The Wrong Tail
When Chris Anderson, the Wired editor-in-chief, wrote about the Long Tail in October 2004, many of us realized that some business models have changed — and even disappeared. The fact that companies such as Amazon were making money by selling only a few copies of millions of different items was a revelation at this time. The old model of best-sellers was disappearing because of the collective power of online buyers worldwide. But now, Anderson has published a book about the Long Tail and Tim Wu has analyzed it for Slate in The Wrong Tail. Of course, I couldn’t resist to use such a title. But more seriously, Wu argues that Anderson has turned “a great theory of inventory economics into a bad theory of life and the universe.” Read more…
First of all, Anderson was probably so happy with the catchy expression he coined two years ago that he tried to use it for everything. But in fact, the “long tail” phenomenon is only valid for cultural goods, such as books, music tunes or digital movies. And why? Because this phenomenon has limits. Here are Wu’s explanations.
What are the Long Tail’s limits? As a business model, it matters most 1) where the price of carrying additional inventory approaches zero and 2) where consumers have strong and heterogeneous preferences. When these two conditions are satisfied, a company can radically enlarge its inventory and make money raking in the niche demand. […] It doesn’t cost much to add another song to iTunes—having 10,000 songs available costs about the same as having 1 million.
So, the Long Tail phenomenon can be appropriately applied to the distribution of cultural products. But what about other distribution sectors? Would we like to have several thousands types of gasoline available at our service stations? And would we benefit from a million operating systems for our computers? Certainly not. And the oil companies and the software industry are certainly not ready to invest in a project that will bring them a thousand customers but will cost them billions of dollars.
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Wu also uses the example of eBay to show how the Long Tail concept can be misused.
Anderson says that eBay “is both the Long Tail of products and the Long Tail of merchants.” But eBay is easy to understand without picking up The Long Tail: It lowers the transaction costs of buying and selling used goods, whether they’re niche products or not. If you call that a Long Tail, then the word means nothing more than “make easier to buy.” And then everything from the Yellow Pages, to paper money, to my real estate agent has suddenly grown a Long Tail.
As a conclusion, the concept of the Long Tail is valid for some distribution sectors, but not all. As notes Wu, Anderson has turned “a powerful idea into a dubious theory of everything.” Do you agree with him? What’s your take on this subject? Please tell me what you think.
Sources: Tim Wu, for Slate, July 21, 2006; and various other web sites
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