A long tail. An effective online business model

For Rhys, Anderson discovered a gold mine. The essence of the discovery is simple - modern discryption is tailored for trade popular goods and ineffective.

The demand for obscure products is so small that it makes no sense to manufacture and distribute them. But the total cost of little-known goods is millions of times higher than the cost of hits. And when every consumer can find information about any product, the future of any industry is associated with narrow niche markets. We only need tools to take into account the desires of each individual person.

This book (one of the most significant business books of the past decade) offers such tools. Quite working, proven in practice. The long tail idea applies to online commerce, publishing, music, film, toys, kitchenware, advertising ... anything.

The book is intended for entrepreneurs and people who want to know their future.

Dedicated to Anna

From the author

Thousands of people have helped create this book; it was an open process: first a popular article appeared, and then the work continued publicly on the blog. Therefore, many people need to thank for their participation, both here and in the notes at the end of the book.

My wife Anna worked as hard as I did. A project like this cannot be accomplished without a strong partner. Her continued support and understanding made this book possible, even though the price was high, from babysitting on Sundays when I worked at Starbucks to lonely evenings, missed vacations and weekends, and other side effects of all-consuming work. However, besides all this activity, she was my editor, first reader, confidant and source of endless support. (Our children - Daniel, Erin, Toby, and Isabelle - also spent the year barely seeing their father, and I want to thank them for their behavior that was appropriate for the situation.)

While doing research and sketching for a future book, I had the opportunity to work in two of the best places for work and reflection on Earth. Louis Rossetto and Jane Metcalfe, our friends, neighbors and magazine founders

In the summer of 2005, I was generously accommodated in Berkeley. (I was a “scientist in my place of work,” which made me feel smarter than I was.) Another close friend of mine, Peter Schwartz, gave me an equally great place in Emeryville, at his Global Business office. Network, where I did most of the work with my first-class assistant Steven Leckart.

Other valuable partners were the staff of the magazine

Bob Cohn and Thomas Goetz, our CEO and deputy. They helped me a lot by encouraging and completing some of my current work as the book began to take up more and more time. Bob also edited the Long Tail article, helping me to better formulate thoughts and choose the right words; this help remains valuable today. Melanie Cornwell's comments on the manuscript helped correct several pop culture errors and made the book better overall. I want to thank Blaise Zerega, who, as the book editor, continued to work when I was too busy, and Joanna Pearlstein, our research specialist, who helped me with many of the diagrams in the book. Special thanks to Si Newhouse, who both gave me the opportunity to reflect on these topics and allowed me to take time off to put my thoughts into a book.

Many scientists have played a large role in identifying and studying the consequences of the "long tail" effect. Erik Brynjolfsson of the Sloan School of Management and Jeffrey Ni of the Krannert School of Management conducted the first studies of Amazon's long tail, which gave me the basis for constructing my theory and convinced that this can be done. They are continuing their very interesting research in this area, and I am very grateful for their support. Anita Elberse at Harvard Business School's work on DVD and Netflix has been very helpful to me. I hope that the results of this study will be published in the near future and look forward to future collaboration.

A long tail. An effective online business model Chris Anderson

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Title: Long tail. An effective online business model
By Chris Anderson
Year: 2012
Genre: Self-improvement, Foreign business literature, Foreign applied and popular science literature

About the book “Long Tail. An Effective Internet Business Model "Chris Anderson

Unlike the Pareto rule, which in relation to the mass economy sounds like "20 percent of goods bring 80 percent of the profit", the "long tail" rule proves the opposite: little-demanded goods - those same 80 percent - can give a profit hundreds of times higher than the profit from sales of hit products!

The Internet has made it possible to reduce the costs of storing and distributing goods tenfold. The shelf length is now almost unlimited. Find out how to apply this to your business.

On our site about books, you can download the site for free without registration or read online book"A long tail. Effective Business Model on the Internet »Chris Anderson in epub, fb2, txt, rtf, pdf formats for iPad, iPhone, Android and Kindle. The book will give you a lot of pleasant moments and real pleasure from reading. You can buy the full version from our partner. Also, here you will find latest news from the literary world, learn the biography of your favorite authors. For aspiring writers, there is a separate section with useful tips and recommendations, interesting articles, thanks to which you yourself can try your hand at literary skills.

Quotes from the book “Long Tail. An Effective Internet Business Model "Chris Anderson

Amazon says something, the market for books that are not sold in regular stores already accounts for a third of the total book market and continues to grow rapidly (Figure 4). If such trends develop, the real book market could become twice as large as we can assume, if only we can overcome the scarcity economy. Venture capitalist and former music industry consultant Kevin Lowes says, "The biggest money comes from the least sales."

In 1988, British climber Joe Simpson wrote Touching the Void, a heartbreaking account of how he nearly died in the Peruvian Andes. Although the reviews for the book were good, it was moderately successful and then forgotten. Then, ten years later, a strange thing happened. Into Thin Air by John Krakauer, another book about tragedy in the mountains, became a sensation. Suddenly, Touching the Void began to sell again.
Booksellers displayed it next to Into Thin Air, and sales continued to grow. In early 2004, IFC Films made a film based on it, which received good feedback... Almost immediately after, HarperCollins released a second paperback edition, which stayed on the New York Times bestseller list for fourteen weeks. By mid-2004, Touching the Void was selling nearly twice as much as Into Thin Air.
What happened? Discussion on the Web. When Into Thin Air was first published, individual readers wrote reviews of it on Amazon.com, pointing out similarities to the much-praised, then-even lesser-known, Touching the Void. Other customers read the reviews, looked at the old book, and added it to their cart. Very soon, the seller's software drew attention to customer behavior - those who bought Into Thin Air, bought Touching the Void, and began offering them together.

I am skeptical about such statements. If people do not choose for themselves, then someone else chooses for them. Centuries of study retail(and the lessons of Soviet stores) show that this is not at all what customers need.

