In 2004 Chris Anderson wrote an influential book called The Long Tail. In it,
he argued that the future of business is to sell less of more. The main premise is that collectively, things that are in
rather low demand can amount to quite large volumes. This is because there is a large number of people who belong to the long tail and they encompass a wide rage of tastes.
A classic example of successful long tail sales is Amazon. A substantial subset of the book sales for the largest
online retailer comes from obscure books. Amazon itself could afford to stock up on rare books as well as offer these via
numerous online partners. The net effect is that a lot of book sales occured in the long tail. This phenomenon is captured nicely
in a quote from an Amazon employee: “We sold more books today that didn’t sell at all yesterday than we sold today of all the books that did sell yesterday.”
In a recent post here, we examined the reasons that people feel compelled to blog. From the post and the comments it received, it became clear that quite a few people
are blogging to make money. The blogs that they started live in the long tail of the blogosphere, however, and the reality
is that it is difficult to make money in the long tail – Anderson’s point was that the money is to be made by selling to the long tail, not so much by existing in it.
In this post we examine why that is and look at other aspects of long tail economics.
The 80/20 Rule
There is a famous proverb: 80% of the wealth of the world is in the hands of 20% of people.
While we know that the number of super wealthy is probably closer to 2% than 20%, the proverb turns a famouse rule of mathematics, known as power law, into common wisdom.
If you look at the Wikipedia page linked above, you will be blasted with daunting math formulas. Yet, the concept and the explanation of the
power law is remarkably simple – the rich get richer.
To understand this concept lets look at a familiar example – a popular news service called Digg. It is well known that there are power users on that site who are highly influential. How did that happen? Simply – they were among the first users of the service. As Digg grew
and people joined, new relationships between users formed randomly. In any network, which has influx of new nodes and
random formation of relationships, the nodes that were part of the beginning of the network become hubs.
So behind the seemingly complicated phenomenon, power law, one finds simple concepts of time and randomness.
The reason that the long tail forms is exactly the same as why the hubs form – time. As the number of people in the network grows
the chances that a new person befriends a specific member drops.
The Traffic Problem
Now imagine that the network is the blogosphere where new blogs spring into existence every day.
And as they do, these newly minted bloggers are aspiring to make money. They set up their blog, pick a unique topic, research Google ads
and affiliate programs, and they start writing content. But they are in for big disappointment, because in order to make money from blogging, they’ll need more than good, original content – they need traffic.
Because of the power law, the long tail of the blogosphere is huge and so any individual blog is not easily discovered.
That is, the chance that a random Internet surfer will find a blog that is part of the long tail is nearly zero.
Whatever monetization means the blogger in the long tail settled on, be it Google AdSense or Amazon affiliate codes,
it can only work on large volumes of traffic. AdSense works for Google because the odds are in its favor – it is aggregating small amounts of traffic across the entire web. The math works for them because it is based on
the massive scale of the web. It similarly works reasonably well for the sites with large amounts of traffic, but it fails for smaller publishers who have low visitor counts.
Making Money on the The Long Fail
You can make money on the long tail but not in the long tail. The precise point
of Anderson’s argument is that it is a collective of the long tail amounts to substantial dollars because the volume is there.
The retail/advertising game is a game based on volume. You make money on a lot of traffic to a single popular site or the sum of smaller amounts of traffic to many less popular sites.
What about the companies that count on the long tail of the blogosphere?
Since the incentives for individual bloggers are not many, betting the business on the long tail of the blogosphere
is risky. This applies, for example, to widget companies that hope to gain massive adoption by enticing
long tail bloggers. Perhaps it is possible, but the incentive can not be purely financial.
As long tail bloggers become disillusioned with their revenue potential, the businesses
that bet on the long tail of the blogosphere are likely to pay the price. This price is very substantial,
since, according to the whole scheme, there is a huge amount of money that is locked across the long tail. So if bits and pieces of the long tail begin to disintegrate and the
whole thing collapses, the impact on the businesses built on it would be huge.
Conclusion
It is often forgotten that money is to be made by leveraging the collective long tail, however, making money while being part of the long tail is very difficult. Specifically, in the blogosphere, the vast majority of blogs have very few readers. It is not realistic to expect these blogs to make money.
As the enthusiasm and the incentive in the long tail begin to wear off, what would be the impact on the businesses
that depend on them? Likely, the impact is going to be large.
Now it’s your turn. Please tell us what you think about the long tail of the blogosphere. Is it solid? Or is it in danger of falling apart?
