I wanted to share, this very strong article by TheRegister on the most comprehensive empirical study of digital music sales ever conducted… which sets out to negate the Long Tail theory.
The Long Tail, coined by Chris Anderson editor at WIRED magazine, is a term which I’m sure a lot of you have heard of and often used. Just in case, though, I’ll quickly summarise it… as the anti-thesis of the pareto rule or more common 80:20 rule. The pareto rule states that 80% of any company’s revenue is based on only 20% of the product types sold. While the remaining 80% of the product only serves to generate 20% of revenues. So for example a bookshop selling 10,000 books on it’s shelves would normally receive 80% of it’s revenues from 2000 of the more popular or best seller’s list… while the remaining 8000 books would only contribute to the remaining 20% of revenue.
The Long Tail, which is heavily based on the recent technological advances, (particularly in the web and it’s evolution to 2.0) states that when it comes to digital products since it is now easier to tap into new markets, cliques and niche communities, than it ever has been, you should be able to sell more of the 8000 books… effectively shifting the 80:20 ratio to more of a 60:40… 50:50 or even 20:80. To put it simply, selling less of more.
Chris Anderson based a lot of his theory on the sales of digital music (mp3s) at Rhapsody, and broadened it up to include online video firm NetFlix, and other models. However, 3 guys, including an economist and the founder of Mblox gathered approx. 1.5 million records of digital music sales in an attempt to put the Long Tail theory to the test. The results actually prove that the Pareto rule is still dominant even in the digital arena, perhaps even more so on the web than in real life?!
I used to believe in the Long Tail about 3-4 years ago. At the time the term was very loosely thrown around in the online marketing space, on the premise that with the use of Google Adwords or YSM, you could now expand your keyword base to a near-infinite amount and get more and more of your sales from the 3-4 word phrases that are much cheaper to bid on (say, 3* hotel in kensington london vs. london hotel). However, over the last couple of years it became apparent that however much we tried, most people still searched for generic keywords to start with… and all the long tail keywords only amounted to very little sales. Sure, conversions were quite high on the more specific keywords but the volume’s coming through just weren’t ever enough. The 1000s of long tail keywords only really served to help balance out and offset the high costs-of-sale on the more generic keywords.
Both the book, and the article by TheRegister should be read… I guarantee you’ll enjoy.
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