Endless screen
Television is vulgar, lascivious and dull, not because the audience is vulgar and dumb. Television is so simply because the vulgarity, lust, and stupidity of people are very similar, while their sophisticated aesthetic tastes are completely different.
David Foster Wallace

As the possibilities for choice grow, the negative aspects of the need to make a choice begin to emerge. The choice grows further, the negative aspects grow until they become overwhelming. At this moment, the choice no longer liberates, but dulls. You could even say that he is tyrannizing.

Except that he worked as an assistant to Robert Kennedy in the 60s, everything else was a shameless lie. Seigenthaler called Wales and forced him to delete the article (although he could easily have done it himself). After that, he wrote about the incident, which initiated a still ongoing discussion about how much you can trust Wikipedia.

Finally, to understand how widely this theory is applied, take a look at the following analysis of the long tail of national security by military analyst John Robb and posted on the Global Guerillas website:
Traditionally, the ability to wage war (change society through violence) was available only to nation states, with the exception of a few cases. States had a monopoly on violence. As a result, its distribution was limited, curtailed. This monopoly is coming to an end thanks to three trends.

Traditionally, the ability to wage war (change society through violence) was available only to nation states, with the exception of a few cases. States had a monopoly on violence. As a result, its distribution was limited, curtailed. This monopoly is coming to an end thanks to three trends.
- Democratizing the instruments of warfare. Niche producers (eg gangs) are made possible by globalization. You just need a few people, knives and an airplane (an example of using simple tools).
- Increased harm caused by niche war participants. The magic of a global guerrilla attack system that turns low-cost attacks into major economic and social events.
- Simplification of communication. New groups can easily find new members, reach out to a wider audience, and coordinate with other groups (allies).

Free download of the book “The Long Tail. An Effective Internet Business Model "Chris Anderson

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Dedicated to Anna

From the author

Thousands of people have helped create this book; it was an open process: first a popular article appeared, and then work continued publicly on a blog. Therefore, there are many to be thanked for their participation, both here and in the notes at the end of the book.

My wife Anna worked as hard as I did. A project like this cannot be accomplished without a strong partner. Her continued support and understanding made this book possible, even though the price was high, from babysitting on Sundays when I worked at Starbucks to lonely evenings, missed vacations and weekends, and other side effects of all-consuming work. However, in addition to all this activity, she was my editor, first reader, confidant and source of endless support. (Our children - Daniel, Erin, Toby, and Isabelle - also spent the year barely seeing their father, and I want to thank them for their behavior that was appropriate for the situation.)

By doing research and sketching for a future book, I have had the opportunity to work in two of the best places to work and think on earth. Louis Rossetto and Jane Metcalfe, our friends, neighbors and founders of Wired magazine, generously provided me with space in Berkeley in the summer of 2005. (I was a “community scientist,” which made me feel smarter than I was.) Another close friend of mine, Peter Schwartz, gave me an equally great place in Emeryville at his Global Business Network office where I did most of the work with his first-class assistant Stephen Leckart.

Bob Cohn and Thomas Goetz, our Chief Executive Officer and Deputy Chief Executive Officer, were other valuable partners. They helped me a lot by encouraging and completing some of my current work as the book began to take up more and more time. Bob also edited the Long Tail article, helping me to better formulate thoughts and choose the right words; this help remains valuable today. Melanie Cornwell's comments on the manuscript helped correct several pop culture errors and made the book better overall. I want to thank Blaise Zereg, who, as the book's editor, continued to work when I was too busy, and Joanna Pearlstein, our research specialist, who helped me with many of the diagrams in the book. Special thanks to Say Newhouse, who gave me the opportunity to reflect on these topics and allowed me to take a vacation to clothe my thoughts into a book.

Many scientists have played an important role in identifying and studying the consequences of the "long tail" effect. Erik Brynjolfsson of the Sloan School of Management and Jeffrey Hu of the Krannert School of Management conducted the first studies of the Amazon Long Tail, which gave me the basis for my theory and convinced me that it can be done. They are continuing their very interesting research in this area, and I am very grateful for their support. I found the work of Anita Elbers at Harvard Business School on DVD and Netflix very helpful. I hope that the results of this study will be published in the near future, and look forward to future collaboration.

Professor Haim Mendelssohn of Stanford Business School allowed me to speak to students and suggest the Long Tail as a research subject. Because of this, I worked with his students Angie Shelton, Natalie Kim, Saloni Saraya, and Bethany Poole, who conducted research on Yahoo! Music and eBay. Our work with eBay was assisted by Terapeak, which provided valuable information about the "long tail" of buyers and sellers in this market. Economist Hal Varian of the University of California, Berkeley proved to be a never-ending source of ideas and constantly encouraged me to look at the problem from different perspectives and greater precision.

One of the earliest sources of information that remains the benchmark for the long tail was RealNetworks' Rhapsody. Rob Glazer and Matt Graves have provided ongoing support for which I will be forever grateful. Netflix's Reed Hastings not only supported me and provided information, but also assumed that the term “long tail” would be popular, and was not mistaken. Dave Goldberg from Yahoo! helped me understand the state of the art in the music industry, and Bill Fisher of DVDStation helped me see the changes in the DVD economy and provided the information I needed. Robbie Vann-Adibe, formerly of Ecast, deserves special thanks for inspiring me to start this project.

Among the thinkers and writers who contributed to the book are Umer Ak, who helped me with the House Music section; Glenn Fleischman, who helped with Amazon chapters; Andrew Blau of GBN, who helped me think about the opportunities the world is facing as I work on this book; Rob Reid, whose long and delightful letters on entertainment economics I have quoted abundantly, and Kevin Lowes, whose thoughts on the power of a large number of niches influenced the original article.

My agent John Brockman not only criticized and gave advice, but also introduced me to his wonderful world of thinkers and scientists. I consider many dinners and meetings to which he invited me to be some of the most interesting in my life. My editor at Hyperion, Will Schwalbe, helped me tremendously in concentrating on the book. Its structure is largely in line with his recommendations, and I was able to complete it thanks to his constant enthusiasm and gentle management.

