The Hindu Business Line : Today's hit is tomorrow's niche

Hits are not quite the economic force they once were, declares Chris Anderson, in The Long Tail, explaining why the sales that go with Number Ones are not what they used to be. The non-hits, which form the majority, or the long tail, often outweigh the initial portion of the graph, says Anderson, giving marketers valuable insights into changing consumer behaviour. D. MURALI says this could be a heady read over the weekend.

Bestsellers, blockbusters, chart-toppers and celebrities. These are our obsessions, as if they were `the connective tissue of our common experience'. Our media too is fixated on what's hot and what's not. So much so, hits seem to rule, writes Chris Anderson in The Long Tail, from Random House (www.randomhouse.co.uk).

The short message of the book is that hits are taking a hit. Hits are starting to rule less, says the author. Number one may still be number one, "but the sales that go with that are not what they once were." As a result, hits are not quite the economic force they once were, declares Anderson.

"Where are those fickle consumers going instead?" Just the question any marketer would ask. The author answers: "No single place. They are scattered to the winds as markets fragment into countless niches." Instead of `one-size-fits-all' we now have `a market of multitudes,' because the mainstream has got shattered into `a zillion different cultural shards'. The non-hits are not misses, please note, because `most weren't aimed at world domination'; they are simply `everything else,' long overlooked, at least till The Long Tail began wagging, first as an article in Wired, a magazine that Anderson edits.

"The long tail is the colloquial name for a long-known feature of statistical distributions," explains Wikipedia. It gives as examples Zipf, Power laws, Pareto distributions and general Lévy distributions. Also known as heavy tails, Power-law tails, or Pareto tails, the long tail is characterised by `a high-frequency or high-amplitude population' followed by `a low-frequency or low-amplitude population' gradually tailing off.

What is significant is that the long tail may comprise the majority because it can `cumulatively outnumber or outweigh the initial portion of the graph'.

Three main observations of Anderson's article that was published in Wired in October 2004 were as follows: One, the tail of available variety is far longer than we realise; two, it's now within reach economically; and three, all those niches, when aggregated, can make up a significant market. The article went on to become `the most cited article the magazine had ever run'. Readers found evidences of `tails everywhere... from politics to public relations, from sheet music to college sports'.

One of the first insights that led Anderson into the tail study was at Ecast, a `digital jukebox' company, whose CEO, Robbie Vann-Adibé asked him to guess `what percentage of the 10,000 albums available on the jukeboxes sold at least one track per quarter'. Anderson said 50 per cent, reasoning that half of the top 10,000 books in a typical book superstore don't sell once a quarter.

Adibé stunned him with the answer: 98 per cent! How so? "As the company added more titles to its collections, far beyond the inventory of most record stores and into the world of niches and subcultures, they continued to sell. And the more the company added, the more they sold."

The 98 per cent rule

Interestingly, "the demand for music beyond the hits seemed to be limitless." Though all songs didn't sell in big numbers, `nearly all of them sold something.' Nor did the non-hits hurt to carry; they were "just bits in a database that cost nearly nothing to store and deliver". The 98 per cent rule, Anderson calls it. Even where the 80/20 rule holds good (that is, 20 per cent of your products accounting for 80 per cent of the revenue, say) Anderson would advise you not to stop carrying the other 80 per cent of the products. For, eventually, `all those onesies and twosies' start to add up.

The Long Tail is all about `the economics of abundance'. About what happens when `bottlenecks that stand between supply and demand' begin to disappear and `everything is available to everyone'. It is `culture unfiltered by economic scarcity'. The economics of the twenty-first century is already evident `in outline form in the databases of the Google, Amazon, Netflixes, and iTunes of the world', enmeshed in `terabytes of user behaviour data', says Anderson. "For the first time in history, hits and niches are on equal economic footing," he declares. "Suddenly, popularity no longer has a monopoly on profitability."

