Stated simply, this concept suggests that 80 percent of the population will adopt a few of the most popular behaviors, while the remaining 20 percent will choose from a wide variety of less popular, niche approaches. The longtail economy is defined by the ability of marketing to reach a small, but highly engaged and passionate target market or customer segment with a. Why chris andersons long tail theory might be all wrong. The long tail and mass markets the long tail is a statistical concept that is often used to describe massmarket behavior. I consider the question of the implications of tail events for economic policy and climate.
Its called the long tail because if you look at demand on a chart, there is high demand for a small number of hits or blockbusters, but the demand for niche offerings tails off in a long flat curve hence the term long tail. In fact, if the gap had understood the long tail theory as it applied to its own industry, they might have avoided their train wreck by anticipating that their gap brand could not be for everybody, all the time and forever. In general and specially in the entertainment industry, these have been the products available in the traditional market place bri. Liabilities for claims that have long settlement periods. Therefore, the main focus is on mass market demand, while everything that is not profi table enough is excluded. Revisiting the long tail theory as applied to ebooks. The long tail sales volume popularity number of products head tail head. It is often referred that long tail economics is a new perspective on economics of small. The idea that it is sound strategy for companies to have a long tail has been criticised on the grounds that it still in many cases does not make economic sense. Longtail definition in the cambridge english dictionary.
Deep structural uncertainty about the unknown unknowns of. Sep 22, 2010 we find that the long tail has grown longer over time, with niche books accounting for a larger share of total sales. Where firms or professionals in a particular area may add a great deal of value, they are outnumbered by a market that allows everyone to participate. The long tail is a statistical concept that is often used to describe massmarket behavior. Report challenges long tail theory on p2p networks wired.
In longtailed distributions a highfrequency or highamplitude population is followed by a lowfrequency or lowamplitude population which gradually tails off asymptotically. Since it is virtually costless for itunes to store music, it can keep stocks of an almost infinite variety of songs. Neoclassical economics argued that neither institutions nor wealth distribution mattered for efficiency. In 1994 he joined the economist and in 2004 his the long tail article became the basis for his the long tail. The long tail explains why the big commercial hit is dead, how businesses can and will generate most of their future revenue from a long tail of niche products, which serve even the rarest customer needs, and what you can do to embrace this.
Economic history and economic theory article pdf available in journal of economic methodology 4. Why the future of business is selling less of more. The term is often used loosely, with no definition or arbitrary definition, but precise definitions are possible. The long tail why the future of business is selling less of more by chris anderson the long tail challenges existing notions of the market and the entertainment industry by looking at the massive in. The superstar music economy between 2000 and 20 global recorded music income declined by 39. Pim for long tail 3 long tailprofi t from numerous niche products in a stationary distribution business, the range has to be closely linked to demand due to the limited sales area available.
Long tail is a business model that opens a market to everyone that had been previously been supplied by professionals, firms or an elite. Investigating biologya laboratory manual for bio 100, 12th. Historically, the long tail theory was born before the economy for digital creative goods exploded digital music, digital books, digital movies, and so on. A few are of moderate value, as indicated by the much smaller bars in the middle of the histogram. None of the developments discussed in the six themes can take place without a reduction in the cost of reaching a niche. This model is used to illustrate the distribution of a companys turnover for all of its products, from highdemand bestsellers to niche products which only generate a low sales rate. As the curve of the long tail descends, it approaches zero and continues toward infinity. The 50 most important economic theories donald marron.
Long tail marketing concentrates on these less popular products, developing a business sales model based upon products in the long tail. Elberse long tail effect 2006 analysis brynjolfsson et al. The long tail is the name for a longknown feature of some statistical distributions such as zipf, power laws, pareto distributions and general levy distributions. The long tail theorys father, chris anderson, even conceded that the long tail was rather short and really pretty puny, at least the part that had any economic activity at all. Winner of the gerald loeb award for best business book of the year. A very, very few are breakthroughs, as illustrated by the farright outliers, which are referred to as the long tail of innovation. But papers presented at this years meeting of the american economic association demonstrate that its value arises in ways that. Economic theories in the long tail dont deserve short.
