This post is for my workshop on Chris Anderson's book The Long Tail.
The Long Tail
From An employee at Amazon when talking about the Long Tail:
"We sold more books today that didn't sell at all yesterday than we sold today of all the books that did sell yesterday."
What does this statement represent?
What does it mean when I can only find this book on Amazon?
The Response
If the Long Tail killed the Hit and made commodities more widely available, will physical stores survive?
Shelf Space Strategies in Long Tail Markets
The Future
Because of the Internet and the minimal cost of online storage, more and more stuff is not available to a wider and wider audience. Anderson's thesis in The Long Tail is a groundbreaking one. But his new book, Free will have even great implications.
Introduction to Free on YouTube.
So if the Long Tail Destroyed the idea of the 80-20 rule (that is 20% of a companies products make up 80% of its revenue) what will this concept of free economics do to the future of the marketplace?
Nick Carr sums up Google's economic model like this:
"Google’s protean appearance is not a reflection of its core business. Rather, it stems from the vast number of complements to its core business. Complements are, to put it simply, any products or services that tend be consumed together. Think hot dogs and mustard, or houses and mortgages. For Google, literally everything that happens on the Internet is a complement to its main business. The more things that people and companies do online, the more ads they see and the more money Google makes. In addition, as Internet activity increases, Google collects more data on consumers’ needs and behavior and can tailor its ads more precisely, strengthening its competitive advantage and further increasing its income. As more and more products and services are delivered digitally over computer networks — entertainment, news, software programs, financial transactions — Google’s range of complements expands into ever more industry sectors. That's why cute little Google has morphed into The Omnigoogle.
Because the sales of complementary products rise in tandem, a company has a strong strategic interest in reducing the cost and expanding the availability of the complements to its core product. It’s not too much of an exaggeration to say that a company would like all complements to be given away. If hot dogs became freebies, mustard sales would skyrocket. It’s this natural drive to reduce the cost of complements that, more than anything else, explains Google’s strategy. Nearly everything the company does, including building big data centers, buying optical fiber, promoting free Wi-Fi access, fighting copyright restrictions, supporting open source software, launching browsers and satellites, and giving away all sorts of Web services and data, is aimed at reducing the cost and expanding the scope of Internet use. Google wants information to be free because as the cost of information falls it makes more money.
There’s one more twist. Because the marginal cost of producing and distributing a new copy of a purely digital product is close to zero, Google not only has the desire to give away informational products; it has the economic leeway to actually do it. Those two facts — the vast breadth of Google’s complements, and the company’s ability to push the price of those complements toward zero — are what really set the company apart from other firms. Google faces far less risk in product development than the usual business does. It routinely introduces half-finished products and services as online “betas” because it knows that, even if the offerings fail to win a big share of the market, they will still tend to produce attractive returns by generating advertising revenue and producing valuable data on customer behavior. For most companies, a failed launch of a new product is very costly. For Google, in general, it’s not. Failure is cheap."
How will Google's business model shift our perspective towards the future of economics?
Clay Shirky
Failure is cheaper... The average quality of what is produced is much lower but the average quality of what is consumed is much higher.
What is the implication of this change? How will it impact the future of economics?
Shirky's new book is Here Comes Everybody and he has blog as well.
For more information on the Long Tail and the principles that Chris Anderson discussed, visit his blog.
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