The author likens our culture to an ocean, and says: "The only features above the surface were islands of hits." The waterline is `the economic threshold'. And the analogy continues: "When the cost of distribution falls, it's like the water level falling in the ocean. All of a sudden things are revealed that were previously hidden." Which is when you sight the niche markets.

Three forces of the Long Tail

`Make it, get it out there, and help me find it,' are `the three forces of the Long Tail,' explains a chapter. Force 1 helps make by `democratising the tools of production'. An ubiquitous example of such a tool is the PC, or personal computer. "Talent is not universal, but it's widely spread: Give enough people the capacity to create, and inevitably gems will emerge," exhorts Anderson. "We're starting to shift from being passive consumers to active producers." And producing for the love of it; quite aptly, "amateur derives from Latin amator, `lover', from amare, to love".

The second force behind the Long Tail is democratisation of the tools of distribution. "Even for physical goods, the Internet has dramatically lowered the costs of reaching consumers," and made `inventory on demand' possible. For instance, Amazon's solution print-on-demand is to let books stay as `digital files until they are purchased, at which time they are printed on laser printers and come out looking just like regular paperbacks'.

And the third force is to connect supply and demand, by lowering `the search costs of finding niche content'. These are the costs that get in the way of finding your requirement, explains Anderson.

"Some of those costs are non-monetary, such as wasted time, hassle, wrong turns, and confusion. Other costs actually have a dollar value, such as mistaken purchases or paying too much for something because you couldn't find a cheaper alternative." Help comes in the form of user reviews and consumer posts providing `grassroots information', and encouraging you to venture out into the unknown.

Signals and filters

`Is the Long Tail full of crap?' A legitimate question, which is why it is necessary to be equipped with filters to pull coherent signals from noise. Your filters have to be powerful enough even as the signal-to-noise ratio falls farther down the tail. "The Long Tail is indeed full of crap," concedes Anderson. "Yet it's also full of works of refined brilliance and depth — and an awful lot in between," he adds. "Exactly the same can be said of the Web itself."

While editors, record label scouts, studio executives, department store buyers, marketers and advertisers act as pre-filters, blogs, playlists, reviews, recommendations and consumers work as post-filters. The latter amplify, rather than predict, behaviour, distinguishes the author.

`Does a longer tail mean a shorter head?' This is one of the questions discussed in a chapter titled `Long Tail economics'. Three factors help shift demand down, from the head to the tail, says the author. First, the greater variety. "If you offer people a choice of ten things, they will choose one of the ten. If you offer them a thousand things, demand will be less concentrated in the top ten." Second, lowered search costs. And third, sampling, as for instance `the ability to hear thirty seconds of a song for free', thus lowering the risk of purchasing.

Another important question that the chapter answers is whether the Long Tail increases demand or just shifts it. The answer depends on the sector, rules Anderson. "Although human attention and spending power are finite, you can get more for your time and money. Some forms of entertainment, such as music, are non-rivalrous for attention, which is to say you can consume them while you're doing something else."

Though reading needs attention, our `consumption bandwidth of information' has increased because pre-selection through filters ensures that `the words are more relevant' than otherwise. Remember: "Human attention is more expandable than money."

Hits end up in the tail

Does time have a tail too? Yes, affirms Anderson. "Today's hit is tomorrow's niche. Almost all products, even hits, see their sales decay over time." Hits end up in the tail eventually. But Google can change the rules of the game, he says. Because it measures relevance `mostly in terms of incoming links, not newness.' So, `you are more likely to get the best page than the newest one.'

The book finds it awkward that economics is defined as `the social science of choice under scarcity'. Abundance is present in spheres other than technology, says the author. "Green revolution brought abundance to much of agriculture," and India and China are examples of `abundant labour'. You'd agree, "Even ideas can, on some level, be considered abundant, because they can propagate, without limit due to their non-rivalrous nature."

Prices would tend to follow costs, foresees Anderson. "The question tomorrow will not be whether more choice is better, but rather what do we really want? On the infinite aisle, everything is possible." Heady read for a long contemplative weekend.

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