Should you invest in the long tail?

The long tail theory is one of the strong belief of opportunities in Internet. In a few words, dematerialization of goods offers more choice to consumers; The production cost are minimal. Furthermore, online distribution will change the curve of demand. in other words, people will look for rare treasures and this niches will be great. To simplify, if Internet can provide easy access to the long tail, then there will be a market (expected to be serious)

In the last issue of Harvard Business Review, Anita Elberse benchmarked this theory with real data. She analyzed the weekly sales of home videos from January 2000 to August 2005 on a random sample of 5,500 samples. She verified her results with 3,300 artists between January 2005 to April 2007. Her conclusions are surprising. The shape of demand evolved: The tail becomes longer and flatter.

According to her, the long tail theory does not hold. Among her many findings, some excerpts:

  • Consumers of the most obscure content also buy the hits.
  • Consumers who rent obscure movies are in general the heaviest users.
  • Hit products remain dominant, even among consumers who venture deep into the tail.
  • Hit products are also liked better than obscure products.

So the question is open: is the long tail one Internet Eldorado? read the paper and build your opinion.

Reference: ELBERSE A., Should you invest in the long tail?, in Harvard Business Review, Volume 86, Number 7/8, July/August 2008.

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