What Everyone Got Wrong About ‘the Long Tail’ (Marker by Medium)

Fifteen years ago, as Silicon Valley was recovering from the dot-com bust, David Hornik, a long-time VC at August Capital, started seeing a recurring theme in pitches from startup founders: overt references to a new term called “the long tail.” A typical pitch deck included a slide showing a stylized sales graph taken straight from a 2004 Wired magazine article by that name, written by the magazine’s editor-in-chief at the time, Chris Anderson.

“That slide was a constant,” Hornik recalls. “I saw it every week for years.” By the time Anderson converted his article into his bestselling 2006 book, The Long Tail: Why the Future of Business Is Selling Less of More, the ideas represented by the term were so well-known in internet startup circles and the slide so commonplace that one founder labeled a slide “The Obligatory Long Tail Slide,” captioning the accompanying graph with the phrase “Enough said.”

“The Long Tail” was Anderson’s catchy name for a set of observations about the economics of internet markets — observations that are as resonant as ever in today’s “passion economy,” in which anyone can try their hand at turning their specialized interests into sources of income. In his article and book, building on the work of academics like Erik Brynjolfsson, Jeffrey Hu, Michael Smith, and Anita Elberse, Anderson observed that brick-and-mortar stores were constrained by limited shelf space, and therefore aimed to carry only the most popular products. In sharp contrast, online platforms like Amazon and Netflix had infinite shelf space. The tech journalist’s thesis: This radical shift would have far-reaching effects, from the media and entertainment industries that were his main focus, to the markets for everything from crafts to kitchen appliances.

By seeing this pervasive phenomenon so clearly, spelling out its practical implications for businesses and consumers, and giving it a catchy name, Anderson helped make “The Long Tail” a buzzword, and earned a spot in TIME magazine’s 2007 list of the world’s 100 most influential people. (In it Malcolm Gladwell described the concept as “a Truly Big Idea.”)

Anderson captured both the coming phenomenon of the Long Tail and offered a playbook for taking advantage of it, which attracted broad interest, especially among internet entrepreneurs — basically, an upside for anyone who wasn’t going to win by being in the “hits” business.

Approximately a decade and a half later, we can see just how well Anderson’s thesis has played out. He was absolutely right about the benefits to what he called “aggregators,” particularly the e-commerce platforms selling digital entertainment: He accurately saw that, unburdened from the costs and risks of carrying physical inventory, a platform like Amazon or iTunes was suddenly free to offer an unlimited assortment of ebooks, songs, and other digital goods. Even platforms that sell physical products through many third-party sellers — like eBay and the Amazon Marketplace — could and did easily offer an endless assortment of products. Collectively, therefore, this tail of niche offerings in each platform’s infinite catalog added up to an enormous sales total.

Books no longer need to go out of print, no matter how few copies they sell each year, because they survive forever in electronic form.

In fact, depending on exactly where on the sales curve you drew the dividing line between the head (sales of the most popular products) and the tail (sales of niche products), and how long the tail actually stretched, the tail was potentially as large as the head, Anderson predicted. Any company that managed to aggregate these niche sales stood to bring in immense revenue. The profit potential was huge, too, as Anderson and many of his readers saw: Although it’s no easy feat to build a well-running, trustworthy marketplace that attracts large numbers of both buyers and sellers, once such a platform is up and running, the costs of adding new users and new products becomes negligible.

And, indeed, the Long Tail proved a boon to aggregators, as we can see from the success of most of the businesses Anderson was writing about and the many platforms that launched and thrived since he first published his ideas — from YouTube and Spotify to Shopify and BigCommerce.

Anderson also saw benefits to consumers, who could enjoy within the Long Tail what he dubbed “the paradise of choice,” a delightful contrast to both the tyranny of common-denominator fare and the “paradox of choice” (when having many options is less a blessing than a curse). When Anderson was writing, Pandora was already introducing listeners to a panoply of indie music, and eBay was already auctioning off all manner of used goods and collectibles. He also reported that KitchenAid had recently gone from offering its mixer at Target in just three colors to selling the same mixer online in a choice of more than 50. No physical retailer carried the product in Tangerine, for example, because they didn’t think they could sell enough units of that unusual shade — but low sales weren’t a concern for online merchants, who enjoyed the efficiency of a centralized warehouse.

Today, many of us take such vast assortments for granted, until we pause to consider how inconceivable it was 20 years ago that anyone with an internet connection would one day be able to, say, stream a Turkish soap opera or learn how to cook a vegan dish from Zimbabwe. So Anderson was right about the cultural impact of the Long Tail, though he somewhat overestimated how well search tools and recommender systems can actually match users with tastes.