My parents deserve special thanks. I am grateful to my father, Jim Anderson, for showing me the importance of a global view of things and intellectual honesty, and my mother, Carlotta Anderson, for constantly inspiring me with her words and boundless curiosity.

The book publishing research proved to be the most challenging: the ideal source of information (Amazon sales data) was not available, and we had to reconstruct the information from data provided by third parties. For this I want to thank Morris Rosenthal and Tim O'Reilly. Finally, my thanks go to John Battel, author of The Search, whose blog post inspired me to launch thelongtail.com. The site has become the source of countless ideas, advice, data and thoughts from thousands of readers that deserve my special heartfelt thanks.

Introduction

We're obsessed with keeping track of our top-selling items. Our culture is a giant popularity contest. Hits consume us: we make and choose them, talk about them, watch their rise and fall. Every weekend a box office grossing sweepstakes, every Thursday a fight for the survival of the fittest TV show, which continues next week. Several popular songs are in constant rotation on the radio, and executives from all these industries are sweating in search of their next hit.

This is a world built by blockbusters. Over the past half century, huge media and entertainment industries have grown at gigantic box office grosses, gold discs, and high television ratings. It is not surprising that the hit has become the lens through which we view our own culture. Our era is defined by celebrities and mainstream products - they represent the “connective tissue” of our shared experience. The star-making system that began in Hollywood 80 years ago has now permeated all corners of commerce, from footwear to food. Our media is obsessed with what's popular now and what's not. In short, hits are all.

However, if you look closely, you can see that this picture of the world, which emerged in the post-war era of radio and television, shows some signs of wear and tear. Hits start to (scary to say!) Become less important. Number one is still number one, but the sales that accompany it are not what they used to be.

Most of the 50 best-selling albums of all time were recorded in the 70s and 80s (The Eagles, Michael Jackson), no such album has been released in the past five years. Hollywood's box office was down more than 6% in 2005, reflecting the fact that the number of people going to movie theaters is falling, although the population is growing.

Every year mass television loses audience to hundreds of niche cable channels. Men between the ages of 18 and 34 - the most attractive audience for advertisers - are starting to turn off the TV altogether, moving towards the Internet and video games. Popular TV program ratings are falling. The most popular show today in 1970 would not have made it into the top ten.

So, while we are still obsessed with hits, they are no longer the economic force they used to be. Where do capricious consumers flee to? This question cannot be answered unequivocally. They are scattered by the wind across the market, which is divided into countless niches. One area where there has been steady growth is The World Wide Web, however, it is a chaotic sea with a million directions, each of which determines the logic of marketing and media.

iTunes killed radio stars

I became an adult at the height of the popular culture era, in the 70s and 80s. The average teenager could watch half a dozen television channels, and virtually all adults watched several television programs. In any city, there were three or four radio stations broadcasting rock music, and they actually dictated to people what to listen to. Only a fortunate few teenagers who had the money could create a larger music collection.

In the summer we all went to watch the same blockbusters, and received news from the same newspapers and programs. Almost the only places where one could get acquainted with what remained outside of mainstream culture was the library and the comic book store. I was only familiar with popular culture, with what was contained in popular books, and with what we ourselves invented with friends and that never went outside our company.

Compare my way of life - in my youth and Ben, a sixteen-year-old teenager who grew up with the Internet. He is the only son of wealthy parents, lives in the prestigious North Berkeley Hills area, has a Macintosh in his room, his iPod is full (and he gets money for iTunes every week). He has many friends. Like them, Ben has never known a world without high-speed Internet access, mobile phones, mp3, TiVo and online shopping.

The main consequence of this is unlimited and unfiltered access to the most diverse culture, from the mainstream to the deepest underground. Ben's world is very different from the one in which I grew up: it is much less influenced by traditional media and the music industry. If you don't recognize yourself in the following pages of this book, introduce Ben. Its reality is a reflection of the future that awaits each of us.

For Ben, the cultural landscape is a continuous continuum in which commercial and amateur content compete on equal terms for its attention. He doesn't distinguish massive hits from niche products: Ben simply picks what he likes from a menu where Hollywood movies and video game-based amateur videos are arranged side-by-side.

Ben watches TV two hours a week, mostly West Wing (previously recorded, of course) and Firefly, a space-themed TV series that has been discontinued but retained in TiVo. He also considers anime to be television, which he downloads using BitTorrent, a peer-to-peer file-sharing technology, because it is originally broadcast on Japanese television (English subtitles are often made by amateurs themselves).

When it comes to cinema, he loves science fiction, and this is almost normal. Star Wars is his passion, as are all The Matrix episodes. However, he also watches films he downloads, including amateur animation featuring video game characters, and independently produced videos. For example, "Star Wars: Revelation" is a film directed by fans of the original version with special effects that are quite comparable to those seen in the films of Lucas.

Some of the music on his iPod was downloaded from iTunes, but most of the music was shared with him by friends. When someone from the company buys a disc, they usually make copies for everyone else. Ben loves mostly classic rock - Led Zeppelin and Pink Floyd - and many more video game tracks. He listens to the radio only when his parents turn it on in the car.

Ben's reading range extends from Star Wars novels to Japanese manga and comic books available on the Web. He, like some of his friends, is so passionate about the Japanese subculture that he studies Japanese at school. When I was in school, children chose this language because Japan was the dominant economic force and it was believed that language skills could provide opportunities career growth... However, now schoolchildren are learning Japanese in order to make subtitles for anime themselves, dive deeper into manga and find out not only innocuous translated things.

Ben spends most of his free time on the Web, sometimes just visiting random sites, sometimes taking part in discussions on forums dedicated to the game Halo and Star Wars. He is not interested in news, does not read newspapers or watch TV news programs, but he follows the latest tech and other niche rumors on sites such as Slashdot (news for techies) and Fark (strange news). All day he exchanges instant messages with ten of his closest friends. Ben doesn't send a lot of text messages from his mobile, but some of his friends do. (SMS is preferred by those who walk a lot; instant messaging is more convenient for those who spend more time in their room.) He plays video games with friends, mostly on the Web, and thinks Halo 2 is cool, especially the levels modified by the users themselves.

