lorem

I n t e r n e t M a r k e t i n g T e c h n o l o g i e s 385

(continued)

INSIGHT ON TECHNOLOGY

THE LONG TAIL: BIG HITS AND BIG MISSES

The Long Tail is a name given to various statistical distributions char- acterized by a small group of events

of high amplitude and a large group of events with low amplitude. Coined

by Wired Magazine writer Chris Anderson in 2004, the Web’s Long Tail has since gone on to fascinate academics and challenge online mar- keters. The concept is straightforward. Think Hol- lywood movies: there are a few big hits and also thousands of films that no one ever hears about. It’s the legion of misses that make up the Long Tail. Anderson claimed to have discovered a new rule: no matter how much content you put online, someone, somewhere will show up to buy it. Rather than 20:80, Anderson suggested that Internet search, recommendation engines, and online social networks all enable niche products to be discovered and purchased. For example, eBay contains millions of items drawn from every Aunt Tilly’s closet in the world and still seems to find a buyer somewhere for just about anything, generating revenue that would not be realized without an online marketplace.

On the Internet, where search costs are tiny, and storage and distribution costs are near zero, online retailers like Amazon and Alibaba are able to offer millions of products for sale compared to a typical bricks-and-mortar retailer like Walmart or Sears. Without physical stores to maintain, online merchants can save on overhead and labor costs and load up on inventory. Wherever you look on the Web, you can find a great many items that only a few people are interested in buying. But with over 3 billion people online, even a one-in-a-million product could find over 3,000 buyers. Researchers note that most shoppers have a taste for both popular as well as niche products.

One problem with the Long Tail is that people sometimes have difficulty finding niche products because they are—by definition—largely unknown.

The revenue value of low-demand products is locked up in collective ignorance. Here’s where recommender systems come into play: although these systems can skew toward the most popular selections, they can sometimes guide consumers to obscure but wonderful works based on the recom- mendations of others. Netflix has spent millions in recent years on improving its recommender system, and Pandora’s recommender system focuses on gen- erating quality music without regard to popularity.

Search engine optimization is another area where marketers are trying to unlock the power of the Long Tail. Long-Tail keywords are phrases that a small but significant number of people might use to find products. For instance, instead of investing in keywords such as “shoes” or “men’s shoes,” a marketer focused on the Long Tail might choose a keyword like “purple all-weather running shoes.” Google has rolled out various updates to its search algorithm that improve Long Tail searches. Accord- ing to Google, Long Tail searches comprise as much as 50% of all Web queries, with approximately 20% of searches being extremely unique or never seen before. Google uses textual analysis to deliver better, more focused results for these searches. An increas- ing number of Internet users are using natural lan- guage searches (searches that are phrased in the way we would speak naturally, like “where is the nearest pizza place?”) to find products and services. These searches are also a part of the Long Tail, and while big businesses tend to control the more frequently searched keywords, smaller businesses can focus on natural language and other Long Tail searches to dramatically improve their conversion rates.

Social networks also make the Long Tail phe- nomenon even stronger. A recent study found that popularity information of the sort produced in a social network spurs sales of niche products more than mainstream products because of the higher perceived quality of the niche product.

386 C H A P T E R 6 E - c o m m e r c e M a r k e t i n g a n d A d v e r t i s i n g C o n c e p t s

Long Tail search is also pivotal for online sales of rare books. A 2014 study showed that

used books sell for higher prices online than in physical stores. The study’s authors surmised that book buyers are willing to pay a higher price because without the Web, they wouldn’t have found the book they sought.

