*From ctamusements.com

For Chris Anderson, editor-in-chief of Wired, the concept of the “long tail” began as a conversation with a CEO of a digital jukebox company. Anderson explains that the traditional model of economics generally follows the 80/20 Rule, that is “20 percent of products account for 80 percent of sales (and usually 100 percent of the profits).” The CEO of this digital jukebox company posed a question to Anderson, something that went along the lines of:

What percentage of the 10,000 albums available on the jukeboxes sell at least one track per quarter?

Anderson went out on a limb, because they were talking digital media and not traditional media, and guessed that a whopping 50% of the albums stored on the jukebox hard drive sold at least one track per quarter. Wrong, the CEO answered. The answer was a mind-blowing 98 percent.

Culture Unfiltered by Economic Scarcity

In a traditional bricks and mortar store, like Tower Records, space constraints limit the number of albums available to consumers. Essentially, each album takes up a half-inch of space and that space is valuable because it is limited. For an album to be worth that half-inch of space, it has to sell at least four copies a year, and the store owners don’t want to take a gamble on a potential loss. Thus, only the most popular and likely to sell records are made available.

However, we’re not talking about traditional means of production and delivery anymore; now we have digital media. Digital media allows for an endless supply of books, music, movies, television, and goods. That digital jukebox company can offer 10,000 albums because it costs the company very little to store the music, and when you add up all the little “onesies and twosies” – those songs that customers may only purchase a few times a month, the aggregate of those fringe purchases really add up. In fact, with the new growth market, a huge 45 percent of Rhapsody’s total sales are products that are not available in the largest offline retail stores; 25 percent for Netflix; and 30 percent for Amazon.

So what does this all mean? It means that we are living in a new market of niches and customization. Sure, there will always be “hits” like Lady Gaga, the World Cup, and books like The Lovely Bones, but there will also be this growing tail end of the market that include more obscure products that will be available to us. As Anderson explains, “Way out at the end of the curve, tracks were being downloaded just four or five times a month, but the curve still wasn’t at zero. In statistics, curves like that are called “long-tailed distributions,” because the tail of the curve is very long relative to the head.”

*From novelr.com

Before the advent of the Internet, we were confined by locality. The music we listened to was dictated by the few local radio stations that played the music we liked or what was being shown on MTV; the movies we watched were dictated by what was running at the local theater or available at Blockbuster; the clothing we could buy generally came from the local mall or specialty store; books came from the local bookstore or library; etc. Essentially, before this new marketplace was born, all that was available to us resided in the “head” portion of the above graph in red, a.k.a., the “hits.” And, thus, the 80/20 rule began to shrivel and die.

Collective Knowledge

Along with the economic changes resulting from the long tail phenomenon giving the people the power of customized consumerism, came the power of information. In the past, the average American family had a set of encyclopedias, a dictionary, a thesaurus, and a bookshelf or two of non-fiction reference titles. These sources of information were compiled and written by experts and scholars and distributed to the public. Until 2001. In January 2001, a man named Jimmy Wales “set out to build a massive online encyclopedia in an entirely new way–by tapping the collective wisdom of millions of amateur experts, semi-experts, and just regular folks who thought they knew something. This encyclopedia would be freely available to anyone; and it would be created not by paid experts and edits, by by whoever wanted to contribute.” This collective encyclopedia, dubbed Wikipedia, went on to be huge in every sense of the word. In terms of comprehensiveness, it became the world’s biggest encyclopedia by just 2005. Today (or when The Long Tail was published, at least) there are more than 2 million articles available on Wikipedia, far surpassing Britannica.

Of course, Wikipedia can never be considered 100 percent accurate due to the fact that most of the articles can be edited at any time by any person (there are a select few that are locked for editing. See NYTimes’ list of protected Wikipedia articles). However, it is amazingly self-correcting, thanks to volunteer “curators” around the globe.

How to Thrive in the Long Tail World

Anderson explains that the key to creating a thriving Long Tail business is to:

  1. Make everything available.
  2. Help people find it.

Businesses that are going to thrive going forward have to let customers do the work using peer production; they have to “think niche” and avoid focusing too closely on one group of consumers, understanding that one product and price point don’t fit all; they must share, share, share information; and understand the power of “free” (think Skype, Gmail, and providing free 30-second song clips to online customers).

Essentially, we are no longer being told what to listen to, read, wear, watch, think, and understand. Information is no longer authoritative, and neither is our marketplace.

My Thoughts

When I first ordered The Long Tail, I have to admit that I was concerned it might be a little too “techie” or filled with jargon I wouldn’t understand. Anderson is the editor-in-chief of Wired and also put in some time at The Economist, so reading a book by an author with a background rich in technology and statistics seemed intimidating. However, Anderson possesses the unique skill of being both extremely informed and knowledgeable, yet simultaneously able to explain what he knows in plain English, and also knows how to restrain himself–either that, or he has a great editor. See this video of Anderson explaining his Long Tail theories using the industries of film and music as examples – you can see that he’s great at explaining and conveying information to non-insiders.

Although he largely wrote the book offline, the public served as a collective editor of his ideas. Through his blog on the Long Tail, Anderson explained his theories and thoughts and closely interacted with his audience, a process that no doubt helped to refine and sculpt his ideas.

Ironically, The Long Tail went on to be a NYTimes bestseller. Pretty good for a book eschewing “hits,” right? But seriously, I can understand why. This book outlines how everything is changing, and it also makes you really, really excited for the changes and forces you to even feel a little lucky to be living in a world with all of this digital media.

The Other Side

Not everyone shares my enthusiasm for Anderson’s theories. In a 2008 article on Slate titled Long Tails and Big Heads: Why Chris Anderson’s theory of the digital world might be all wrong, author Farhad Manjoo points to the research of a Harvard market professor, in which American music and movie sales were analyzed over the course of a few years. She concluded that Anderson’s Long Tail theory was extremely “flat,” in that, “It’s true that we’re now buying more obscure movies and music than ever before. But we’re merely nibbling on these niches, Elberse reports, while we continue to gorge on a small selection of hits.” Ultimately, the Manjoo points out that we may not be entering the era of obscurity and eschewing cultural hits to the degree that Anderson asserts.