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I just came across the Long Tail blog, and in a matter of days, noticed several people using the terms to describe trends. I decided to read up on it, and here’s what I found.

Longtail is an economic theory with social implications. It was coined by Christopher Anderson in a Wired Magazine article in 2004. And you should care because it describes a new economic model where fragmentation and niche markets are more important than blockbusters and major power players.

Long Tail suggests that “low demand or have low sales volume can collectively make up a market share that rivals or exceeds the relatively few current bestsellers and blockbusters, if the store or distribution channel is large enough.” Take music for example, since Itunes can easily store and distribute songs, it is no longer limited to stocking its inventory with blockbuster artists. In fact, a niche community’s collective demand for less known artists may exceed sales for blockbuster artists.

The same applies with movies in a Blockbuster vs. Netflix scenario. Considering low storing and distribution costs, Netflix is able to house its shelves with movies in lower demand, like documentaries, which may collectively exceed the requests for blockbuster hits, which fill Blockbuster. As Anderson notes in his article, “Now, with online distribution and retail, we are entering a world of abundance. And the differences are profound.”

Long Tail explains how new distribution methods rival main stream channels. I think this is especially true with consumer generated media. Podcasts, blogs and online communities, for example, provide millions of new channels to receive news and share information, which may collectively account for more influence than mainstream paths. Three case points: At a recent Marketing Sherpa conference, marketers stated that the top 100 bloggers are collectively more read than the Washington Post and New York Times combined; Myspace just launched its record label; and the creation of the Media-Citizen and blogosphere provided new avenues to participate in the political process.

This leaves me with one question. What happens when large media player participate in these new economic models by aggregating fragmented content? If traditional media owns these new channels, will the Long Tail phenomena still take effect? For example, Rubert Murdock commented:

“We discuss that: What does a portal mean? In a sense, we say we’ve got 30 million portals: In MySpace, everyone has their own portal. All of our sites will be tightly interlinked technologically, so you can click from one to another.”

What does this mean in the context of Long Tail? While there are many niche communities that comprise Myspace, they entire platform is being monetize in the same way as traditional media.

Open to your comments.

I found these quotes helpful to my understanding of this concept:
“The key factor that determines whether a sales distribution has a Long Tail is the cost of inventory storage and distribution. Where inventory storage and distribution costs are insignificant, it becomes economically viable to sell relatively unpopular products; however when storage and distribution costs are high only the most popular products can be sold.” Wikipedia

“The Long Tail is the myriad of niche products whose collective market share can rival the blockbusters.”

“What’s really amazing about the Long Tail is the sheer size of it… Take books: The average Barnes & Noble carries 130,000 titles. Yet more than half of Amazon’s book sales come from outside its top 130,000 titles. Consider the implication: If the Amazon statistics are any guide, the market for books that are not even sold in the average bookstore is larger than the market for those that are… Venture capitalist and former music industry consultant Kevin Laws puts it this way: “The biggest money is in the smallest sales.” – Wired

p.s. photo from flickr, click for link.

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