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Blockbusters stomp on the long tail, Harvard study finds

The "long tail" theory of Web economics made a big splash a few years back. New research suggests that the effect is probably overestimated.

Remember the long tail? It was the omnipresent theory that suggested there were oodles of cash to be made by monetizing a market's disparate tastes via the Web.

Why sell a million copies of Led Zeppelin's Coda, when you can make a thriving business of selling two to three copies of your neighbor's garage band to Rick, two copies of a Nigerian band's tunes to Susan, and so on?

As new research highlighted in Harvard Business Review suggests, the answer may well be that the real money is in the blockbuster, not the long tail, after all:

Meanwhile, our research also showed that success is concentrated in ever fewer best-selling titles at the head of the distribution curve. From 2000 to 2005 the number of titles in the top 10 percent of weekly sales dropped by more than 50 percent--an increase in concentration that is common in winner-take-all markets. The importance of individual best sellers is not diminishing over time. It is growing....

Is most of the business in the long tail being generated by a bunch of iconoclasts determined to march to different drummers? The answer is a definite no. My results show that a large number of customers occasionally select obscure offerings that, given their consumption rank and the average assortment size of offline retailers, are probably not available in brick-and-mortar stores. Meanwhile, consumers of the most obscure content are also buying the hits. Although they choose products of widely varying popularity, top titles generally form the largest share of their choices. (The wide appeal of these top titles is, of course, what makes them popular in the first place.)

Not only this, but the researchers find that "no matter how I slice and dice the customer base, customers give lower ratings to obscure titles." So, not only is the long tail less profitable, it's also less enjoyable. Chris Anderson, the man who wrote The Long Tail and whose theory became de rigueur, tries to defend his theory, but it doesn't measure up to Harvard Business Review's analysis.

What's the takeaway? If you're a vendor, you're still better off trying to appeal to the short tail of demand, whatever your industry. If you're an open-source vendor, in particular, you probably can't afford to do otherwise. The economics of open source generally favor monetizing the unwashed masses of an existing market.

Indeed, this is the biggest opportunity in open source: To bring Open Product X, Y, or Z to an existing but top-heavy market, one where vast hordes of would-be buyers are priced out of a market or have been kept out by the complexity of existing products. This is what Alfresco does for Enterprise Content Management/Collaboration. It's what Openbravo does for ERP. It's what SugarCRM does for CRM. And so on.

Is there money in the long tail? Probably. Do you want it? Probably not.