Chris Anderson's The Long Tail does something that only the best books do—uncovers a phenomenon that's undeniably going on and makes clear sense of it. Anderson, the Wired editor-in-chief who first wrote about the Long Tail concept in 2004, had two moments of genius: He visualized the demand for certain products as a "power curve," and he came up with a catchy phrase to go with his observation. Like most good ideas, the Long Tail attaches to your mind and gets stuck there. Everything you take in—cult blogs, alternative music, festival films—starts looking like the Long Tail in action. But that's also the problem. The Long Tail theory is so catchy it can overgrow its useful boundaries. Unfortunately, Anderson's book exacerbates this problem. When you put it down, there's one question you won't be able to answer: When, exactly, doesn't the Long Tail matter?
The graph below is the Long Tail in a nutshell.
This image accurately describes the demand for cultural products. In most entertainment industries (films, music, books, etc.) a few hits make most of the money, and demand drops off quickly thereafter. Demand, however, doesn't drop to zero. The products in the Long Tail are less popular in a mass sense, but still popular in a niche sense. What that means is that some businesses, like Amazon and Google, can make money not just on big hits, but by eating the Long Tail. They can live like a blue whale, growing fat by eating millions of tiny shrimp.
This insight goes only so far, but like many business books, The Long Tail commits the sin of overreaching. The tagline on the book's cover reads, "Why the Future of Business Is Selling Less of More," which is certainly wrong or at least exaggerated. Inside we learn about "the Long Tail of Everything." Anderson's book, unlike his original Wired article, threatens to turn a great theory of inventory economics into a bad theory of life and the universe. He writes that "there are now Long Tail markets practically everywhere you look," calling offshoring the "Long Tail of labor," and online universities "the Long Tail of education." He quotes approvingly an analysis that claims, improbably, that there's a "Long Tail of national security" in which al-Qaida is a "supercharged niche supplier." At times, the Long Tail becomes the proverbial theory hammer looking for nails to pound.
What are the Long Tail's limits? As a business model, it matters most 1) where the price of carrying additional inventory approaches zero and 2) where consumers have strong and heterogeneous preferences. When these two conditions are satisfied, a company can radically enlarge its inventory and make money raking in the niche demand. This is the lifeblood of a handful of products and companies, Apple's iTunes, Netflix, and Google among them, all of which are basically in the business of aggregating content. It doesn't cost much to add another song to iTunes—having 10,000 songs available costs about the same as having 1 million. Moreover, people's music preferences are intense—fans of Tchaikovsky aren't usually into Lordi.
But it's important to remember that many industries don't rely on the weird economics of information products. Take the oil industry, which Anderson doesn't discuss, but whose significance is obvious—compare Exxon's $371 billion in revenues in 2005 to Google's $6.1 billion. The Long Tail doesn't seem to tell us much about the future of the oil biz. It's not really clear how Exxon might benefit from expanding the types of gas it makes available at its service stations. It would cost Exxon a lot to install extra pumps, and few people have well-developed tastes for types of gasoline. Since it's not easy for Exxon to reduce its inventory costs, product diversification is expensive. There might be long lines in gasoline retail, but there's no Long Tail.
The Long Tail also sometimes doesn't work in its home category: the information-technology industries. The key issue is the question of standardization. Sometimes consumers want a diverse set of product offerings. But sometimes they prefer a standard or compatible product. Most of Anderson's examples are content firms, where product diversity is almost always a good thing. But in the information-transport industry, standardization is usually more important. Do people want 10 different types of (incompatible) Internet connections? Or just the fastest one they can get? How about 30 types of (incompatible) Ethernet cables?
What the book doesn't get at is the relationship between these standards-driven industries where the Long Tail doesn't matter, and the content industries where it does. There aren't Long Tails everywhere. Instead, for every diverse Long Tail there's a "Big Dog": a boring standardized industry that isn't sexy like Apple or Amazon but that delivers all that niche content you're hungry for. For example, there's the telecommunications side of the Internet, the backbone carriers that exist purely to deliver content. Their standardization makes accessing the Long Tail possible.
To his credit, Anderson briefly mentions the standardization problem. He also makes a valiant effort, near the end of the book, to show the Long Tail in action outside the entertainment industries, using eBay, KitchenAid, and a company called Salesforce.com. But, at their worst, these examples threaten to make the phrase Long Tail meaningless. Anderson says that eBay "is both the Long Tail of products and the Long Tail of merchants." But eBay is easy to understand without picking up The Long Tail: It lowers the transaction costs of buying and selling used goods, whether they're niche products or not. If you call that a Long Tail, then the word means nothing more than "make easier to buy." And then everything from the Yellow Pages, to paper money, to my real estate agent has suddenly grown a Long Tail.