ETech – The Economics of the Long Tail

Chris Anderson, talking about the long tail
There’s a history with the long tail. Take TV. As cable channels came around, the share of network channels have been falling. We went from an 80/20 distribution (in 1985) to a 50/50 distribution today. Other long tail examples–Google: long tail advertisers; eBay: long tail hard goods; offshoring: long tail services

The three forces of the long tail:

  1. Democratize the tools of production (minimize the costs of distribution) eg. GarageBand
  2. Minimize the costs of distribution which minimize the costs of consumption
  3. Connect consumers to amplify word of mouth (collaborative filtering) minimize the noise down the tail

Research projects he’s working on:

  • Can the standard demand curve be impacted (change the slope) by the long tail? Millions of niches equal out the effects of big hits
  • Does the long tail have fractional elements? Is the tail is made up of millions and millions of smaller tails? Do you see the same power law distribution in these small tails?
  • How does price elasticity work in the tail? Should prices be lowered or increased down the tail? Maybe for entertainment you want lower prices down the tail (a want), information (a need) might raise prices down the tail
  • Bottom of the pyramid theory. There are huge markets of people at the bottom of the socio-economic ladder. If you can create .10 cent products, you could tap into a massive new market
  • Secondary markets. How does secondary markets (like used books) becoming more liquid (on Amazon) affect primary markets?