Nerd Guru

Because technical people need good soft skills to get ahead.

Thursday, February 08, 2007

Book Report: The Long Tail

You have to understand a little bit about marketing in order to function well with the MBA's in your life that come up with ideas for products. It's a necessary evil of engineering. That's not to say that you have to go out and buy MBAs for Dummies or something similar, though. Instead, there are lots of more interesting materials out there.

OK, I admit a bias on this one. As someone who makes their living creating web sites, I may bring a prejudice to the topic of using the Internet in a variety of ways. Still, it's not like the Internet doesn't touch everyone's lives, though. It just happens to touch mine not only as a user of its content, but as one of the millions of creators of it as well.

With that, I bring you a (perhaps the) defining marketing book of the Internet Age:

The Long Tail: Why the Future of Business Is Selling Less of More

Chris Anderson is way cooler than me just based on his day job as the editor in chief of Wired magazine. The purpose of his book is best summed up by a selection from the introduction:

"TV shows were more popular in the seventies than they are now not because they were better, but because we had fewer alternatives to compete for our screen attention. What we though was the rising tide of common culture actually turned out to be less about the triumph of Hollywood talent and more to do with the sheepherding effect of broadcast distribution.

The great thing about broadcast is that it can bring one show to millions of people with unmatchable efficiency. But it can't do the opposite - bring a million shows to one person each. Yet that is exactly what the Internet does so well. The economics of the broadcast era required hit shows - big buckets - to catch huge audiences. The economics of the broadband era are reversed."

That's essentially what The Long Tail is. Instead of selling one big hit to people via some broadcast medium, sell a million niche pieces of content to one person each. The name of the book comes from the graph you'd see if you ranked items by popularity.

The above image comes from the Wikipedia article on The Long Tail phenomenon and is what, say, iTunes sales might look like. On the far left (in green), there are the hits that sell a lot. Justin Timberlake lives in that part of the curve. As you move to the right (in yellow), the number of sales drop off pretty quickly, but that tail goes on seemingly forever. This is where your struggling garage band might be found. The tail goes on so far, that many online Long Tail retailers (NetFlix, iTunes, Amazon, etc) sell every item they put into their massive catalogs at least once.

Think about that. Everything in the catalog sells at least once (actually 98% of what is in the catalog sells once, give or take). If that were true, there's a lot of money to be made just by having a great big catalog, isn't there? That's what Jeff Bezos said.

In an example from the book, your local Borders carries about 100,000 book titles. Amazon carries nearly 4,000,000. Borders can only afford to shelve books that are hits because it has to pay for the the building the store operates in, scores of employees, utilities, etc. In order to offer a new book, they ultimately have to create space for it by no longer carrying an older one. Amazon, though,can carry as many books as they want to given their vast where house system. Each new title is almost free for them to stock because of the economies of scale. Yet, for each book they carry, SOMEBODY will buy it and they will make a profit off of that one sale due to the extremely low overhead. Amazon will sell at least one copy of almost all 4,000,000 of those titles, 3,900,000 of which your local Borders or Barnes & Noble can't get for you with out a special order. In fact, Amazon gets 25% of its sales from items you can't find at any brick and mortar bookstore.

There are lots of anecdotes in this book, including a reasonable claim that the Sears catalog was an early Long Tail for rural Midwestern farmers. Pieces of functionality that need to be in place for a successful Long Tail are analyzed as is our emerging niche culture and future possibilities of the phenomena. This is a fun read, in part because you have probably used a lot of the websites mentioned inn it and can relate better to the Long Tail shopping experience. Impress your marketers by quoting this one and even make suggestions to your product lines based on its concepts. That sort of thing will improve your relationships with those folks and help build your reputation in the process. Having endorsements from people in a variety of job types can be beneficial when it is time for that performance evaluation.


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posted by Pete Johnson @ 10:19 AM   0 comments

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