The Long Tail: When A Famous Theory Got (Almost) All Wrong

Published in

Before The Dot

8 min readNov 23, 2017

In October 2004, Chris Anderson, editor in chief of Wired magazine, published an article titled The Long Tail. Two years later, he publishes the eponymous book, where he elaborates his theory. His key idea will have a lasting impact on entrepreneurs, marketers and several generations of students: with the advent of the digital economy, consumers can find products tailored to their specific tastes and stop consuming only generic, hit products.

This theory takes its roots from the observation of two main changes:

The number of items in catalogues is increasing, since on the one hand they don’t need to be stored in the limited space of the retail shelves, and on the other hand, the search and recommendation tools allow consumers to find the right product within a large spectrum of choices.
E-commerce will change the demand curve, since consumers value niche products, perfectly tailored to their tastes, much more than standardized products. Thus, the tail should not only grow longer, by the emergence of new products, but should also get thicker, since consumers that will favour (and even be ready to spend a bit more) products that are closer to their taste and needs. Anderson even asserts that the juxtaposition of different niche offerings, which are not adapted to retail shelves, should lead to increased revenue

In the chart above, goods are placed on the horizontal axis depending on their popularity, and sales volume on the vertical axis. On the left, the hits. They are profitable and are already on the shelves of brick-and-mortar retailers. The grey area represents products that are not profitable enough to be available at retailers. The emergence of digital merchants, by its effect on supply, should modify the demand of consumers, reducing the demand of hit products and increasing the demand for niches products (the more on the right, the more niche they are). When a record shop owner could offer 15,000 items, Amazon can without any problem offer several hundred of thousands.

Anderson’s theory does not limit itself to asserting that e-merchants will be able to broaden their product catalogue, like many pundits say. His theory also states that e-merchants will deeply affect the demands of consumers, who will desert the homogeneous offers of hit products to focus on personalised products that are closer to their needs. Thus the Pareto principle, indicating that 20% of the articles are generating 80% of the sales, shall disappear.

His book had a tremendous influence on the business world. Marketers, consultants, entrepreneurs, CEOs, brand managers, journalists, have all predicted the advent of these new rules of the game, one where markets will be automatized and plenty of niche brands and e-commerce websites will appear. A couple years later, symptomatically, Tim Ferriss published his book “The 4-Hour Workweek”, which gave advices to create a “muse”, a small niche company. A muse would generate a modest turnover but big enough to offer financial freedom. The long tail was on everyone’s mind. And the world would never be the same.

The long tail: actual behaviours vs theory

Anita Elberse, professor at Harvard Business School, asked herself if the long tail would not end up being a bit like the Solow Computer Paradox (“You can see the computer age everywhere but in the productivity statistics.”). In 2008, in her article Should You Invest In The Long Tail?, she studied two emblematic industries that were highlighted in Anderson’s books: the music industry and the film industry.

The goal is clear: “If you are a producer, you have pressing decisions to make about product development and marketing investments. If you are a retailer, you must decide how broad an assortment to stock and whether to guide customers toward obscure selections that may yield higher margins. In either case, your choices will vary dramatically depending on which theory you subscribe to.”

Her takeaways are crystal clear: by studying the data from Rhapsody (60k subscribers at the time, 1m of references) and Quickflix (a competitor of Netflix, with 16k titles in its catalogue), she realized that the tail doesn’t follow Anderson’s predictions. Or at least only partially.

As predicted by Anderson, the number of titles that sold only a few copies almost doubled for any given week from 2000 to 2005. However, at the same time, the number of titles with no sales at all in a given week quadrupled. Thus the tail represents a rapidly increasing number of titles that sell very rarely or never. Rather than bulking up, the tail is becoming much longer and flatter.

Even more annoying for the long tail theory, Anita Elberse shows that the hit products are even more concentrated than they were in the past. From 2000 to 2005 the number of titles in the top 10% of weekly sales dropped by more than 50%. When Anderson predicted the progressive decrease of the sales volume of best sellers, figures tell a whole different story: hit products have never been so attractive.

And it is the exact same story in the film industry. The tail is even more polarized in the digital space than in retail stores. Again, the tail is getting longer in the digital space and it is not fattening but flattening, even more and faster than in the physical space.

