Month: July 2006

The great­est song that has ever been record­ed is sit­ting on a serv­er some­where on the inter­net right now. At least, the great­est song to you, that is. Like­wise, the most amaz­ing film you’ve ever watched is sit­ting in a film can­is­ter on a shelf in a dusty ware­house, wait­ing for you to find it. The exact tool to fit the needs of the project you’re plan­ning this week­end awaits you across the coun­try, where right now, no one is even con­sid­er­ing try­ing such a task. Why don’t you know where to go to find these items, or per­haps that they even exist?

Chris Anderson’s book, “The Long Tail – the Future of Busi­ness is Sell­ing Less of More,” explains that the tools to help you find them, or even cre­ate them your­self, are the keys to that form the new econ­o­my. This future of com­merce was long pre­vent­ed by the bot­tle­necks of pro­duc­tion, dis­tri­b­u­tion, and dis­cov­ery which tech­nol­o­gy and savvy busi­ness think­ing have swept aside. Now, near­ly every writ­ten or spo­ken word, record­ed track or video, or even fash­ion or imple­ment is a sim­ple search term away from you.

While research­ing tech­nol­o­gy trends, Ander­son was dis­cussing down­load sta­tis­tics with the CEO of Ecast (a net­worked juke­box sys­tem) and under­es­ti­mat­ed the per­cent­age of the total track col­lec­tion that gets played at least once per quar­ter (near­ly all do). Puz­zled by the actu­al data he had been pre­sent­ed, he went on to try and see what oth­er areas of eco­nom­ics this showed up in. The alpha result of that work showed up on a slide pre­sen­ta­tion. How­ev­er, the beta, and tru­ly ground­break­ing ele­ment came in the form of the arti­cle Ander­son wrote for the Octo­ber 2004 issue of Wired Mag­a­zine (where he serves as edi­tor-in-chief), titled The Long Tail. That arti­cle has become the most cit­ed in the his­to­ry of the mag­a­zine and offered evi­dence that there was a great deal of niche vari­ety, that it could now be eco­nom­i­cal­ly made avail­able, and this all adds up to a siz­able market.

In short, the Long Tail (as it applies to sales, say) is a curve plot­ting indi­vid­ual sales ver­sus sales rank­ing. Now, it’s easy to imag­ine that this falls of very rapid­ly. The hid­den secret, is that nev­er actu­al­ly drops to zero. The curve obeys a Pare­to dis­tri­b­u­tion, at type of pow­er law dis­tri­b­u­tion, which while reach­ing very low num­bers, always stays above zero. Ander­son quotes Eric Schmidt, CEO of Google, who explains where his com­pa­ny sought oppor­tu­ni­ty under­neath this curve:

The sur­pris­ing thing about the Long Tail is just how long the Tail is, and how many busi­ness­es haven’t been served by tra­di­tion­al adver­tis­ing sales. The recog­ni­tion that busi­ness­es such as ours show a Pare­to dis­tri­b­u­tion appears to be a much deep­er insight than any­one real­ized. It’s some­thing that sci­en­tists have known for a long time, but it’s nev­er got­ten any atten­tion. When we looked at our busi­ness, we con­clud­ed that we built a mod­el that works well in the mid­dle of the curve. After read­ing the [orig­i­nal Wired] arti­cle, we looked at the Tail and asked our­selves, Howe are we doing against this opportunity?

I can­not say that Ander­son agrees with me here, but after read­ing the book, I get the sense than it is the fil­ter (or search sys­tem), which con­nects sup­ply to demand, which is the linch­pin to the long tail econ­o­my. There has, always been a tail, albeit far short­er before the advent of acces­si­ble pro­duc­tion tools and dis­tri­b­u­tion meth­ods. How­ev­er, the inabil­i­ty to find what one want­ed (espe­cial­ly when they prob­a­bly did­n’t eve know exact­ly what they were look­ing for) allowed or caused the hit-dri­ven econ­o­my of the past. The book dis­cuss­es the issues with too much choice, and not only does Ander­son men­tion Bar­ry Schwartz’s The Para­dox of Choice : Why More Is Less, one could argue that The Long Tail is a rebut­tal to that argu­ment. It’s not that hav­ing an over­whelm­ing choice isn’t what peo­ple want, it’s just that hav­ing no way to hone in on sig­nal in the noise makes every­thing, in effect, noise. It may be the engi­neer in me, but I see the tools of search, rec­om­men­da­tion, and fil­ter­ing (col­lec­tive­ly called fil­ters, by Ander­son) as the key to the argu­ment (feel free to dis­agree with me, Ander­son relies on three points, and he’s the one whose done the homework).