I suspect that if I were 25 years younger, then as a teenager, I would spend the same time. The main difference between Ben and me is choice. I was limited to what was broadcast on the radio. He has the Internet. I didn't have a TiVo (or even cable TV); he has it all, and BitTorrent to boot. I didn't even know that there was such a thing as manga, much less where to get it. Ben has access to all of this. Would I watch Gilligan's Island reruns if I could create a clan with friends in World of Warcraft? I doubt…

The popularity of TV programs in the 70s was not due to the fact that they were better: they had no alternatives to compete for the time we spent at the screen. What seemed to us to be the rise of conventional culture turned out to be not so much a triumph of Hollywood talent as the herd effect of proliferation on broadcast networks.

The good thing about broadcasting is that it can very effectively get the transmission to millions of people. But it cannot give every person the opportunity to choose from millions of programs. However, this is exactly what the Internet is doing so well. The economics of the broadcast era demanded hits — “big baskets” —in order to capture large audiences. Economy era high speed internet the opposite. Transmitting one stream to millions of people is extremely expensive and costly for a point-optimized network.

The demand for “big baskets” still exists today, but they are no longer the only market. Hits are now competing against an endless number of niche markets of all sizes. Consumers are increasingly picking one of the niches that suits them. The era is ending when one and the same thing suited everyone, and a new one comes to replace it - the market for diversity.

Our book talks about this market.

Dividing the common into billions of different cultural fragments endlessly frustrates traditional media and the entertainment industry. After spending decades practicing the skills of creating, selecting and promoting hits, it turns out that this is not enough. The audience shifts to something else. There is an imperceptible infiltration ... There is no good word for non-hits. Of course, this is not “ unsuccessful projects"Because most of them did not strive for power over the world. They are "everything else."

It is strange that this category was not paid attention to. After all, in the end we are talking about the overwhelming majority of everything that exists in the world. Most movies aren't hits, most music doesn't make it to the top 100, and most video programs don't even get rated by Nielsen, much less prime time. Nevertheless, many of them all over the world attract a multi-million dollar audience. They do not count as hits and therefore do not count.

However, what we are talking about is what the previously stable market is heading towards. A simple situation, when there were several hits, and the rest seemed not to be noticed, now turns into a complex mosaic of millions of mini-markets and microstars. The mass market is turning into a mass of niches.

This mass of niches has always existed, but now the cost of access to them is falling: consumers find niche products, and niche products find them; they are suddenly becoming an economic and cultural force to be reckoned with.

New market niches do not replace the traditional hit market, but simply appear on the same scene for the first time. For a century, we have been shielded from everything except the bestsellers to make the most of our expensive warehouse space, screens and attention. Now, in an era of connected consumers and digital “everything,” the distribution economy is radically changing as the Internet engulfs every industry it touches and becomes a store, movie theater and radio at a fraction of the traditional cost.

Think of a fall in distribution prices as a drop in water levels, or an ebb. A new space is opening up, which has always existed, but it was simply hidden by water. Niches are the intensive distribution of products that were previously unprofitable to offer from an economic point of view. Many of them already existed, but were simply invisible or difficult to find. These are movies that were not shown at your local cinema, music that were not on local radio, sports equipment that were not sold at Wal-Mart stores. All of this is now available via Netflix, iTunes, Amazon, or elsewhere as reported by Google. The invisible market has become visible ...

Other niche products are new. They are created by a growing industry at the intersection of commercial and non-commercial worlds, where it is difficult to tell when professionals leave and amateurs take over. This is the world of leading blogging, video creators, musical groups playing in garages: all of them are suddenly able to reach audiences thanks to the digital distribution economy.

"Rule of 98%"

The idea for this book came about when I answered one question incorrectly. As editor of Wired magazine, I speak, among other things, on technology trends. Since my career began in the scientific world, and I studied economics while working at The Economist, I first of all try to be based on real data. Never before have we had access to so much information. The secrets of the 21st century economy are stored on the servers of companies that surround us - from eBay to Wal-Mart. While real data is not always easy to obtain, the leaders of these companies constantly work with information and intuitively feel what is important and what is not. The secret to predicting trends is in conversations with leaders.

This is exactly what I did in 2004, talking to Robbie Vann-Adibe, director of Ecast, a company that supplies digital jukeboxes. Digital vending machines are similar to ordinary ones (a large cabinet with speakers and flashing lights, like in bars), the difference is that instead of hundreds of disks, the digital vending machine has a high-speed Internet connection, and users can choose from thousands of records that are downloaded and stored on the hard disk.

During our conversation, Vann-Adibe asked me to guess the percentage of albums (out of 10 thousand available), of which at least one track is sold per quarter.

I knew, of course, that the question was not an easy one. The usual answer is 20%, according to the "20/80 Rule", which, as experience suggests, applies absolutely everywhere. That is: 20% of products are responsible for 80% of sales (and usually 100% of profits).

However, Vann-Adibe worked in a digital content business and that business is different. So I thought and assumed that out of the whole 50% of the 10,000 albums in the quarter, at least one track is sold.

Think about it, this is an absurdly high number ... Half of the most popular 10,000 books in a regular bookstore are not sold at least once a quarter ... Half of 10,000 CDs at Wal-Mart are not sold quarterly. In fact, Wal-Mart doesn't hold that many disc titles. It is difficult to imagine a market in which such a large share of such a large number is sold at all. It seemed to me that digital market has its own characteristics, which is why I assumed such a large number. Needless to say, I was very wrong. The correct answer is 98%.

“Isn't it fun? Vann-Adibe said. "Everyone is wrong!" He, too, was stunned: the company was expanding its music collection, surpassing what is available in most music stores, affecting niches and subcultures, and the music was sold and sold. The more the company added music, the more it sold. The demand for non-hit music seems endless. Of course, the songs were not sold in large volumes, but almost all of them were somehow sold ... And since they are just bits in the database and it costs nothing to store and deliver them, these small numbers became noticeable.

