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July 04, 2008

Long Tail Controversy and Explanations

Dr. Elberse of Harvard caused a ruckus in an article in the current Harvard Business Journal issue about an interesting new study she's been involved in ( Wall Street Journal summary here), as far as I know the only one to look at how online buying patterns are changing. She also raises a ruckus with her title, "Should You Invest in the Long Tail," which is chosen to discredit Chris Anderson's Long Tail book.

I see her title as attacking a straw man, personally. My sense of the Long Tail isn't about ignoring what's popular, as she implies, but rather understanding that stocking the top ten of anything is getting you less market share than it did pre-Internet. But, Chris Anderson is perfectly able to take care of himself, as he shows. As is Anita in response. They're also more fun than my verson.

The Long Tail is of particular interest to me, because I studied it personally, and was involved in a way to overcome it somewhat in one arena, web caching. The Long Tail is a newfangled network-researchy name for an oldfangled problem: why libraries need to be big to keep more than a handful of their clients happy, and why you can never keep all your customers happy with any finite-sized library. Even in the Library of Congress, some people will want books only published abroad.

A mathematician named Zipf came up with a mathematical model that he designed to model the frequency of linguistic word use. It decays slowly, to reflect the fact that, although "the" and "and" are way popular, you also see "arthroscopic" and "quantitative" in real use as well. The law turns out to apply to libraries and web caches as well.

A cache is a bunch of commonly used stuff kept close by for quick access. They've traditionally done well indeed in computers, speeding up processors and disks alot. A web cache is that idea applied to the Web, except it doesn't actually work as well. And that's because what people look at on the web follows Zipf's Law. You need to continuouly prefetch the entire Web onto your web cache to get the kind of improvement you get with disk caches.

I was involved with a couple of measures to work around this a bit. One measure was to support efficient push and look at how much different policies for pushing pages accessed by cache users would help. Another was, observing that caches work better the more people they have going through them, to implement a scalable way of having big cache clouds work together. Our work showed each of those could've been a big improvement, but would still not bring you to the domain of disk cache improvements. So, *I* certainly saw fit to invest in the Long Tail. The answer to Elberse's question, of course, depends on what you're doing.

So what did Dr. Elberse et al see over time? That the long tail on the overall curve tails off at the end and becomes more concentrated at the moat interesting stuff. The highest 10%, for example, becomes more popular and the lowest 10% becomes less popular. That's very interesting stuff, and it's something to think about and research more. The work raises one additional question for me: if you have a certain number of marketing or cache slots to fill, will they become more or less effective over time? Notice that's a different question.

Another thing to think about is that books' title popularity is still long-tailed, despite having had centuries to concentrate.

Hat tip and good call on the Elberse/Anderson controversy at Marginal Revolution.

Posted by Jon Kay at July 4, 2008 02:20 AM
Comments

What has changed is that the Internet now makes it feasible to find many of the 10,000 people worldwide who are interested in what you are selling. If your break-even point is 2,000 sales, your chances of finding even that many customers (unless they had something else in common that you could use to target advertising) was previously tiny. Now, it may actually be worthwhile to make whatever it is.

Posted by: wj at July 4, 2008 12:10 PM

Neat article. I think both ignore the dynamic time aspect of demand to some degree, but cool stuff. Indeed, I've always thought that the dynamic time aspect was the bit that "long tail" reliant marketers had trouble grasping, namely, that demand for individual items inevitably tails off over time, so niche concentration is more subject to market decline. In addition, it's tougher to predict which niche items will still have some future demand--the rate of decline is less predictable. The most reliable indicator is having been in the top of the "head" at some point, and it's not all that reliable. I mean, what's the current market for Hamilton Jordan's White House memoirs published in '82? How many Oscar nominees made in that year can you name? Odds are that if you were read the list, you might recognize three out of five.

What's enabled the long tail 'netwise is the miniscule inventory cost of data. But when it comes to physical items, the "usable shelf life" of Long Tail inventory kicks in. We see this in library inventories. Libraries can only have so many items, yet new material comes out constantly. So they cull. (Yes, book lovers, libraries MUST divest themselves of a certain amount of material regularly, or quit buying new material. Sad, ain't it?) A library may cull out as much as 10% of its titles every year.

In profit-oriented businesses that require physical inventory, succesfully selling the Long Tail niches requires much better guessing as to demand decline than selling the Head does. MUCH better. That and/or REALLY cheap inventory and storage costs.

Another aspect is that the amount of material available for the Long Tail has itself grown, which one would think to some degree drives the effect observed by Elberse. More new material coming in than in the past, and MUCH larger backlogs of old material. IOW, the Head is necessarily restricted in size at any given point in time, but the Tail can grow relatively much larger over time. Call the Head that 3000 for a video store, and the Tail is everything else in the video world not in that 3000...which grows at what rate?

Even looked at as the top 10%, the same effect would still be present, as the most popular items become concentrated in the Head and the Tail keeps growing and growing. IOW, looked at as a graph, the "bulge" would continually shift incrementally leftward towards the Head, as the material that would ordinarily be culled instead continues to accumulate in the Tail, as the zero-demand and near-zero-demand items remain in inventory FOREVER.

Posted by: Tully at July 4, 2008 12:46 PM
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