One key exam­ple cit­ed, and one that has rat­tled around in my head for years, is mp3.com. At one time, it served as the evi­dence cit­ed that the inter­net is noth­ing more than a col­lec­tion of crap. It had thou­sands upon thou­sands of tracks and vir­tu­al­ly no way to find any­thing of inter­est. It was­n’t until I recent­ly dis­cov­ered Pandora.com that I began tru­ly see how mp3.com might have actu­al­ly worked if it had actu­al­ly had intel­li­gence in it’s data­base. Ander­son states, in response to a study done on con­sumers appar­ent­ly refus­ing to come to a deci­sion as often when pre­sent­ed with too many choic­es, that the para­dox of choice turned out to be more about the pover­ty of help in mak­ing that choice than a rejec­tion of plenty.

Fil­ters come in more than just inter­net search­es, though, and as Ander­son points out, they were around long before the inter­net exist­ed. Prof­itable fil­ters have come in the form of the yel­low pages or TV Guide and rec­om­men­da­tion engines have always been your opin­ion­at­ed friends. How­ev­er, word-of-mouth is far more than just a small cir­cle of friends in the place in which we live, as the rise of blogs and social soft­ware has shown us repeat­ed­ly. Tastemak­ers used to be record DJ’s or movie pro­duc­ers, but now, they’re any­one with an opin­ion and the time to express it. Trust lev­els are high­er when we feel that the per­son express­ing that opin­ion is speak­ing from expe­ri­ence, and not for prof­it, or as Ander­son puts it:

The new tastemak­ers are us. Word of mouth is now a pub­lic con­ver­sa­tion, car­ried in blog com­ments and cus­tomer reviews, exhaus­tive­ly col­lat­ed and mea­sured. The ants have megaphones.

Regard­less of the key­stone, if Ander­son is right, then the stakes here are tremen­dous. In dis­cussing the advent of the online super-store, which is noth­ing less than the sto­ry of Jeff Bezos’ Amazon.com, Ander­son tells us just what kind of fig­ures in retail this means:

Today online shop­ping has passed cat­a­log shop­ping and now accounts for about 5 per­cent of Amer­i­can retail spend­ing. It’s still grow­ing at a whop­ping 25 per­cent a year, and is well on track to ful­fill Bezos’s orig­i­nal pre­dic­tion that online retail would even­tu­al­ly reach around 15 per­cent of total retail, which would give it more than a tenth of the $12 tril­lion Amer­i­can economy.

That’s over $1,200,000,000 dol­lars a year. And now we’re see­ing a mas­sive amount of that com­ing from items that could have nev­er jus­ti­fied shelf space in even the coun­try’s largest retail super-stores just ten years ago. Fur­ther, to under­stand the Long Tail is to see just what latent mar­kets are avail­able to us. There are count­less wants and needs down in the skin­ny and end­less part of the tail that the old means of busi­ness sim­ply could not address.

Anoth­er impor­tant point the rep­re­sents a shift in the way we must view busi­ness is one of resources. Online stores have effec­tive­ly infi­nite shelf space because stor­age and band­width are, for all intents and pur­pos­es, free to them. The abil­i­ty to rec­og­nize what resources are ‘free’ allow a busi­ness to lever­age that to it’s advan­tage. This is one of the keys to so many suc­cess­ful online media sites, such as the iTunes music store, Flickr, YouTube, and more. The nich­es way out towards the end of the tail take no more resources in a online store such as these as do the hits at the head; that is: a sale is a sale. Once the infra­struc­ture is in place, hav­ing users get some use for free or hav­ing them scour the most obscure items on your servers costs you essen­tial­ly noth­ing in extra over­head and it will only aug­ment your sales.

