11-05Written by Jennifer Ahnsoojin.jennifer@gmail.com10(Democratize the tools of distribution ) ( Connect supply and demand )

35. 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 professorCopyright is essentialDifferent objectives, motives, methodsGray area about copyright(independent labels, academic presses)Give up some of their copyright2008-11-0511Written by Jennifer Ahnsoojin.jennifer@gmail.com

36. What are the breakthrough characteristics ?Infinite number of goodsUnlimited 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)2008-11-0512Written by Jennifer Ahnsoojin.jennifer@gmail.comThree steps to infinite variety1. Physical RetailersProfit threshold for physical stores (ex Tower Records2. Hybrid RetailersProfit threshold for physical stores with no overheads(ex. Amazon )3. Pure Digital RetailersProfit threshold for physical stores with no physical goods(ex. Rhapsody)source : The long Tail

37. What are the breakthrough characteristics?Nearly zero marginal inventory and distribution costPure 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! 2008-11-0513Written by Jennifer Ahnsoojin.jennifer@gmail.comAmazon 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!

38. 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

39. Main effect

40. Helping people move from the world they know ( hit) to the world they don’t know ( niches) ,

41. Driving demand down the tail by revealing goods and services that appeal more than the lowest-common-denominator fare 2008-11-0514Written by Jennifer Ahnsoojin.jennifer@gmail.comThe world of scarcityThe world of InformationThe world of abundant(Recommendation age)How to gather the informationHow to hunt the informationHow to use the filtersNichescomfortableFilter the noises for meJust Fit my needsTailoredGood filters

42. What the breakthrough characteristics? The misunderstandings about infinite choicesTend 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 technology2008-11-05Written by Jennifer Ahnsoojin.jennifer@gmail.com15Require Filter PowerSignal to Noise RatioConsumer Acceptance Thresholdsource : The long Tail

43. What the breakthrough characteristics ?Pre-filters and Post filters

44. Pre-filters is trying to predict what will fit for customers needs  predicting tastes

45. 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 2008-11-05Written by Jennifer Ahnsoojin.jennifer@gmail.com16

46. What the breakthrough characteristics ?The death of the 80/20 ruleThe misunderstood in the 80/20 RuleIt’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 salesOriginal 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. 2008-11-05Written by Jennifer Ahnsoojin.jennifer@gmail.com17Bricks-and-mortar retailerLong Tail retaileronline only inventory= NichesOffline only inventory = Hits

47. What is breakthrough characteristics ?Shorten head : the hits and nichesThe Cause of shifting demandAvailability of greater variety : choice of one of the ten vs. choice of one of the thousand  less concentrated in the top tenLower “search costs”  recommendation and filters. There is sampling  trial of a song : reducing the risk of purchasingSuccessful Long Tail aggregators need to have both hits and niches !

48. Although the demand has shifted to the Tail, The Long tail theory doesn’t mean the abandon of the hit economy

49. 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 easier2008-11-05Shifting demand(because of 3 aspects) Both hits and niches should be co-exist Written by Jennifer Ahnsoojin.jennifer@gmail.com18

50. The Secret of successful Long Tail businessTwo big imperatives9 rules of successful Long Tail aggregators2008-11-05Written by Jennifer Ahnsoojin.jennifer@gmail.com19: infinite goods, clear the rights ( big barrier to growing the Long Tail) 1. Make everything available2. Help me find it: collaborative filtering, creating larger marketRule 1. Move inventory way in…or way outLower your cost Virtual Inventory ( Amazon), Digital Inventory ( iTunes)  centralized (indirect ) inventoryRule 2. Let customers do the work Peer-production ( eBay, Wikipedia, Craigslist, MySpace, Netflix, Google Adsense)

51. It’s not outsourcing, it’s crowd-sourcingRule 3. One Distribution method doesn’t fit allThink Niche Try to fulfill various consumption patterns.

52. Multiple distribution channels are the only way to reach the biggest potential marketRule 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 manyThe Secret of successful Long Tail business2008-11-05Written by Jennifer Ahnsoojin.jennifer@gmail.com20Think NicheRule 5. One Price doesn’t fit all About niche product, people more tend to be price inelastic

53. more flexible, price discrimination by various productRule 6. Share Information Providing transparent and various information can build trust at no cost

54. Information about buying patterns, when transformed into recommendations, can be a powerful marketing tool

55. Gathering information about buying pattern and user profile should be the shape of “opt-in” rather than “opt-out” - Loose controlRule 7. Think “And” not “or” In hit economy ( scarcity thinking ), markets are zero-sum, namely, either/or choice

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 Rule 8. Trust market to do your job “Pre-filtering” vs. “Post-filtering”, Predict-oriented market vs. measure & respond market

57. Wisdom of crowds  ① People are information-rich, ② easy to compare goods, ③spread the word about what they like

58. Don’t predict the market ! : measure and respond (measuring is easier than offline market! ) The Secret of successful Long Tail business2008-11-05Written by Jennifer Ahnsoojin.jennifer@gmail.com21Loose controlRule 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

59. 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 2008-11-05Written by Jennifer Ahnsoojin.jennifer@gmail.com22Secrete of Strong BrandMeasuring BrandMaking BrandManaging BrandThe Brand DiamondThe Brand purchase funnelBrand RelevanceMarket SegmentationInformation efficiency( as the time factor)Risk Reduction( As the trust Factor)Image benefit( as the expressive factor)Strong brand helpsReference : “Power Brands” HajoRiesenbeck/JeskoPerreyIf 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 filtersRisk Reductionmake up by collective wisdomService Brand Power > Product Brand Power