THE LONG TAIL - THE 98% RULE - PART I
This summer, we had the pleasure of reading several interesting books; the one that had the most profound effect on us, however, was Chris Anderson's book entitled The Long Tail.
We note from the outset of the book that Anderson's theory was essentially developed out of a 2004 conversation that he had with a friend of his, Robbie Vann-Adibe, the CEO of ECAST, a digital jukebox company. At page 7, Anderson describes the similarity of a digital jukebox and a regular jukebox as both are big enclosures with speakers and blinking lights, often found in bars. However there is one main difference between the two. Rather than a hundred CDs, a digital jukebox has a broadband connection to the Internet and patrons can therefore choose from thousands of tracks that are then downloaded and stored on a local hard drive.
During this conversation between Anderson and Vann-Adibe, Anderson asked Vann-Adibe what percentage of the 10,000 albums available in the jukeboxes sold at least one track per quarter. To Anderson's astonishment, the answer was 98%. Anderson soon found out the songs didn't sell in big numbers, but nearly all of them sold something. At page 8, Vann-Adibe explained to Anderson that in a world of minimal packaging costs and instant access to almost all content in a digital format, consumers exhibit consistent behaviour: they look at almost everything.
As Anderson noticed our increasing reliance on digital entertainment sources such as iTunes and Amazon, it became clear to him that the strong presence of these sources in our daily lives allows for the emergence of a market of niche products. Digital content, such as songs on iTunes, do not take up any physical space, thus allowing for an infinite number of slots to exist online. These songs, therefore, can be carried by iTunes for virtually no cost, revolutionizing the traditional market of supply and demand.
However as Anderson found, at page 9, everything you put out there will eventually find demand. This phenomenon initiated Anderson's consideration of a radically different business model, which he then coined as "The Long-Tailed Distribution".
More to come on Anderson's book The Long Tail in tomorrow's blog. Thanks, Ian and Suzana. --------
