Complications of the Long Tail: choice, social behavior and costs

Chris Anderson, the editor in chief of Wired, was the first author to coin the phenomenon of the Long Tail. He published an article in 2004 in this magazine, and two years later, released a book entitled “The Long Tail – Why the Future of Business Is Selling Less of More”. According to Anderson1, The Long Tail strategy for a business is to increase profit by catering to numerous small niches instead of the “head” of the curve, which is made of few commercial successes or hits. Anderson uses large and flourishing Internet companies such as, as Amazon.com, Netflix, and Rhapsody as examples to support his argument. Even though Anderson succeeds emphasizing the recent changes in business led by Internet, the opportunities online retailers saw in an environment without shelves, his analysis is lacking in three main respects: he misinterprets the idea of choice, disregards human social behavior, and omits transaction costs.

According to Anderson, the tail’s growth would lead to more opportunities for costumers to find what they really want in niches. However, he doesn’t consider that personal choices can be related to immediate necessities and time. In the chapter 10, Anderson uses jam as an example to illustrate people’s desire for variety. He compares a supermarket (300 kinds of jam) to an online store (1200 types), arguing that consumers can get the kind they whish. This could be true for a jam connoisseur because this person doesn’t necessarily want to consume the product immediately, but not for someone buying their next breakfast. He also doesn’t evaluate consumer willingness to spend more time online to find all these niches. In the future of business, Anderson sees infinite choices; however, decisions in this environment may be progressively more difficult over time, and there is not enough data to prove consumer’s behavior in an unprecedented market.

The second problem is the inconsistency of his business analysis with the human social behavior. Anderson approximates human preferences as “consumption functions” when he takes for granted that filters are the best connectors of the new supply and demand.

The author says that in the internet era, filters and recommendations are important tools to help people to locate their niches. However, he does not realize that external (offline) recommendations can also modify the accuracy of the filters. One can have a DVD borrowed, a habit of buying two magazines per month in a news stand, and lent books from the local library. The perfect filters that Anderson so emphatically endorses and considers a powerful force of the Long Tail will never have complete data to determine what a person or a company really wants.

The author also discusses hits in the second chapter, highlighting that consumers still look for them, but this search is deemphasized as soon as consumers find their niches. Anderson has qualified data to show that micro-cultures have been growing with the Internet. However, he exaggerates when states that “we [Americans] are turning from a mass market back into a niche nation” (pp. 40). The author believes that the watercooler effect caused by television will turn into diverse virtual watercooler effects. However, many social interactions take place outside an environment dominated by social niches. Most water coolers are in workplaces, after all.

Thompson2 argues that there are different levels of interactions and the strongest type is the human and not the one mediated by computer. Discussions and recommendations of foods, music, and other goods that occur in person can do more than point out products that fit someone’s taste- they can change and create desires out of the need for shared experience. If we become a niche nation, will we have something to connect us besides the optical fibers?

Finally, there are some specific economic problems that the author does not discuss in his study. First, he believes that electronic transactions (B2B and B2C) will occur flawlessly. The growth in online transactions has created many opportunities for credit card fraud and requires sophisticated security to protect consumers. Anderson writes “online shopping is still less than 10 percent of American retail” (pp. 147). If the online retailers follow the tail’s growth, a larger infra-structure will have to be generated to support the new demand. Transaction costs are considerably higher if the item needs to be shipped directly to the consumer because of the complex logistics chain, labor, and fuel required to deliver individual items to addresses rather bulk shipments to bricks-and-mortar stores.

Another issue is that the tools of production are not entirely free and, therefore, not affordable to everyone. In the chapter four, he argues that “democratizing the tools of production” is another powerful force of the Long Tail. Even though amateur producers of digital goods have been popularized, he doesn’t recognize that to produce digital goods, people need to have a basic infra-structure (a relatively new personal computer, software, and bandwidth) and knowledge. Unfortunately, full-access to Internet is not a reality for most of people outside the US. In Brazil, for example, the Internet penetration is only 11% according to comScore.

The most important finding of Anderson’s that consumers have been moving from a mainstream to a niche culture during recent years. Nevertheless, his statements about consumer choices will need a deeper investigation, especially regarding the immediate necessity of physical goods and time consuming issues. The author overestimates the efficacy of internet’s systems and underestimates the importance of face to face human interaction, which has been investigated by other disciplines including anthropology and neurosciences. Finally, he omits important aspects of transaction costs that make the tail forces weaker and argue against its practicability. Living in a period of transition, the author starts exploring a possible tendency in the Internet business, but doesn’t examine the complexity of his own discovery. In a culture driven by hits, media conglomerates and high-technology monopolies, Anderson is naïve to declare that the Long Tail will resist and will not be cut off.

1Anderson, C. (2006). The Long Tail: Why the Future of Business Is Selling Less of More. New York: Hyperion.

2 Thompson, J. B. (1995). The media and modernity. Cambridge: Polity Press.

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2 Responses to Complications of the Long Tail: choice, social behavior and costs

  1. jeffhora says:

    I find your critique of The Long Tail well balanced. Given the tone of the book and audience for which the book is written, it would be easy to agree with Anderson. By focusing on the sociological shifts that the information economy technologies afford and staying within that scope, it is a little easier to make the case.
    I agree with your selection of a misinterpretation of choice. One of the things that T.A. McCann mentioned in class was that time is much more precious in this economy. You point out that, in the jams example, many people are unwilling to take the time to look for a niche product, whether that is asparagus-lime preserves or a boutique version of strawberry. It does take time and perseverance to find whether the niche product you’re looking for exists at all, and then where might be the best place to purchase it, if other than at the site where you find it. As to filtering to find the product, it may have been recommended by a friend or family member, not Google. The most effective communication between people is still face-to-face or as close to that as you can get. This leads to your second point about human social behavior. Human choice is very complex, although it certainly can be influenced by recommendations, reviews and referrals. Any one of these, however, can take place offline, thereby skewing future online filters for recommendations, reviews and referrals because they don’t have insight into a choice.
    You mention the problems with B2B businesses which agree with my analysis of the How Not to Build an Online Market article. The effort to combine the Texas and California propane markets proved difficult because of the slightly different structures of each market, their size, location, and assumptions about the need for middlemen. While business models for B2B will emerge and evolve, it is not tidy process. Particularly when the realm of international B2B is considered, with financial regulations, import/export rules differing between countries, etc., there is considerably more complexity that will need to be made more simple and automated to enable the kind of growth envisioned in the book.
    You affirm what we have mentioned in class, which is that we are in a time of transition. While Anderson’s book isn’t perfect, it does provide a tantalizing view of what might eventually be.

  2. […] Jeff on Raquel (review – note, he’s posting to his blog for a record) […]

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