Chris Anderson’s 2006 book,
“The Long Tail: Why the Future of Business Is Selling Less of More
,” didn’t take long to go from the “tail” to the “head.“
The popularity of Anderson’s book is due to the fact that its thesis is both simple and powerful.
In a world where consumers have more choice than ever before and through the internet, the limitations of shelf-space have largely been reduced, businesses will be driven more by the sale of a smaller number of more products than they will be by the sale of a larger number of fewer “hit” products.
Many were quick to jump on the Long Tail bandwagon and there is still no shortage of proponents and believers.
But is Anderson’s Long Tail theory valid?
According to Anita Elberse, an associate professor of business administration at Harvard Business School, the answer is, for the most part, “no.“
In a thorough and intriguing article in the July-August 2008 issue of the Harvard Business Review, she details how her analysis of empirical data leads her to the conclusion that it is “highly disputable that much money can be made in the tail“.
This is because “the tail is likely to be extremely flat and populated by titles that are mostly a diversion for consumers whose appetite for true blockbusters continues to grow.“
To arrive at this conclusion, she looked at the music and home video markets – markets that she notes Anderson used in his book as perfect examples of the Long Tail theory “in action.“
Her analysis is based on data from Nielsen VideoScan and Nielsen SoundScan; Quickflix, an Australian DVD rental service similar in nature to Netflix; and Rhapsody, an online music subscription service.
Here’s a summary of Elberse’s findings:
- “The top 10% of titles accounted for 78% of all plays, and the top 1% of titles for 32% of all plays” on Rhapsody.
- On Quickflix, “the top 10% of DVDs accounted for 48% of all rentals, and the top 1% for 18% of all rentals.“
- Nielsen VideoScan shows that “the number of titles that sold only a few copies almost doubled for any given week from 2000 to 2005” however during that same period, “the number of titles with no sales at all in a given week quadrupled.” This is indicative of a tail that is “becoming much longer and flatter.“
- The “tail again lengthens but flattens” for music sales according to Nielsen SoundScan and an “ever smaller set of top titles continues to account for a large chunk of the overall demand for music.“
Interestingly, despite the fact that digital distribution was supposed to level the playing field for independent and emerging recording artists, Elberse finds that these artists have lost out to “superstar artists” with major record label deals, meaning that digital distribution, contrary to expectations and beliefs, has actually reinforced the importance of the “hit.“
Elberse’s research also discovered that the smaller group of the heaviest users of services like Quickflix and Rhapsody are the ones most likely to venture out into the tail, however even with these users, most of the content consumed still comes from the head.
There are a lot of other interesting findings in Elberse’s research and I would encourage readers here to peruse her article.
Getting back to the “big picture,” it’s the practical implications of Elberse’s research that are most worth discussing.
Logically establishing that the tail is difficult to profit from because it is increasingly flat, Elberse suggests that it’s “imprudent for companies to upend traditional practice and focus on the demand for obscure products.“
She basically advises:
- Don’t completely ignore the tail.
- Keep close tabs, however, on your costs in the tail because profits in it are challenging to find.
- Continue to focus on your “hits” because these are your bread and butter.
Anderson responded to Elberse’s article and while he states that her work “looks rock solid” and expresses confidence in her analysis, he claims that there is a “subtle difference in the way we define the Long Tail, especially in the definitions of ‘head’ and ‘tail’, that leads to very different results.“
He argues that the head should be considered what is available in the largest bricks-and-mortar retailer in the market while the tail is everything else.
In her response, Elberse, who actually participated in the research that Anderson used as part of his book, calls Anderson’s argument “odd” and points out, in order to remove semantics from the debate, she focused on painting a picture of the overall sales/consumption distribution trends so as to avoid having to arbitrarily define head and tail.
She concludes by stating her belief that:
“It is crucial that managerial decisions are grounded not in romantic notions of the impact of technology, but are based on empirical evidence of what is actually taking place.“
This is precisely the approach that executives, managers and entrepreneurs should be taking.
At the end of the day, I find that one cannot ignore the subtitle of Anderson’s book – “Why the Future of Business Is Selling Less of More.“
Semantics aside, Anderson’s argument is quite clear – businesses can thrive by focusing on selling “less of more.“
It’s a bold and “romantic” notion but one that clearly isn’t accurate.
The quantitative and qualitative analyses leave little doubt – while a “long tail” exists (as it always has in some form), it’s quite obvious that the “future of business” isn’t radically different from the “history of business” in that producers and retailers are still largely dependent on the sale of the most popular products to drive profits.
Of course, Elberse isn’t the first person to highlight the flaws in Anderson’s Long Tail theory.
Flash forward to 2008 and it appears that the more researchers look, the more evidence they find that Anderson truly did overestimate and overpromise.
As I pointed out when discussing Anderson’s new book:
“We do live in interesting times but to sell books, I would argue that authors like Anderson…have mastered the art of spin and exaggeration.
“They leverage current trends and fads to write ‘business’ books that are heavy on sex-appeal and excitement but short on substance and perspective.”
As it stands, I feel comfortable stating that the overriding general argument laid out in “The Long Tail” has been thoroughly debunked and thus executives, managers and entrepreneurs need only ask themselves one question: why chase your tail when the real money is in your head?