Vann-Adibe found that Common Market niche music is huge and virtually unlimited. He called it the "98% rule." He later told me: “In a world where distribution and packaging are practically worthless, consumers behave in a special way. They buy almost everything ... I think this requires a lot of changes on the part of content distributors, but I don't know what exactly needs to be changed! "

I decided to answer this question. It became clear to me that this is a contradictory common sense statistics tell something important about the new entertainment economy in the digital age. With an unrestricted market, all our assumptions about hits and niches turned out to be wrong. Scarcity requires hits: if there is little space in the warehouse or if the number of radio bands is limited, it is logical to fill them with what sells best. People will only buy what is available.

And if the space in the warehouse is not limited by anything? Perhaps, in this case, hits are not the right approach. What if the non-hits - ranging from regular niche products to bad ones - add up to a market as large, if not larger, than the hit market? The answer is clear: this situation will radically change some of the largest markets.

So, I began my research that led me to the leaders of the burgeoning digital entertainment industry, from Amazon to iTunes. Whoever I asked, they answered me: the hits are good, but niches are turning into a huge new market. The “98% rule” turned out to be almost ubiquitous! Apple said that each of the million music tracks on iTunes was sold at least once (now there are twice as many songs on iTunes). Netflix admitted that 95% of its 25,000 DVDs (currently 55,000) were fetched at least once a quarter. Amazon did not give an exact figure, but independent sales research suggests that 98% of its 100,000 most popular books sold at least once a quarter.

All companies surveyed were impressed by the demand for things that previously seemed economically insignificant, from DVDs of British TV series surprisingly popular on Netflix to low-rated music, which is heavily sold on iTunes. So, for the first time, we can see what demand actually exists in our culture, if it is not influenced by a scarcity economy.

This demand looks very bizarre. It is even difficult to imagine that everything on offer finds its buyer. This is strange: as a rule, we do not think in terms of "one thing per quarter". When we think about traditional retail, we think about what sells well. We are not interested in sporadic sales, because in traditional retail a disc sold once a quarter occupies the same one and a half centimeters on the shelf as a disc sold a thousand times. This shelf space has a cost: rent, overhead, wages and so on - all this should pay off in sales. In other words, what is sold once or twice just wasted space.

However, if the space is worthless, you can again turn your attention to the fact that it is not sold often, and these products start to make a profit. Understanding this fact led to the creation of Amazon, Netflix and other companies that I interacted with. They all realized that where traditional retailing fails, the Web economy is growing. Many were still seldom sold, but these products were so much that in the end they turned into big business.

For the first half of 2004, I did this research and publicly articulated my findings, moving forward with every speech. At first my talk was titled The 98% Rule. Then - "New rules for the new entertainment economy." (I agree, not the best name.)

Rhapsody, one of the largest online music retailers, gave me real data on the popularity of its products in one month. When I plotted a graph from them, the curve was completely unexpected.

It started out like any other demand curve ranked by popularity. At the beginning, several hits were downloaded a large number of times, and then the curve dropped sharply. Interestingly, it never dropped to zero. If you look at the one hundred thousandth song, it becomes clear that it was downloaded thousands of times in a month. And the curve continued: 300, 400, 500 thousand - no store can afford to keep so many records ... However, no matter how far I looked, the demand remained. At the very end of the curve, the compositions were downloaded only four to five times a month, but this is still not zero ...

Such curves are called "long tail curves" because the "tail" of the curve is very long compared to its beginning. So I came up with the term "long tail". It first appeared on slide 20 of one of my presentations on "new rules". I think Reed Hastings general director Netflix convinced me that I was hiding the most interesting ... By the summer of 2004 my performances were called "Long Tail", and I almost finished the article of the same name for my magazine.

When The Long Tail article was published in Wired in October 2004, it quickly became the most cited article ever published in the magazine. Three main observations, backed up by previously unpublished information, seemed incontestable: 1) The tail of the variety available is much longer than we think; 2) now it can be used profitably; 3) all these niches, if combined, turn into a significant market.

TiVo is a popular US brand of digital video recorders. The set-top box allows you to record TV programs on the internal hard drive and watch them later separately or together with another program ("time-shifting"). Approx. per.

Access to diversity further expanded again at the household level with the introduction of toll free 800 numbers. In 1967, AT&T introduced New Product- Interstate Inward WATS (Wide Area Telephone Service), also called Automated Collect Calling, in order to counter the expected shortage of telephone operators. Operators could not cope with the number of calls at the expense of the receiving party. AT&T believed that automation would help avoid a shortage of workers, but in general it would not be particularly popular. The company never dreamed that by 1992, just 25 years later, 40% of AT&T's long-distance calls would be toll-free.

Free calls allowed a revival of catalog shopping. The era of automobiles has driven the population to the suburbs, where the choice is again limited to goods in local stores. Suburban populations, increasingly wealthy, were ready to spend money again, and by the mid-1970s they had credit cards. Code 800 numbers sparked a boom in home purchases.

In contrast to Sears and the use of huge centralized warehouses, the later wave of catalogs was niche oriented. Color printing technology allowed niche merchants to print hundreds of thousands and even millions of catalogs that bombarded mailboxes and contained images of the same quality as magazines. If only 1% of those who received the catalog responded in response, it still made a profit.

Niche products have found a way to reach mass audiences again. Sports goods, home decoration, underwear, garden furniture, clothing, hobby items - every month the specialized trade offered a huge selection. All you had to do was have a credit card and make a call, and the goods were delivered within a week or two. This abundance was impressive, but what personal computers made possible far surpassed it.

General catalog

Electronic commerce on the Web in the early 1990s was based on a directory model. Ordering was even more convenient, there was more choice, and the penetration rate was deeper. Overhead costs are lower. The Internet has provided an opportunity to show the catalog to everyone, now there is no need for printing and mail. This method worked in all cases where directories were used, and in some other areas.

Certainly, some types of products have proven to be more profitable than others. However, how do you determine which ones?

