Should You Invest in the Long Tail? By: Elberse, Anita, Harvard Business Review, 00178012, Jul-Aug2008, Vol. 86, Issue 7/8
One school of thought represented by the economists Robert Frank and Philip Cook, in their 1995 book The Winner-Take-All Society argues that broad, fast communication and easy replication create dynamics whereby popular products become disproportionately profitable for suppliers, and customers become even likelier to converge in their tastes and buying habits. The authors offer three reasons for their view: First and foremost, lesser talent is a poor substitute for greater talent. Why, for example, would people listen to the world's second-best recording of Carmen when the best is readily available? Thus even a tiny advantage over competitors can be rewarded by an avalanche of market share. Second, people are inherently social, and therefore find value in listening to the same music and watching the same movies that others do. Third, when the marginal cost of reproducing and distributing products is low -- as it certainly is with goods that can be digitized -- the cost advantage of a brisk seller is huge. Frank and Cook were elaborating on the economist Sherwin Rosen's earlier work describing the "superstars" effect, in which a field's few top performers pull ever further away from the pack. According to this line of thought, hits will keep coming -- to the increasing detriment of also-rans.
Although that thesis continues to hold sway, another idea has emerged in recent years -- presented just as persuasively, and proposing the opposite. The "long tail" theory took shape in an article by Chris Anderson, editor of Wired magazine, which grew into the 2006 book The Long Tail: Why the Future of Business Is Selling Less of More. The book's subtitle puts the strategic implications in a nutshell. Now that consumers can find and afford products more closely tailored to their individual tastes, Anderson believes, they will migrate away from homogenized hits. The wise company, therefore, will stop relying on blockbusters and focus on the profits to be made from the long tail -- niche offerings that cannot profitably be provided through brick-and-mortar channels.
Anita Elberse (email@example.com) is an associate professor of business administration in the marketing unit at Harvard Business School. Her article "How Markets Help Marketers" appeared in the September 2005 issue of HBR.