Tag Archives: chris anderson

Accounting for taste

Chris Anderson’s “The Long Tail” looks at a set of interrelated trends emerging in Internet marketing: specifically, recommendation engines and, more broadly, the wide, virtually “unlimited” selection of products offered by online retailers who use them. Basically, Anderson writes, recommendation engines give customers an easy way to seperate the wheat from the chaff and find more of what they like. Because online retailers can offer such a wide selection of products, their recommendations guide customers in new directions to explore a vast array of options that might never have been available to them at a traditional “brick-and-mortar” store. Together, Anderson argues, these services form a new way for the producers of niche products to reach an audience, ultimately creating a more level playing field for producers and consumers alike, challenging the dominance of mainstream, “hit-driven culture.” He uses the term “the Long Tail” to describe the array of niche markets that thrive under the auspices of retailers like Amazon and iTunes and actually outnumber the “hits” in terms of their sales volume.

While Anderson’s analysis of the new market is pretty apt, I’m concerned about some of the conclusions he draws. He seems too taken with idealistic notions of “unlimited selection” and consumer empowerment to give a clear view of what the new model really means. “You can find everything out there on the Long Tail,” he claims. But is there really a market for everything? And if there were, would large retailers necessarily cater to it? Even on the Internet, truly free, unlimited consumer choice is an illusion.

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Long Tail

Chris Anderson points out that this digital age has presented “an entirely new economic model for the media and entertainment industries”, which should promt the fields to reform away from old models based on economic scarcity.

He cites that the physical world puts two dramatic limitations on our entertainment. Firstly being the need to find local audiences, and secondly the constraints of physics itself. In the physical world of scarcity, a store has only so much space and funds to hold a limited stock of products. “Retailers will carry only content that can generate sufficient demand to earn its keep.” While there may not be high demands for certain items in a given area, this is not to say that the demand for them does not exist.

Anderson refers to these restrained market models with “hit-driven economics”. This has created “an age without enough room to carry everything for everybody”. The world on online distribution and retail is “a world of abundance.”

A model based on scarcity cause us to assume that “only hits deserve to exist”, in an effort to increase revenue and lower opportunity cost. However executives at iTunes, Amazon, and Netflix, have discovered that “misses usually make money” as well. The digital world has reduced the difference between a “hit” and a “miss” to simply different entries in a database. Both are equally worthy of being carried.

According the Amazon statistics “the market for books that are not even sold in the average bookstore is larger than the market for those that are.” These large, previously ignored markets, are something that industries should start investing in.

Andersons lays out two rules for companies willing to “get over the economics of scarcity” and profit off the Long Tail market. Rule one is to make everything available. The industries need to embrace niches because there will always be an audience for them. Documentaries and foreign films are two things Anderson mentions that have a large demand, but little availability. He wants us to throw away our “estimates of demand” and just “thoughtlessly” make all products available for purchase.

Jumping back to the notion of the digital world not being constrained as heavily as the physical world, he introduces rule two: “Cut the price in half. Now lower it.” In regards to the music business he states “If it clearly costs less for a record label to deliver a song online, with no packaging, manufacturing, distribution, or shelf space overheads, why shouldn’t the price be less, too?” Songs on iTunes should be 79 cents, not 99. We should be basing “price according to digital costs, not physical ones” for digitally run markets.

The last of his rules is for the industries to help people find what they want. In an effort to harness the Long Tail market, he shows how industries are using recommendation sytems to cater to a users needs.