Monday, March 2, 2009

The Longer Long Tail

This book by Chris Anderson does a great job of explaining in simple economic terms the impact of what's been happening over the last 10 years in the economics of markets and why "the future of business is selling less of more".  The basic points are: 

1. First, increase supply by making everything available. (SUPPLY)
Once you convert products from physical atoms (a book) to digital bits (a listing on Amazon) you reduce the costs of distribution (no real estate store front) and remove the ROI/square foot constraint of limited shelf space. Even the biggest book store has limited space but an on-line store can just plunk down another hard drive and list thousands more books. Lower distribution and shelf space costs mean it's more feasible to offer more variety. As a result the monopoly of mass market hits is reduced and the availability of niche work rises. 

2. Second, with all this massive supply of things out there, I need help to buy. (DEMAND)
As a consumer, if I can find it (using search) and I can be assured of its quality (by using reviews, votes, diggs, etc) I am more likely to buy, driving up the income from niches relative to hits.

The Longer Long Tail describes the interaction of these demand and supply factors in industries such as music (Rhapsody vs Walmart), books (Amazon vs Barnes & Noble), used stuff (E-Bay) and others by using data that shows the shift in revenue from hits to niches.  

The fragmentation of demand has always been there because everyone is a unique individual but the tools to find, harvest, and make more affordable singular taste to the niche degree have only recently become available.  It's a very good time to be alive.  

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