Book Review: The Long Tail

Today’s book review is The Long Tail: why the future of business is selling less of more, by Chris Anderson. Originally a Wired magazine article, then workshopped as a blog, it got the biggest response of any Wired magazine, so Anderson decided to develop it as a book.

I had been looking forward to reading it. I hadn’t read the original article, but had read about the concept, and found it fascinating.

Basically, the concept is that with the availability of more information, and cheaper ways of selling individual types of things (think Amazon), the market changes, and people tend not to buy blockbusters any more, but are able to exercise their own individual choice much more.  There are a few pre-requisites though. Because as you get down the tail, lots of it is complete junk (at least to most people). So you need a way to actually sift through the information and figure out which bits you actually want. You also need a way to get the actual products much more cheaply than used to be the case – in most cases in the book, this has come about because distribution has become easier, so the costs of inventory are lower.  And there needs to be point to all this choice – customers actually have to discover that as they have more choice of different things, they do want it.

Back when I studied economics at school, an example used often of the failure of markets was how ice cream stands tend to cluster at the middle of the beach. For individual consumers, it would be better if they were evenly spread, but each one knows that you’ll get the best takings at the centre, because you’re closer, on average, to the customers. So they all cluster there.

This book suggests that in some markets, businesses have started to figure out ways of profiting from all those customers at each end of the beach, who would really rather not have to walk all that way for an icecream, but haven’t had any choice in the past. And it’s working now, because they’ve figured out how to lower their product costs by serving those under-served customers.

I read this book in a holiday house in Far North Queensland that I found on the internet. Itself an example of the long tail in action. Ten years ago, I wouldn’t have had the time to do the research (which would have involved ringing up local real estate agents, and asking them detailed questions about each house available) and would have ended up in a chain hotel, probably.

There are an awful lot of people out there who buy things from the mass market because they have to, not because it’s their preference. If someone could make money from a bike shop that sold just to women (and therefore had lots of bikes that might fit me to choose from), then I’d probably spend money on cycling equipment than I do now. And I’d probably save money on other stuff that I don’t really want, as a result.

But I found myself getting annoyed with the book’s calm assumption of utopia reached, nonetheless. In Australia, Amazon doesn’t do much for me, unless I’m willing to spend an extortionate amount on international shipping (I usually buy three or four books a year from Amazon, which is a very small proportion of our household’s book buying). Netflix (an example also used frequently in the book) is (of course) only available for US customers. For Australians, Bigpond movies has just started up. As usual with Australian internet startups, it has failed to understand the business model, and the searching (which according to this book, is Netflix’s key competitive advantage) is absolutely hopeless.

Here in Australia, we’re still stuck in a small market, with high distribution costs, and hence high inventory costs, and we just don’t have as much choice available. It’s way better than it used to be – see my earlier beach house example. And this book gives you a very useful framework to use to think about where this is going to work, and where it isn’t.

It’s a great, insightful book; like all the best groundbreaking books, it all seems obvious after you’ve read it (but not before, at least in this case).  And I’d recommend it, if you like thinking about economic trends.