The graph at the top represents what has become known as the Long Tail, the idea that the orange bit (all the little guys) has a larger area that the red one (the hits).
Technologists thought the orange bit would be bigger, because that is in their interest (for technology, the money is in the platforms that serve all the smaller players) and it’s a more positive story (it makes room for the little guys).
A recent example of this convenient thinking is super-angel investor, Paul Graham’s rallying call for people considering doing a startup: “ The monolithic, hierarchical companies of the mid 20th century are being replaced by networks of smaller companies”. The opposite is true, as witnessed by the tech. galaxies, Google, Apple and Amazon or the fact that 75% of notional value contained within Graham’s Y Combinator, rests with 2% of the companies they have invested in, and most will go bust.
If you are a technologist looking at retail you build Ebay to serve lots of small vendors in the orange portion of the graph.
The red bit, on the other hand, is served by the brands and the brand builders. In the Retail analogy, instead of Ebay and small sellers, this is a brand like IKEA supported by agencies rather than platforms.
The Internet is a hits business, the red bit contains hit content/brands/ businesses, and the rest is served by the ‘hit’ platforms, the aforementioned Google, Apple, Amazon.
Even if the orange portion were bigger than the red, the largest profit would still flow to the hit platforms rather than the niche businesses of the long tail.
There is evidence that the long tail is wrong, however, that the red bit, the part technology platforms can serve but don’t control, is bigger than in the pre-digital era, and that brands are more important than ever.
This is because although there are more niches that are economically viable, there are less members of each niche. Where there once were two specialist soul music record stores serving Chicago and San Francisco respectively, now there is one, online.
This is why Gangnam Style has been viewed online an unbelievable, one billion times. It is like a large brand, an extreme hit of the digital age.
It means that even with infinite channels, audience will congregate around hit content or brands and that the traditional advertising model of leveraging creativity rather than technology to capture attention will be even more important.
Economic models till now have been based on physical goods or finite delivery channels, creating limited supply and unfulfillable demand. Digital goods now mean that we have infinite supply (online news, Spotify, Youtube) and the scarcity is people’s attention.
On the web, hits and celebrity are where people’s attention is focused and like celebrity ego it should come as no surprise that the web is less of a Long Tail than a Big Head business.