Making Millions With The Long Tail

In October of 2004, Chris Anderson, the editor of Wired magazine, wrote and published an article called, "The Long Tail." It has since been turned into a book that I'm currently working my through.

The original article is available for free at Wired's website. Of course, Wikipedia also has a Long Tail entry.

It's a must read for anyone involved in business online.

The gist of it is this: the Internet has changed the way we sell products. When there is no appreciable cost associated with selling more of the less popular items, stores online do not have to market only the top "hits." Because the "tail" of the less popular items is so long (in other words, there are far more unpopular items than popular ones), these products still make up a significant portion of total sales.

You can see in the following image, the less popular products represent the "long tail."



I'll let the original article do a bit of the explaining:

Unlimited selection is revealing truths about what consumers want and how they want to get it in service after service, from DVDs at Netflix to music videos on Yahoo! Launch to songs in the iTunes Music Store and Rhapsody. People are going deep into the catalog, down the long, long list of available titles, far past what's available at Blockbuster Video, Tower Records, and Barnes & Noble. And the more they find, the more they like.

Because there's no cost to increased shelf space, it's more profitable to sell one of each for twenty lesser known songs than it is to sell 10 of one popular "hit."

Take a look at some of the business that have made use of this strategy:

• Google
• Amazon
• iTunes
• Ebay
• Rhapsody

The question, then, is how can you take advantage of the Long Tail? It's especially difficult if you're mostly based in the physical world, and you're selling real products that do, indeed, take up shelf space. But there are ways.

For example, instead of bidding on the hottest keyword in an Adwords campaign, bid on twenty of the less popular, much more focused keywords (especially those which are most likely to increase conversion once they click on your ad).

You can take advantage of other wide spreading media markets that have the potential to reach your niche. A video on YouTube might be seen by hundreds of thousands of people per day. Do you need that many to see you're video? Probably not. But that same video also has the potential to be seen by hundreds of interested, potential buyers in a single day. That's more noticeable.

In short, the Long Tail is creating opportunities for businesses with an eye for innovation and creativity.

For further reading, I also recommend checking out the Pareto Principle, also known as the 80-20 Rule. It's good to know what it is, because it's what has guided business for decades.

And, in some ways, the Long Tail throws it out the window.