Ander­son attempts to point out some of the poten­tial pit falls of the Long Tail. One, is essen­tial­ly if we fil­ter out too much, espe­cial­ly in the form of news, that we may essen­tial­ly unplug our­selves from the real world. Can we real­ly run the risk of fil­ter­ing out every­thing but that what we know we already want to hear, fur­ther polar­iz­ing our­selves from oth­ers? Well, as Ander­son also points out, a good fil­ter isn’t going to just be a feed­back loop, it will force you into new are­nas in order to bring you new things. I may not have as much faith in the world mak­ing its way to every­one (there are some who seem bent on keep­ing out that which they do not want to hear, in news, music, books, or more), but I do agree you’ll have to work pret­ty hard to carve out a chunk of the inter­net that only agrees with you. The Long Tail, as Ander­son sees it, need­n’t be frag­men­ti­za­tion of cul­ture and soci­ety, but rather democ­ra­ti­za­tion of both. Fur­ther, the fact that any one of us laps over into a vast num­ber of sub-cul­tures (or tribes, if you like), will tie us back into the sub-cul­tures by way of network.

I do have some reser­va­tions about Ander­son­’s book. First, this is the sort of argu­ment where one would expect lots of data. There are num­bers giv­en and charts to visu­al­ize the con­cepts, to be sure, but I could­n’t help but think that some of the argu­ments giv­en felt as though the num­bers had sim­ply been guessed at or cob­bled togeth­er on a Post-It pad. For exam­ple, there are some num­bers giv­en for just Ama­zon’s CD busi­ness as com­pared to all music poten­tial­ly avail­able to sell. The num­bers don’t seem to add up and even Ander­son­’s words make them feel very fuzzy and vague (and this from the indi­vid­ual who linked to spread­sheet data on his blog for most charts shown). Also, Ander­son does­n’t cite where many of these came from to ver­i­fy them our­selves (some infor­ma­tion is con­tained in an appen­dix for fur­ther read­ing, but far from all of the date giv­en is sourced). I read a few sec­tions like this and could­n’t help but long for a hyper­link on those to do some back­ground work. I am some­what well versed in who’s who in the tech and online word (hey, I got the Anil Dash t‑shirt ref­er­ence he made), but just attribut­ing a quote to some name I’m not famil­iar with seems like cut­ting short in a book. Per­haps I’ve just been spoiled on social sci­ence books writ­ten by lawyers, who foot­note every state­ment of fact as a mat­ter of course.

My reser­va­tions on data and cita­tions aside, there is plen­ty of evi­dence to sug­gest that Ander­son has real­ly come across some­thing sig­nif­i­cant there. The book comes around to enter­tain­ment media often as a source of evi­dence, and that is real­ly more a result of the matu­ri­ty of those mar­kets in the dig­i­tal realm than it is evi­dence that the Long Tail only applies to them. There are some non-enter­tain­ment exam­ples as well that indi­cate that the Long Tail does, indeed, apply out­side of the hit or niche mar­kets of the enter­tain­ment indus­try. How­ev­er, with­in that indus­try, we can expect to find more to peak our refined tastes and have to put up with less low­est-com­mon-denom­i­na­tor music and film.

The spe­cif­ic his­to­ries giv­en for many exam­ples, along with some admit­ted­ly sparse hard data and appli­ca­tion to eco­nom­ic the­o­ry, make this book indeed The Long Tail v1.0, which is ready for pub­lic release. I’m hop­ing that this is some­thing that Ander­son feels is worth con­tin­u­ing to inves­ti­gate and fol­low up on, be it in Wired, on his blog, or in future books. I do high­ly rec­om­mend­ed this book to those who wish to see where busi­ness, Web 2.0, tech­nol­o­gy, design, and mod­ern cul­ture all come togeth­er under a sin­gle uni­fy­ing theory.

The Long Tail – Why the Future of Busi­ness Is Sell­ing Less of More is avail­able July 11th from Hype­r­i­on Press. You can pre-order the book now online from Amazon.com and oth­er fine book deal­ers, where no doubt the rec­om­men­da­tion engines will sug­gest to you oth­er great books on busi­ness, eco­nom­ics, and technology.