Why is the digital space fattening the tail?

Anita Elberse, intrigued by her discoveries, continue her work on this blockbuster economy, where winners take it all, or at least where winners take most. She summarized her work in her book Blockbusters.

In a nutshell: creative industries (gaming, movie, music, publishing), like the digital economy, follow the winners-takes-all rule.

Why are these rules at work in these industries?

There are four main reasons to explain the benefits of betting on blockbusters:

If you don’t aim at building a blockbuster, you remove yourself from the most promising projects.
Blockbusters attract the best talents. Crazy projects are often more attractive than cautious projects, and a failure in that context will always be forgiven.
The most ambitious projects are more efficient in terms of marketing and sales: you have big names, higher budgets, more word-of-mouth.
It is simpler to have access & better conditions with the distribution channels when you are a potential blockbuster. In fact, Elberse’s work shows that the best predictor of a commercial success in the film industry is not the the actors, the period of the day, the genre, or the competition, but the number of screenings. Distribution plays the same critical role in the music and publishing industries.

More broadly, this blockbuster strategy is linked to the growing uncertainty of the success of a given project. If you are sure that each of your small bets will succeed, investing in them is a good strategy (“volume strategy”). But on average, a modest project does not have a significantly better chance of success in returning the initial investment than a big, ambitious project. Venture capital is a good illustration of these business dynamics.

Toward a standardized production?

Behind the long tail, there is also a quite romantic idea, suggesting that every consumer has a very singular taste. I, for example, am delighted to discover an edition of books being at the precise crossroad of the heroic, philosophical, and poetic, mixing French and Northern American cultures, published during the XIXth century. Yes, indeed!

What data reveals in reality, is that consumers of niche products are generally also the consumers of a given category. Enthusiasts of black and white Russian cinema are in fact only the most active viewers, who will also watch most of the hit movies. In her study, Anita Elberse notices that, on average, consumers that rented a popular movie will rent 20 other movies in a period of 6 months. The ones that rented a niche movie will rent 50 other movies in the same period. There is in fact no segment of viewers that only watches black and white Russian movies, or readers of books covering the precise crossroad of the heroic, philosophical, and poetic, mixing French and Northern American cultures, published during the XIXth century. The most active consumers are just going deeper into the tail. And more occasional consumers are focusing on the blockbusters. The digital economy changed nothing about that: the supply increased but consumer behaviour stayed the same. Note: the average notation of blockbusters is higher for the occasional consumers AND for the most active consumers.

Thus, it is undeniable that e-commerce has multiplied the number of available products and services, even the more niche ones. However, data suggests that it would be quite foolhardy to significantly modify the management of the supply. So what should we remember?

Recommandations & operations tips

For investors and producers:

Don’t change radically your asset allocation and portfolio management strategies. Your profits will come to a large extent from your blockbusters.
When you invest in or produce niche products or services, minimize your costs. The chances of successfully reaching the target are not significantly higher than your most ambitious projects. Also, the smallness of the demand at the end of the tail makes these projects not very profitable.
Focus on promoting the best-sellers. By definition, they are targetting far more consumers and are on average better appreciated than niche products.

For entrepreneurs and distributors:

To attract the biggest consumers, you should maximize the size of your portfolio. The most active consumers are also the ones that will look for niche offerings.
Minimize the costs linked to niche product. When possible, build business models that allow you to not bear the storage and shipping costs for these products (eg: Amazon marketplace).
Attract consumers with blockbusters.
Even if you manage to have higher margin with niche product, don’t excessively redirect consumers to these products to avoid frustration. Average satisfaction is higher for blockbusters, for almost all consumers.

A last note on the tail

A common misperception is to approach the composition of the tail as static. But in fact products and services are moving within the tail. The blockbuster of tomorrow might come from a niche product of yesterday. Lady Gaga started by playing for a very niche audience: when she was managed by Troy Carter, she was performing European dance-club inspired music to gay clubs and arty fashion crowds. She was very niche. She then went up and up in the tail. It’s the same story. So you should take deep care of the blockbusters, but not forget that some niche products or services might eventually become blockbusters. Wouldn’t it be too easy otherwise?