This is the question Jeff Bezos asked himself when he was working for D.E. Shaw in New York. It was 1994, and the Internet had just gained popularity, expanding 2300% a year. Bezos, a good mathematician, was asked by his bosses to identify opportunities for doing business on the Internet. At an event in Silicon Valley ten years later, he said:

I went to the Direct Marketing Association and got a list of all the products that were being sold remotely. Clothes came first. Gourmet food is second. At the very bottom of the list were books, and even then they got into it only because there were such organizations as the Book of the Month Club. There were no catalogs offering books at the time.

The early 1990s saw the rapid development of the American book industry. Crown Books has reshaped the business landscape with discounter chains, achieved record sales and led to the creation of other similar chains. After that, Barnes & Noble and Borders took a step forward and opened book supermarkets. Sometimes these supermarkets were opened in converted cinemas or bowling alleys. They sold up to 100 thousand titles of books, which is five times more than the number of books in a regular bookstore. The incredible choice and affordability ushered in an era of abundance for book buyers.

There were more and more books, and they became cheaper. What else is needed?

Bezos asked himself the same question:

I tried to figure it out. If you used the Internet in 1994, with primitive browsers and the technology of the day, you know how inconvenient it was. The browser constantly crashed, nothing worked as it should, and the speed was scanty, even with the best modem ...

I came to the conclusion that if something can be successfully done off the Internet, then it is better to leave it as it is ... No need to sell clothes, although this is the most popular category, as clothes can be very effectively sold in stores and by mail. That was my criterion: choosing a category in which Internet use would significantly improve the customer experience, and in a way that can only be done on the web.

It turned out that the moment of having a choice is the main thing that attracts book buyers. It also turned out that you cannot make a large paper catalog of books - this is impractical. More than 100 thousand new books are published annually. The largest stores sell 175 thousand items, and such large stores only three. And so the idea came up: let Amazon.com be the first place to find and purchase millions of books with ease.

This idea was based on an opportunity that lurked in the depths of a seemingly mature book industry. Although there are many publishers, almost all sales were handled by two wholesalers with warehouses throughout the country.

Great opportunity for virtual trading!

By this time, there were at least 1.5 million books available for English language- only 10% of them were sold in stores. Today the Books in Print online database contains information on nearly 5.6 million titles. Bezos also knew that directories of individual publishers began to appear on the Internet, offering textbooks, book exchange, self-published books, and more. There was no reason Amazon couldn't offer all of these titles.

The Internet has overcome most of the physical barriers to unlimited choice. The big sellers were big, but they still had to consider the economy retail space, employees, location, opening hours and weather conditions. They were more efficient than independent sellers and could offer more choice. However, even their business model was deadlocked long before all the available goods ran out.

Today, online shopping has replaced paper-based shopping and accounts for 5% of US retail. This share is growing at 25% a year and, perhaps, Bezos's predictions that Internet trade will occupy 15% of the market, that is, more than 1/10 of the American economy of 12 trillion dollars, may soon come true.

Of course, there are and are popular sites for physical merchants. Bn.com complements the Barnes & Noble brand and offers a selection comparable to Amazon's. In both cases, shopper cards can be used to get a discount, and in Manhattan, where B&N has multiple stores, day-of-order delivery is possible. There is network side and Wal-Mart, Best Buy and countless others retail chains... The Web's unlimited retail space enables them to offer shoppers more choice, build loyalty and reach out to new ones who may be far from the physical store.

Long tails everywhere

Bezos's vision of unlimited retail space, abundance of information, and easy search has paid off among virtual merchants like eBay and helped traditional retail. As a result, today, wherever you look, there is a “long tail” effect in all markets.

Google has found a way to join the long tail of ads, and Microsoft is lengthening the tail of video games into small, cheap downloads on Xbox Live. Open source projects such as Linux and Firefox are the long tail of programmers' work. Offshore business is the long tail of the labor market. In addition, the Internet has created the longest tail ... of pornography, taking into account all possible tastes and characteristics.

Less visible examples include the development of microbreweries and the beers they sell - the long tail of brewing. Selling special T-shirts, shoes and other clothing is the "long tail" of fashion. The development of networked universities is the "long tail" of education.

Finally, to understand how widely this theory is applied, take a look at the following analysis of the long tail of national security by military analyst John Robb and posted on the Global Guerillas website:

Traditionally, the ability to wage war (change society through violence) was available only to nation states, with the exception of a few cases. States had a monopoly on violence. As a result, its distribution was limited, curtailed. This monopoly is coming to an end thanks to three trends.

- Democratizing the instruments of warfare. Niche producers (eg gangs) are made possible by globalization. You just need a few people, knives and an airplane (an example of using simple tools).

- Increased harm caused by niche war participants. The magic of a global guerrilla attack system that turns low-cost attacks into major economic and social events.

- Simplification of communication. New groups can easily find new members, reach out to a wider audience, and coordinate with other groups (allies).

The result is a long tail. New, niche producers of violence have blossomed. The demand for the result of their actions has also sharply increased. Major conflicts (for example, the confrontation between the Islamic world and the United States) were initiated not by states, but by Al-Qaeda and its clones.

The Three Aspects of the Long Tail

Make it, put it up for sale and help me find it ...

The long tail theory boils down to the following. Our culture and economy are increasingly moving from focusing on a relatively small number of hits (mass products and markets) at the beginning of the demand curve to a huge number of niches at the tail. In an era that is not limited by the physical boundaries of the retail space and distribution bottlenecks, goods and services aimed at narrow audiences can be as attractive economically as mass products.

However, this is not all. The demand must follow the new supply, otherwise the “tail” will cease to exist. Its value is measured not only by the diversity presented in it, but also by the number of people striving for it. True understanding of demand is possible only when the supply is infinite. It is the aggregate sales, use and other participation of people that makes the expansion of diversity a significant economic and cultural force. The Long Tail starts with millions of niches, but only makes sense when they are inhabited by humans.

All of the above is reduced to six positions of the "long tail" era.