The principles of the long tail linkedin slideshare. This economic strength of tourism, associated to a high growth potential, has continuously induced deep. Examples of business that follow this economic path are online businesses such as and apples itunes. Call it the silver series and charge half the price. The long tail of ecommerce standards technology cscmp. To explore news medias competitive market capacity, economic theories are applied in this study. Fat tails and the economics of climate change fattailed. The bottom line is that the long tail is culture unfilteredby economic scarcity.
The long tail phenomenon, he argues, will reshape our understanding of what people actually want to watch or read, etc. For this to happen, one or more of the following forces have to come into play. Journal of media economics application of the long tail economy. Long tail the new growth market obscure products you cant get anywhere but online product not available in o. The long tail, in business, is a phrase coined by chris anderson in 2004. When so many people are wasting countless millions on ineffective marketing the long tail is the doorway to a method of marketing products or services that is absolutely free to implement. The long tail theory took shape in an article by chris anderson, editor of wired magazine, which grew into the 2006 book the long tail. However, information technology in general and internet markets in particular have the potential to substantially increase the collective share of niche products, thereby creating a longer tail in the distribution of sales.
What happens when the economics of scarcity meets the. While many marketing strategies focus on promoting a specific product or brand, long tail marketing involves more inventory management than product promotion see also product marketing. The long tail theory can be reality for traditional megabrands. Networks, social networks, electronic commerce, recommender systems, gini coefficient, long tail, influence, social media, web 2. In 1994, amazon was founded and the long tail economic model began to show its power. Apr 24, 2006 the long tail is an economic theory made popular by chris anderson, chief editor of wired magazine, who pointed out that the web is enabling a whole class of content to be shared which wasnt sharable before. The reality of its fragmented, unlimited distribution tail also defines the apparel retailing industry. The long tail is a book i recommend all my clients to read. The long tail long tail business models are about selling less of more by focussing on offering a large amount of niche products, while each item sells relatively infrequently. Report challenges long tail theory on p2p networks wired magazine editorinchief chris andersons long tail theory article, book, blog predicts that digital distribution will lead to a jump. This book is a practical and accessible guide to understanding and implementing the long tail theory, providing you with the essential information and saving time.
The long tail download ebook pdf, epub, tuebl, mobi. Economic policy in the face of severe tail events nordhaus. This paper investigates the internets long tail phenomenon. Of course there already was a relatively small and growing economy of digital creative goods, but it wasnt comparable with the size and dynamics of todays markets. In statistics and business, a long tail of some distributions of numbers is the portion of the distribution having many occurrences far from the head or central part of the distribution. The term is based on an ancient saying that presumed black swans did not exist a saying that became reinterpreted to. In this paper, i aim to reconcile these opposing findings by proposing that consumer uncertainty represents a hidden yet important boundary condition for. The long tail allows retailers, whose primary business is conducted online, to have an infinite amount of stock. The presentation explains the 8020 rule, what happens when the market moves from scarcity to abundance and what the long tail means for the entertainment industry. Long tail is the idea of chris anderson that was posited in the october 2004 issue of wired magazine that suggests that the online marketplace is drifting away from mainstream products and moving towards niche products. Anderson argued that products in low demand or with low sales volume can collectively make up a market share. The book was published in multiple languages including english, consists of 288 pages and is available in paperback format.
The long tail theory was developed in 2004 by chris anderson, editorinchief of wired magazine. The theory of the long tail can be boiled down to this. In statistics, the term longtailed distribution has a narrow technical meaning. A year later in 2005, he was selected as the best editor of the year. But papers presented at this years meeting of the american economic association demonstrate that. Essentially, the long tail theory was playing out in the real physical world even before the internet made its impact. We will call these tail events in the sense that they are way out of the tail of a probability distribution. Pdf this paper investigates what economics of long tail is bringing to. In his groundbreaking work, the long tail, chris anderson says that theres money to be made in the long tail of niche offerings. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. The long tail pdf summary chris anderson 12min blog. While anderson presents a fascinating idea backed by thoughtful if repetitive analysis, many critics questioned just how greatly the niche market will rework our common popular culture.
