The paradoxe of long tail

By | 13/12/2008

I have seen many people, many post, many blogs, talking about the long tail.

It is not my purpose here to explain what the long tail is. Well, it was  not. Until I realized that many people did not understand exactly what the long tail is. To make it brief, many people confuse the long tail with Pareto distribution, or, in a broader sense, Power law. But the paradox is that long tail effect is, in fact, somehow flatening the power law.

Long tail is about something slighty different : long tail is about the size of the catalog. This is visible in the october 2004 original article by Chris Anderson, but it has been mathematically formalized in a paper published in october 2003 at MIT – Sloan School of Management, called “Consumer Surplus in the Digital Economy : Estimating the Value of Increased Product Variety at Online Booksellers“.

What is interesting in this paper ?

First, it states that the size of the Amazon catalog, when it is about books, is about 23 times the size of the Barnes and Noble catalog, and 57 times the size of an independant bookstore. This is true also for CD, DVD, etc…

Amazon has a very interesting sentence : “everyday, we sell more books that we did not sell yesterday than books that we sold yesterday”. This is the opposite of mass marketing, which tends to sell the same thing everyday.

Second very interesting idea : the pareto law still applies, but it moves from 80-20 to roughly 70-30. The distribution tail is growing. This can be seen on table 4, which shows that books after position 250.000 (which means 90% of the catalog) accounts for 29,3% of sales. The tail is flatening.

Third very interesting point: a huge catalog increases consumer spending. In this case, the paper estimates a move from 731M US$ to 1 billion US$.

This was in 2003. What about now ?

Let us make this experiment : let us type ipod in the search engine of some online and brick and mortar store.

  • bestbuy.com : 94 products
  • Amazon.com (electronic department) : 32356 products

Let us search books about ipod.

  • Barnes and Nobles : 141 items
  • Amazon.com : 13926 items.

The size of the catalog keeps on increasing. What would be the impact of this ? Huge customization, community marketing, nich marketing, but, overall, a flatening of the tail. Which would mean somehow the end of power law, the tail would no longer be a tail, the statistical distribution transformed, clusterd into category of products, of course some being more bought than others, but not that much.

How can traditional brick and mortar manage this ? This is the question.

 

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