Long Tail

Long tail is a term commonly known in the business world and designates the strategy of selling small quantities of very diverse products. This theory was elaborated by Chris Anderson in 2004. He presented the long tail in an article in Wired and gave such examples of this strategy as Amazon and Ebay.

Long Tail explained

The Long Tail is an established term from statistics and economics. It was first used in October 2004 by Chris Anderson in an article in Wired. The article about the long tail noted: many new economies are characterized by a significant influence of sales of specific, niche products, and the profits from their sales are comparable to the profits from the sales of best-sellers.

The long tail is a common expression for a phenomenon that has long been known to statisticians. The most frequently used law in statistics, the Gauss's bell that is called for its shape, is criticized in some of its uses for its narrow tail. In finance, for example, this narrow tail corresponds to an underestimation of extreme variations, and new models, called leptokurtic, seek to eliminate this problem. The phenomenon is also known as large tails, power law tails or Pareto tails.

It is almost always possible to build a successful business in niche economies that are sufficiently backed by demand. As stated above, Anderson in his article about the long tail cites several examples. 57% of all Amazon's online bookstore sales are "non-bestseller" books, not available at most "offline" bookstores. 20% of movies rented from Netflix on DVD do not go on the big screen and are not sold in regular stores. What's more, the total cost of obscure items can be orders of magnitude higher than that of "hits."

Previous studies

So, the "long tail" theory is as follows: modern culture and economy is steadily shifting from selling a small number of "hits" (mainstream products and markets) at the beginning of the demand curve to a large number of specific, niche products at its "tail." Such trends are present in music sales (iTunes, Rhapsody, etc.), and in television and video-on-demand (TiVo, YouTube, etc.).

Of course, such distributions (in probability distribution theory, the Pareto) existed before Anderson's article. For example, word frequencies in fairly long texts and population distributions (a small number of "millionaire cities" and many suburbs, towns and small cities). Anderson, on the other hand, was one of the first to popularize it in relation to the new economies, the era of the Internet, if you will, Web 2.0. More documented examples and illustrations of the "long tail" theory can be found in the book "The Long Tail: Why the Future of Business Is Selling Less of More".