1. In almost all markets there are significantly more niche products than hits. This ratio grows as the cost of means of production falls and their distribution.

2. The cost of accessing niches drops sharply. By combining phenomena such as digital distribution, powerful search technologies, and the widespread availability of high-speed Internet, online markets are reshaping retail. Thus, now in many markets you can offer a much larger selection of products.

3. Simple growth in supply does not in itself lead to a change in demand. Consumers need to be given the opportunity to find those niches that best suit their interests and preferences. Many tools are effective here - from recommendations to ratings. These filters can shift demand to the tail.

4. As soon as the variety in the offer increases significantly and filters appear to understand it, the demand curve is flattening. There are still hits and niches, but hits are becoming less popular and the popularity of niches is increasing.

5. Although none of the niche products are sold in large quantities, the number of niche products is so large that, collectively, they can form a market that rivals the market for hits.

6. As soon as all of the above happens, it becomes visible real form demand, unclouded by inefficiencies in distribution, lack of information and physical constraints. Moreover, this form is much less dependent on hits than we are used to thinking. It is as diverse as the population itself.

So the Long Tail is a culture independent of economic scarcity.

How long tails arise

Nothing we've talked about happens without one important condition: lowering the cost of niche access. What causes these costs to fall? The answer may differ from market to market, but usually the explanation includes one or more of the following important aspects (Figure 7).

Rice. 7. Aspect 1. Democratization of the means of production

The first aspect is democratization of the means of production... Here best example- a personal computer that gave everyone a lot of tools: from the printing press to film and recording studios. The power of personal computers has resulted in the number of "manufacturers" - people who can do what only professionals could do just ten years ago - increased by a thousandfold. Not everyone has talent, but many do. Give people the opportunity to create, and they will certainly create masterpieces.

Accessible content is growing faster than ever. This is what lengthens the "tail" to the right, multiplying the number of goods. For example, in the music field, the number of albums increased by a phenomenal 36% in 2005 to 60,000 titles (up from 44,000 in 2004) - largely due to the ease with which musicians can now record and release music. At the same time, musical groups have posted more than 300 thousand compositions for free access, further lengthening the “tail” (Fig. 8).

Rice. eight. Aspect 2. Democratizing distribution tools

The second aspect is reducing the cost of consumption by democratizing distribution tools... The fact that everyone can create something makes sense only when others can consume it. The personal computer has made everyone a manufacturer or publisher, and the Internet has made everyone a distributor.

In its most dramatic form, it is the economy of the confrontation between bits and atoms, the difference between the fractions of cents for distributing products on the Web and the whole dollars needed to use cars, warehouses and trade pavilions. The Internet has dramatically reduced the cost of reaching consumers even for physical items. After spending decades and billions of dollars, Wal-Mart has built the world's most sophisticated supply chain to bring a huge range of low-cost products to consumers around the world. Today, anyone can access an equally large list simply by going to eBay.

Notes (edit)

This refers to the American Football World Cup. Approx. per.

Courier delivery service. Approx. per.

Interstate incoming phone service. Approx. per.

Automatic calls at the expense of the receiving party. Approx. per.

Direct Marketers Association. Approx. per.

End of free trial snippet.

Chris Anderson, the editor-in-chief of Wired magazine, was the first to draw attention to an interesting phenomenon that began to be observed with the development of the Internet. Anderson conducted research that lasted nearly two years and developed a theory he called the "long tail" rule. Unlike the Pareto rule, which in relation to the mass economy sounds like "20 percent of goods bring 80 percent of the profit", the "long tail" rule proves the opposite: little-demanded goods - those same 80 percent - can give a profit hundreds of times higher than the profit from sales of hit products! The Internet has made it possible to reduce the costs of storing and distributing goods tenfold. The shelf length is now almost unlimited. Find out how to apply this to your business.

* * *

The given introductory fragment of the book A long tail. An Effective Internet Business Model (Chris Anderson, 2012) provided by our book partner - the company Liters.

Introduction

iTunes killed radio stars

Ben's reading range extends from Star Wars novels to Japanese manga and comic books available on the Web. He, like some of his friends, is so passionate about the Japanese subculture that he studies Japanese at school. When I was in school, children chose this language because Japan was the dominant economic force and it was believed that language skills could provide career opportunities. However, now schoolchildren are learning Japanese in order to make subtitles for anime themselves, dive deeper into manga and find out not only innocuous translated things.

The good thing about broadcasting is that it can very effectively get the transmission to millions of people. But it cannot give every person the opportunity to choose from millions of programs. However, this is exactly what the Internet is doing so well. The economics of the broadcast era demanded hits — “big baskets” —in order to capture large audiences. The economics of the high-speed Internet era are the opposite. Transmitting one stream to millions of people is extremely expensive and costly for a point-optimized network.

Our book talks about this market.

Dividing the common into billions of different cultural fragments endlessly frustrates traditional media and the entertainment industry. After spending decades practicing the skills of creating, selecting and promoting hits, it turns out that this is not enough. The audience shifts to something else. There is an imperceptible infiltration ... There is no good word for non-hits. Of course, these are not "unsuccessful projects", because most of them did not seek power over the world. They are "everything else."

The new niche market does not replace the traditional hit market, but simply makes its first appearance on the same scene. For a century, we have been shielded from everything except the bestsellers to make the most of our expensive warehouse space, screens and attention. Now, in an era of connected consumers and digital “everything,” the distribution economy is radically changing as the Internet engulfs every industry it touches and becomes a store, movie theater and radio at a fraction of the traditional cost.

Other niche products are new. They are created by a growing industry at the intersection of commercial and non-commercial worlds, where it is difficult to tell when professionals leave and amateurs take over. This is the world of leading bloggers, video makers, and garage bands who are suddenly able to reach audiences thanks to the digital distribution economy.

"Rule of 98%"

During our conversation, Vann-Adibe asked me to guess the percentage of albums (out of 10 thousand available), of which at least one track is sold per quarter.