Long tail is a concept in statistics, describing the distributions with. Yu jeffrey hu is an assistant professor of management information systems at the krannert school of purdue university. The long tail is a relatively new economic phenomenon. The theory of the long tail is that our culture and economy is. In the most important business book since the tipping point, chris anderson shows how the future of commerce and culture isn t. The classical school, which is regarded as the first school of economic thought, is associated with the 18th century scottish economist adam smith, and those british economists that followed, such as robert malthus and david ricardo. Anderson uses physical items like cds and books as his primary examples, noting that amazon sells many more unpopular cds than it does. The long tail is a business strategy that allows companies to realize significant profits by selling low volumes of hardtofind items to many customers, instead of only selling large volumes of a reduced number of popular items.
Longtail liabilities are likely to result in high incurred but not reported ibnr. Anatomy of the long tail erik brynjolfssonis the director of the mit center for ebusiness and the schussel professor of management at the mit sloan school of management. Theory on the long tail effect predicts that consumer demand in online markets spreads over a long tail of niche products. The distribution could involve popularities, random numbers of occurrences of events with various probabilities, etc. From time to time, something occurs which is outside the range of normal expectations. Aggregate sales of niche products can be as profitable as the traditional sales model, where a small amount of bestsellers account for most revenues. The goal here is to first illustrate organizational migrations away from the long tail strategy, and then to consider the underlying reasons behind this trend. There has been a lot of controversy among economist about the true content of economic theory or its subject matter.
The long tail approach, by contrast, is to simply dump huge chunks of the archive onto barebones dvds, without any extras or marketing. Anderson expanded the theory to explore implications for culture, and for business, and coined the term long tail. This issue has been analyzed by martin weitzman who proposed a dismal theorem. Almost all inventions are useless, as indicated by the large amount of mass on the far left. We all know that if you want to open a successful restaurant one of the consideration is location. What emerges is not a rosy picture of the fate of longtail products. These are three apparently distinct strands of economics, yet they have a common motivation. Sep 12, 2017 14 sep 2017 blockchain reinventing economics and government 32 long tail premise 8020 rule false in digital markets sell less of more items look at the long tail as a market itself source. Netaporter was founded by natalie massenet in 2000, as. Our culture and economy are increasingly shifting away from a focus on a relatively small number of hits.
The long tail economic theory the long tail and its effect. Work in economics accepted the chair in public economy and commerce at the palatine school in milan, where he lectured for two years. Why the future of business is selling less of more book. The general idea is that, under limited conditions concerning the structure of uncertainty and risk aversion, society has an indefinitely large expected.
Oct 02, 2016 the long tail summary october 2, 2016 april 9, 2019 niklas goeke entrepreneurship 1sentencesummary. Working paper, university of north carolinachapel hill. Mar 23, 2019 theory on the long tail effect predicts that consumer demand in online markets spreads over a long tail of niche products. I consider the question of the implications of tail events for. The superstar music economy 5 the death of the long tail. The drivers of long term interest rates are complex and the report delves into these issues in some detail. In this paper, i aim to reconcile these opposing findings by proposing that consumer uncertainty represents a hidden yet important boundary condition for the long tail effect. The subject matter of economics or economic theory has been variously defined. Pdf anderson 2006 argues that ecommerce and other new technologies. The main characters of this business, non fiction story are. Winetta lees presentation the basic principles of the long tail looks at chris andersons theory of the long tail. The new york times bestseller that introduced the business world to a future that s already here now in paperback with a new chapter about long tail marketing and a new epilogue. His reputation as a pioneer in economic analysis is based primarily on these lectures, published posthumously in 1804 under the title elementi di economia pubblica elements of public. How do products contribute towards revenues in traditional brick and mortar stores, in contrast how is it in a long tail business wal mart makes 80% of its revenue with 20% of its products.
Fattailed uncertainty in the economics of catastrophic climate change martin l. According to adam smith economics enquires into the nature and causes of the wealth of nations. Weitzman introduction i believe that the most striking feature of the economics of climate change is that its extreme downside is nonnegligible. If you continue browsing the site, you agree to the use of cookies on this website.
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