Tuesday, March 22, 2005

The Long Tail

Entrepreneurs, especially technical entrepreneurs with modest expectations should take a serious look at what Chris Anderson, the editor of Wired magazine, calls "The Long Tail". The basic idea is that the overall economy is made up of millions of niches and business success will increasingly come from being able to accommodate the focused needs of each small niche, rather than generalized products and services that are designed for mass markets. As Chris says:

The Long Tail is about how the mass market is turning into a million niches. The term refers to the yellow part of the sales chart at left [below], which shows a standard demand curve that could apply to any industry, from entertainment to services. The vertical axis is sales, the horizontal is products. The red part of the curve is the "hits", which have dominated our commercial decisions to date. The yellow part is the non-hits, or niches, which I argue in the article will prove equally important in the future now that technology has provided efficient ways to give consumers access to them thanks to the "infnite shelf-space effect" of new distribution mechanisms that break thought the bottlenecks of broadcast and traditional bricks and mortar.

The two big points of the Long Tail theory are these: 1) The yellow part potentially extends forever to the right; 2) The area under that line--the market it represents--may become as big as the hits at the left.

See the Wikipedia article for The Long Tail.

Check out Chris Anderson's The Long Tail blog. It's a great example of an idea that grew into an article that spawned an idea for a book and is now essentially a book in progress that will eventually become a physical book but continue to evolve independently of the physical book as technology and the eocnomy continue to evolve. This is a model that will be increasingly used in the future.

-- Jack Krupansky


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