Sunday, October 31, 2004

This Tail Has Legs


Chris Anderson, the editor-in-chief at Wired, has penned an
article that is truly beginning to influence dialog on new Internet business models. Perhaps you saw a reference to the "Long Tail" in Mary Meeker's recent report on blogs/RSS. And over the past week, the "Tail" has wended its way into a number of different articles by prominent journalists, including Dan Gillmor, who referenced the idea in today's column about Google.

Here's the thesis: in the new Internet economy (or what some folks are calling the Web 2.0), businesses are making money not only on the hits -- the blockbusters in different content categories, such as books, digital tunes, DVDs, or anything else sold on the Internet -- but the "misses" as well. It's the very "Long Tail" of the entire market that only the Internet can exploit because of (a) the physical limitations of traditional sales channels, and (b) the intelligent tools that Internet companies are now using to connect people with content. Good quote:

"When you think about it, most successful businesses on the Internet are about aggregating the Long Tail in one way or another. Google, for instance, makes most of its money off small advertisers (the long tail of advertising), and eBay is mostly tail as well - niche and one-off products. By overcoming the limitations of geography and scale, just as Rhapsody and Amazon have, Google and eBay have discovered new markets and expanded existing ones."

Sound like propaganda from the Bubble days? Perhaps a bit, despite the good hard numbers that exist to support this idea. In any case, the idea is compelling for its simplicity, and for its ability to explain why some Internet companies are doing so well and why there's so much activity on the edge.


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