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Monday, December 11, 2006

The Long Tail: Making Sence of Adsence

Ever searched for a particular CD, but realised that no music store carried it? Ever looked for that particular author, but could some how, never find that book he wrote? Ever thought why certain news stands don’t carry the magazines you like? Ever wondered why you never get that particular software, the shops never sold it? It’s not uncommon that during your daily sojourns through market places, the commodity that you want is missing from shelves and ‘popular’ thought.
That’s exactly what Chris Anderson, calls the ‘the tyranny of lowest- cost- denominator fare’. In the of world retailing, a particular product can survive on shelves only if, the revenue generated by selling of the product, can pay for the shelf space. Media, whether its text based, acoustic or visual, suffers the most from this effect. As a result, a theatre shows a movie only if there are approximately 1500 people willing to watch it in a two week span, a CD is available only if two copies of it are sold in a month. As consequence, products that cannot make the required revenue fade away from selves. The consumer is forced to buy products that are available, not the products that he or she would ideally like to purchase.
This is where ‘long tail’ steps in. Purchasing, follows a very common statistical phenomenon, a few ‘titles’ (music, books or software) sell a lot, while a large number of ‘titles’ are rarely bought. This can be seen from the graph, where the red area, represents the titles that are purchased the most, while the trailing yellow part of the graph show the titles that are rarely bought. This trailing part of the graph is called ‘the Long Tail’. In the average physical model of retailing, the store will only carry products that lie in the darker area of the graph, as more people will buy those products and hence the revenue generated through their sales will be able to pay for the shelf space occupied by them.
In a physical store, area is limited; hence the shelf space is limited. The shelves will then be filled by products that are ‘popular’ (or lowest-common – denominator). But what if the self space is made limitless? In that case, the shop will be able to carry almost every title that has ever been released. It can potentially carry ‘popular’ products and ‘niche’ products, that is, products that you want but are not generally available. As a result the shop will be able to cater to all sorts of personal choices and likings. Anderson postulates that, if every one is able to get access to the title he or she wants, then, the number of titles sold in the ‘long tail’, could be more than the number of ‘popular’ title sales.
This reverses the traditional business model, where what sells is sold, instead everything can be sold now. But where can we get ‘unlimited’ shelf space? Unlike traditional shops, the internet does not have any constraint on the ‘shelf space’, there are no physical shelves. All the online retailing sites are an example of this. The site carries titles that are available, the buyer, just has to search and click to get what he wants. The title is physically kept in a warehouse, where the entire area is used for storage. Once the consumer has made his choice and paid through his credit card, then the title is sent to him or her.
This model is still constrained by the warehouse space and till now is being used for physical commodities, like paper backs and CDs. For mp3 music or ebooks, the situation becomes even simpler; the original file is stored on a server from which a copy is sent to the buyer. Server space can hold lot more data (music, movies etc) than a physical shop can. Thus a consumer can get any title he or she is looking for.
Yet one major problem still remains: how do you inform the user that the title that he wants, or one that he would like, is available on a particular site? This what computer programs, like ‘Adsence’, do. Every retail site has a list of titles that is generated once the consumer has selected the ‘title’ he or she wants. This list contains titles ( usually ‘people who searched for the title user has chosen, also chose this’ or simply, ‘other titles’) that the site has, which could interest the buyer. This model of retailing is what has skyrocketed the sales of websites like (books) and (music).As Anderson says “the cultural benefit of all this is much more diversity, reversing the blanding effects of a century of distribution scarcity, and the tyranny of the hit”. Welcome to an era free from market’s dictates of what’s ‘popular’ and available and what’s not.
Link: The Long Tail
Link: Chris Anderson


Golbguru said...

Arjun, thanks for visiting my blog. I am going to try to land my hands on the Newsweek article.

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