Anderson claimed that the Internet would revolutionize digital content by making even niche products highly profitable, and that the revenues produced by small niche products would ultimately outweigh the revenues of hit movies, songs, and books. But some newer research casts some doubt on the revenue potential in the Long Tail. Solid best sellers have expanded and produce the vast part of online media revenues. Netflix’s most recent earn- ings report boasted record highs, which it credited to its growing group of original series and recently added blockbuster hits like the television series Friends, not the thousands of titles in its Long Tail. In fact, its DVD business, where most of its Long Tail titles are available, has only 5.5 million sub- scribers, compared to 62 million subscribers of its streaming service, which consists primarily of more popular movies and shows. Similarly, another study found that while the number of ISBNs of e-books in the Canadian market expanded rapidly in 2014, the number of ISBNs selling at least one copy remained unchanged. The situation is similar in the music industry. As music services compete to offer increasingly large catalogs of songs, the well-known

artists do better, while each individual member of the growing Long Tail finds it harder to stand out amidst lesser-known peers. On mobile devices especially, “front end display” for music services and e-books is smaller than on desktop screens, and only the superstars get this valuable marketing real estate.

On the other hand, up-and-coming artists have fewer barriers to entry and more avenues than ever to promote themselves without the aid of major labels. Artists like violinist Lindsey Stirling started out in the Long Tail; she has put up her own videos on YouTube, and has since become a major com- mercial success. Indie music labels’ percentage of the top 200 albums by sales grew from just 13% in 2001 to 35% in 2010. And would-be authors have more options to publish their works and market themselves, despite the low odds of penning a smash hit.

Both the Long Tail and the winner-take-all approaches have implications for marketers and product designers. In the Long Tail approach, online merchants, especially those selling digital goods such as content, should build up huge libraries of content because they can make significant revenues from niche products that have small audiences. In the winner-take-all approach, the niche products produce little revenue, and firms should concentrate on hugely popular titles and services. Surprisingly, contrary to what Anderson originally theorized, the evidence for online digital content increasingly sup- ports a winner-take-all perspective.

SOURCES: “Netflix Wags Its Short Tail,” by Justin Fox, Bloombergview.com, April 17, 2015; “Hidden in the Long Tail,” The Economist, January 10, 2015; “Revisiting the Long Tail Theory as Applied to Ebooks,” by Marcello Vena, Publishingperspectives.com, January 8, 2015; “The Long Tail And Why Your SEO Keyword Strategy Is Wrong,” by Joshua Steimle, Forbes, December 23, 2014;“New Data on the Long Tail Impact Suggests Rethinking History and Ideas About the Future of Publishing,” by Mike Shatzkin, Idealog.com, June 25, 2014; “Tales of Long Tail’s Death Greatly Exaggerated,” by Tracy Maddux, Bill- board.com, June 17, 2014; “Why Alibaba’s Long Tail Makes Amazon’s Look Like a Bobcat’s,” by Matt Schifrin, Forbes, May 8, 2014; “The Death of the Long Tail,” Musicindustryblog.com, March 4, 2014; “Winners Take All, But Can’t We Still Dream,” by Robert H. Frank, New York Times, February 22, 2014; “Blockbusters: Why the Long Tail Is Dead and Go-Big Strategies Pay Off,” by Ginny Marvin, Marketingland.com, October 23, 2013; “How Google Is Chang- ing Long-Tail Search with Efforts Like Hummingbird,” by Rand Fishkin, Moz.com, October 18, 2013; “Microsoft, Apps and the Long Tail,” by Ben Bajarin, Time.com, July 8, 2013; “Goodbye Pareto Principle, Hello Long Tail: The Effect of Search Costs on the Concentration of Product Sales,” by Eric Brynjolfsson et al., Management Science, July 2012; “Recommendation Networks and the Long Tail of Electronic Commerce,” by Gail Oestreicher-Singer, New York University, 2012; “Research Commentary—Long Tails vs. Superstars: The Effect of Information Technology on Product Variety and Sales Concentration Patterns,” by Erik Brynjolfsson et al., Information Systems Research, December 2010; “How Does Popularity Affect Choices? A Field Experiment,” by Catherine Tucker and Juanjuan Zhang, Management Science, May 2011; “From Niches to Riches: Anatomy of the Long Tail,” by Eric Brynjolfsson et al., MIT Sloan Management Review, Summer 2006; “The Long Tail,” by Chris Anderson, Wired Magazine, October 2004.