Nonetheless, consumers definitely benefited — and these benefits have extended well beyond cultural goods like books and music. Today, if you need a new lint screen for your ancient Maytag dryer, chances are you can order it on FiltersFast.com or AppliancePartsPros.com. And if you prefer to stay in a yurt or a treehouse over a hotel room, you can do so thanks to Airbnb and Hipcamp — just two of many Long Tail service platforms that have sprung up since the book’s publication.

In addition to consumers and aggregators, Anderson also wrote about a third group: the producers of all these niche offerings, for whom he foresaw an effect that would be largely noneconomic, mainly in the form of intangibles like attention and reputation. He wrote that while cultural variety would certainly increase, “How and when the money will follow is something that the next few decades will reveal.”

For now, producers are seeing mixed results. On the plus side, tens of thousands of people (such as bloggers and podcasters, TikTokers, or Etsy craftspeople) can make at least some money doing what they love. What’s more, sellers of once-popular products can continue offering these products indefinitely, long after their mass sales have dwindled. “We have games that in the retail era would have simply vanished off the face of the earth,” says David Edery, the CEO of Spry Fox, a developer and publisher of games distributed through Google Play, Apple’s App Store, and other game platforms. We can see the same phenomenon in books, which no longer need to go out of print, no matter how few copies they sell each year, because they survive forever in electronic form.

Nonetheless, for the majority of creators, the Long Tail has underdelivered financially. “The way [Anderson] wrote about it caused people to think that individual content creators will suddenly make more money than they used to,” Edery says, “and I just don’t know that that’s true.”

Making matters worse for creators is that blockbusters continue to leave niche products in the dust, particularly in the entertainment industry. The Harvard Business School economist Anita Elberse has amassed and presented data showing that digital distribution has actually made blockbusters a better business bet than ever. For one thing, recommender systems haven’t lived up to their early promise, such that Netflix (for example) still keeps pushing its already popular shows and movies, rather than ones that cater to your idiosyncratic tastes.

There is no question that some producers are succeeding in the Long Tail, some wildly — just think of the YouTubers and Instagram influencers who are earning millions focusing on makeup tips, product unboxing, and other specialized topics. And countless other producers now stand at least a chance to profit from their passions.

Unfortunately for artists, that also means a chance to lose money. The Long Tail fosters intense competition among niche creators: Though digital shelf space is unlimited, consumers’ time and attention remain finite, so creators have to spend more and more resources to try to stand out. This is why we see so much free content and so many ads. As in any arms race, each contender has a shot at a payoff — but the only sure winners in this marketing arms race are the platforms.

Ongoing marketing costs are one of a couple of major ways that Long Tail platforms have shifted significant risks back to the creators. Up-front costs are another. Spotify pays nothing for a song that never gets played, and Airbnb pays nothing for a room that happens to stay vacant; these platforms have no skin in the game. Meanwhile, the musician had to create the song and the Airbnb host had to pay the mortgage.

What does the Long Tail have to do with this risk shift? In the earlier era of limited shelf space, distributors had to put money where their mouths were: retailers, publishers, and other intermediaries, therefore, had to be discerning gatekeepers. They managed to mitigate their downside risk through a portfolio approach, where winners would cover the losses from the also-rans. In today’s era of The Long Tail, where the upside to infinite inventory is high and the downside negligible, the incentive to the platforms is to open the gates and take all comers. That approach pits the creators against one another without providing up-front backing. The result is exactly backward: The party that can least manage the risk (the individual creator) is the one shouldering it.

Today, Anderson, who is now the CEO of 3D Robotics, says he is sympathetic to the creators and maintains that any disappointment they’ve experienced comes from a fundamental misreading of the book, which never promised that artists could make money in the Long Tail. Rather, he wrote from the beginning that the real money would go to the aggregators — the companies who could reap the rewards from the entire area under the long-tail curve, not the narrow vertical slices representing each creator.

Anderson says he wishes that recommender systems would get better at surfacing niche content, rather than fueling rich-get-richer effects. Yet, in response to those who point out that we’re living in a world that is more hit-driven than ever, Anderson says people may have gotten excited by the idea that the Long Tail era was the end of the blockbuster — but he never actually said that. He says, “It was the end of the monopoly of the blockbuster.”

 

This article written by Marina Krakovsky appeared in Marker by Medium.