Think about it, this is an absurdly high number ... Half of the most popular 10,000 books in a regular bookstore are not sold at least once a quarter ... Half of 10,000 CDs at Wal-Mart are not sold quarterly. In fact, Wal-Mart doesn't hold that many disc titles. It is difficult to imagine a market in which such a large share of such a large number is sold at all. It seemed to me that the digital market has its own characteristics, which is why I assumed such a large number. Needless to say, I was very wrong. The correct answer is 98%.

Vann-Adibe found that the overall market for niche music is huge and virtually unlimited. He called it the "98% rule." He later told me: “In a world where distribution and packaging are practically worthless, consumers behave in a special way. They buy almost everything ... I think this requires a lot of changes on the part of content distributors, but I don't know what exactly needs to be changed! "

I decided to answer this question. It became clear to me that this counterintuitive statistic was telling something important about the new entertainment economy in the digital age. With an unrestricted market, all our assumptions about hits and niches turned out to be wrong. Scarcity requires hits: if there is little space in the warehouse or if the number of radio bands is limited, it is logical to fill them with what sells best. People will only buy what is available.

This demand looks very bizarre. It is even difficult to imagine that everything on offer finds its buyer. This is strange: as a rule, we do not think in terms of "one thing per quarter". When we think about traditional retail, we think about what sells well. We are not interested in sporadic sales, because in traditional retail a disc sold once a quarter occupies the same one and a half centimeters on the shelf as a disc sold a thousand times. That shelf space has a cost: rent, overhead, payroll, and so on, all of which must pay off in sales. In other words, what is sold once or twice just wasted space.

Rhapsody, one of the largest online music retailers, gave me real data on the popularity of its products in one month. When I plotted a graph from them, the curve was completely unexpected.

Such curves are called "long tail curves" because the "tail" of the curve is very long compared to its beginning. So I came up with the term "long tail". It first appeared on slide 20 of one of my presentations on "new rules". I think Reed Hastings, CEO of Netflix, convinced me that I was hiding the fun ... By the summer of 2004, my performances were called The Long Tail, and I had almost finished an article of the same name for my magazine.

Tails everywhere

One of the nicest aspects of the response to the article was that it was applicable to a huge number of industries. The article was about the new economy of entertainment and media; I casually mentioned that eBay (which sells products) and Google (with small advertisers) are also long-tail companies. However, readers have seen the Long Tail everywhere: from politics to public relations, from musical scores to varsity sports.

People intuitively realized that the emerging efficiency of distribution, production and marketing is changing the way we think about what is profitable. The best way to describe it is that unprofitable consumers, products, and markets turn into profitable ones. While this phenomenon is most prominent in the entertainment and media industries, you just have to look at eBay and notice the same trend everywhere - from cars to traditional crafts.

The Long Tail is actually about the economy of abundance, what happens when the walls between supply and demand in our culture begin to break down and everything becomes available to everyone.

I am often asked to name a product that does not include the "long tail" effect. I usually answer that this is most likely something so common that there is no variety, since it is not needed. For example, flour. I remember how I bought it in a store in a large package, on which it was written: "Flour". Then I went to the local grocery store Whole Foods and realized that I was wrong: today there are more than twenty types of flour - from simple wheat flour and its variants to exotic products such as amaranth flour and blue corn flour. Surprisingly, the "long tail" now has to do with flour.

Growing wealth has transformed us from economy-seeking shoppers who buy brands (or non-branded products) to connoisseurs whose taste differs from others in a thousand little things. Our behavior as consumers is now described in oxymorons: massclusivity, slivercasting, mass customization. All these words speak about one thing - about the "long tail".

Economy of the XXI century

This book is partly - research project carried out with the help of students and professors from Stanford Business Schools, MIT and Harvard. It is also the fruit of over a hundred speeches, brainstorming sessions, and visits to companies and industries that understand the Long Tail is changing their world. The book was born in collaboration with dozens of companies and executives who shared megabytes of inside information, giving me the opportunity to explore the microeconomics of Internet markets in an unprecedented way.

Interestingly, the economy of the 21st century is already visible in the data of Google, Netflix, Amazon and iTunes and the like all over the world. It can be seen in terabytes of information about how consumers behave in a situation of unlimited choice: until recently, such a question did not make sense, but now it has become extremely important.

Surprisingly, very few economists work with this information, mainly because they do not ask for it (most of the scientists I have worked with are from business schools, only a few are economists). There are a few exceptions: UC Berkeley economist Hal Varian is part-time at Google, and auction economists love eBay, not surprisingly. However, such specialists are rare. Some of the data in the book have never been published before.

Given the novelty of the topic, I asked for help from experts in various fields. As an experiment, I have publicly worked on particularly complex conceptual ideas on the thelongtail.com blog. It usually went like this: I put in an almost finished description of how the "20/80 rule" changes, and then dozens of smart readers wrote their comments or their own blog posts, pointing out how to improve the text. Sometimes such brainstorm attracted up to 5 thousand visitors a day.

Manufacturers software allow the most dedicated users to use the early (beta) versions of the software. In exchange for this privilege, users test programs on their own computers and find bugs that the developer missed. Beta testing is the foundation for building quality apps. I hope that a similar process - checking out the provisions of the book in public - has led to the fact that this work is better, or at least more logical.

It is worth mentioning here the difference between beta testing a book and writing it publicly. Many have tried to do the latter - laid out draft chapters and sometimes even allowed them to be collectively edited. I used the blog mainly as a diary describing my research. Most of what you read is not written on the web.

Finally, about the concepts. While I have coined the term "long tail," I cannot claim to have figured out how to use the efficient economics of online retail to bundle poorly selling products. This was done by Jeff Bezos of Amazon around 1994. I learned a lot from conversations with him and his colleagues at Netflix and Rhapsody, as well as with others who have dealt with this issue.

Real inventors are entrepreneurs. I was just trying to synthesize the results of their work into a circuit. This is exactly what economics does: it looks for simple and clear schemes that describe the phenomena of the real world. The creation of a schema is an achievement in itself, but it pales in comparison to the achievements of those who discovered and used the phenomenon itself.