Dr. Forbush Thinks

Yesterday I listened to a talk given by Chris Anderson, the author of the book, “The Long Tail.” He also has a blog over @ The Long Tail.

The idea behind his book is quite simple, yet it is also quite eye opening. Basically Chris tells us that all markets can be described as a power curve. OK, the mathematicians out there know what I’m talking about, but the rest of you are lost. So, imagine a piece of graph paper with an x and a y axis. The x-axis runs across the bottom of the graph and it describes items of different types arranged in order of popularity. The items to the left are the most popular and the items to the right are the least popular. Now, imagine the y-axis representing sales of those items. Obviously the most popular items sells the most and it will be plotted as the highest on the y-axis. So, now if you plot the points on the graph you should find that all the items lie on a curve that has a very long tail to the right.

If you are still following me, then I can assume that the math I’ve already described wasn’t to complicated so I’ll go on assuming that it isn’t.

The point that Chris makes is that in the last century mass marketing has concentrated on the few items to the left hand side of the graph and it has ignored the items to the right hand side of the graph, even though 80% of the potential market is ignored while 20% of the market is pushed with unrelenting marketing and advertising. This brings up many questions, including: “why is so much marketing money wasted on pushing items that are already popular?” It obviously has to do with what is desired by the business side of the equation, rather than what is desired for the customer side of the equation. The market shape described by Chris is not just hypothetical, it has been observed by the sales of music. The thousands of titles that are now available on line represent a market that is unencumbered by distribution of rare titles. And what is observed is a power curve with a very long tail.

One can imagine that the sales of 1000 individual rare one of type songs costs the same as selling 1000 copies of the most popular title. In the “old days” before the Internet, however it would have been difficult to know where to ship a single copy of some rare song so that the person who wants it would be able to find it on the self of the record store that he frequented. So, the idea of matching a person to a rare infrequently desired item is much easier.

Although music was the example that Chris used, this idea applies to all markets. Amazon.com showed us this with books, and E-Bay shows us this with the diversity of matching even rarer more random types of items. This long tail is the future and many new companies know this and they are acting on their own ideas related to targeting this long tail.

The key to using this information is the method needed to match the people to the items in the long tail. If we think of a plot of “all items transacted” we would start with the most popular item that is bought and sold. I have no idea what it is, but surely someone does. Maybe it is waste. Out in the tail there are cupcakes and coffeecakes sold once a year at the school Christmas fundraiser. Even further out there are even rarer transactions. If someone wants to make money out on the tail there needs to be a way to collect the things together in some way so that one can sell a lot of these rare items. For example, someone could start a business that specializes in selling home baked goods. They could collect a large number of potential bakers together online and they would submit web pages describing their food. The potential business would be a way to match all of these potential bakers with those that appreciate home baked food shipped overnight by FedEx or some other overnight shipping company.

Imagine the problems solved by the collection of all of these potential bakers. A person is not limited to one person or another person, but they could select from thousands of potential dishes or deserts. The person who cooks the meal no longer needs to advertise or search for business. Instead they rely on getting a hit on their item advertised at a place where people who are looking for food are shopping. Assuming that the business creator works out the shipping problem, then this model could offer unlimited diversity of food to a potential customer. Of course this model might not work for all food from anywhere around the world, but it is true that it increases the diversity available to the people that it can reach.

Now, this curve is not static. Items become popular and they become less desirable. This happens for various reasons. Some items just might be better than all other similar items. Word of mouth spreads this information, and the best item is sought by the majority of those looking for that type of item. Another way that an item becomes popular is by forced marketing where an item is advertised so much that people are unaware of any similar items in the market. People who need that type of item will select the only item they believe to be available fitting the desired class.

The point here is that there will be a large number of new potential business opportunities that are available looking for people to start new businesses. The idea is to create new ways to get diverse goods aggregated into groups that people will be able to search for particular rare items. There might be an opportunity for an online model train scenery supplier that collects artists together that will produce specialized pieces on demand. Or, it might be political blogs that aggregate all of the best writing on particular ideologically specific areas. Oh, I guess that’s been done already. Well, there are still phrenology and numerology aggregates that don’t exist yet.

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Don't forget what Stephen Colbert said, "Reality has a well-known liberal bias."


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