Anderson Defends Investing in the Long Tail

By Tom Foremski - July 15, 2008

Harvard Business Review published a feature article by Anita Elberse: Should You Invest in the Long Tail?.

She concludes that there really isn't much profit to be found in the "Long Tail." This is very very bad news for the many Silicon valley startups that have business plans heavily dependent on "Long Tail" economics.

Anita Elberse writes:

For Chris Anderson, the strategic implications of the digital environment seem clear. “The companies that will prosper,” he declares, “will be those that switch out of lowest-common-denominator mode and figure out how to address niches.” But my research indicates otherwise. Although no one disputes the lengthening of the tail (clearly, more obscure products are being made available for purchase every day), the tail is likely to be extremely flat and populated by titles that are mostly a diversion for consumers whose appetite for true blockbusters continues to grow. It is therefore highly disputable that much money can be made in the tail.

She adds:

The companies that will prosper are the ones most capable of capitalizing on individual best sellers.

This is why book publishers compete fiercely in bidding wars to secure blockbuster titles. She describes the fierce competition for a specific book:

Hyperion was determined to get it; New York magazine quoted an industry insider as saying that “jaws hit the floor over how much they paid.” Everyone recognized it as a high-stakes gamble in a high-risk genre. But ultimately it paid off big.

What was the title of the book? The Long Tail by Chris Anderson. It seems that there are plenty of profits in the Long Tail, at least for Chris Anderson and his publisher!

Backachya . . .

Chris Anderson hit back after a "quick read" and basically concluded that nothing had changed and that it all depended on where you say the "head" is and where the "tail" is located. Debating the Long Tail - Harvard Business Online's Conversation Starter

My point is not to suggest that Elberse is wrong and that I'm right, it's only to point out that different definitions of what the Long Tail is, from "head" to "tail", will generate wildly different results.

Foremski's Take: Well, if you get widely different results depending on where you slice the head and tail then there really is no "Long Tail." You can prove or disprove the concept as much as you wish.

As a business you want to be in the "head" because that's where the profits are the fattest. You don't want to be in the "tail" you'll get there anyway.

If you are a startup start well in the "head" is my advice. Don't try to build a "Long Tail" business or you'll get your head handed back to you.

Please See:

Choking On The Long Tail - The Unbearable Burden

Long Tail Economics - Bonanza Or Bogus?


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By Tom Foremski - July 15, 2008 | Permalink | Comment | Category: Disruptive
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Comments (2)

Scott Rafer:

Hear, hear, regarding the terrible economics of the tail. However, startups can't start in the head which is where the incumbents are already profitable and the buyers are risk-averse. The "shoulder" is the place and corresponds nicely to the entry point highlighted in Clayton Christiansen's model, where new entrants do a good-enough product built on a cheaper infrastructure and steal away medium-sized customers.

Posted: July 15, 2008 5:47 PM

Tom Foremski:

Scott: I like the shoulder concept!

Posted: July 16, 2008 6:59 PM

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