Six months ago there was barely a pitch I heard that didn't include a slide entitled "Long Tail" or "The Long Tail of [fill in the vertical]," with the obligatory long tail curve. Impressively, it has taken less than a year of entrepreneurs explicitly referencing and explaining the Long Tail before it has become so well recognized and understood that it need only be implicated in passing without the same sort of fanfare as it used to receive. This is by no means an indication of the diminishing relevance of the Long Tail. Quite to the contrary. It is a recognition that the Long Tail is so obviously relevant and important as to no longer require explanation. Saying "Long Tail" is like saying "viral" or "search engine optimization" -- the concept is part of the standard parlance for VCs and entrepreneurs alike.
Yet despite the fact that "Long Tail" has become short hand, the economics of the Long Tail are, to my mind, still often misunderstood. I continue to hear funding pitches that talk about the Long Tail as a powerful enabler for content creators. Companies are presented to me premised upon the increased value of Long Tail content for musicians and artists and film makers. The fact that increasingly the likes of Amazon and iTunes make it possible for Long Tail authors or bands to sell a few books or records through legitimate, recognized channels is touted as the revolution of the artist. Far from it.
It is certainly the case that in the aggregate, Long Tail content is extraordinarily valuable. The question for VCs and entrepreneurs is "for whom?" I've had the good fortune over the last year or so to engage in a number of conversations about the economics of the Long Tail with Chris Anderson and to see those economics illustrated by innumerable Long Tail investment pitches. And, from those conversations and pitches, I have come to the conclusion that there are essentially two general classes of technology the will benefit economically from the Long Tail -- aggregators and filterers. And while both aggregators and filterers rely upon the increasing volume and diversity of content to assure their value in the ecosystem, that growth of content will not have a material impact upon the value of any one piece of content floating somewhere in the Tail. The value will all inure to the benefit of the aggregators and filterers. So who are the aggregators and filterers?
The aggregators are those web businesses that seek to collect up as much of the Long Tail content as is possible, so as to make their "stores" a one stop shop for content no matter how popular or obscure. That aggregation may be on a horizontal basis, as is the case with Amazon or Netflix, or it may be on a vertical basis, as is the case with WantedList or GameFly (the Netflix of porn and video games respectively). The value to consumers from these content aggregators is that they need not shop in dozens of places on the web in order to acquire a diverse set of content. As a result, aggregators are able to extract a disproportionate amount of value for the sale of each individual piece of content. And while creators are likely to sell slightly more content as a result of the increased ease of salability, they will not likely emerge from the obscurity of the Tail merely because they are made available for sale on Amazon or iTunes.
The filterers are those businesses that make it easier to find the content in which we are interested, despite the increasing proliferation of content creators, hosts, aggregators, etc. The purest form of filterer is the search engine. But the more obscure the content, the less effective the generalized search engine will be. Thus, I have been pitched on an increasingly large number of vertical search engines that use their thematic focus (shopping, real estate, employment, etc.) as a proxy to increase search effectiveness. And I have also seen an increasing variety of clever technical solutions to help filter the myriad of available content (for example, Pandora uses professional musicians analyzing songs based upon a standard set of characteristics and Delicious and Flickr use forms of end user tagging to characterize a disparate set of content). Again, while these different filtering technologies may make it slightly more likely that an end user finds his or her way to a piece of obscure content, it will not likely be sufficient to catapult an artist into the mainstream. The beneficiary of the filtering is the end user and the filterer, not the content owner per se.
(As an aside, I believe that it is difficult to be an aggregator without also being a filterer. It will be hard to sustain the scale necessary for an aggregation business if you don't initially also provide some of your own filtering tools. For example, Amazon has long been a leader in collaborative filtering, as has Netflix for that matter (interestingly, iTunes has been the laggard in this respect and I anticipate that we will see innovation on the filtering side from Apple soon enough). Once a business has reach scale as an aggregator, it can then rely upon mechanisms like affiliate programs and content syndication to empower others to be the filterers for their content (this has happened with Amazon in spades). But until that time, it will be necessary for aggregators like iFilm or Rhapsody to come up with their own clever filtering mechanisms to help consumers fully appreciate and navigate the breadth of the content they have to offer.)
None of this is intended to express any skepticism about the power of the Long Tail or the importance of the phenomenon. Long Tail economics are implicit in virtually every new media company I spend time with. But I think it is helpful for venture capitalists and entrepreneurs alike to focus on where the money is in the Tail. The real money is in aggregation and filtering and those will continue to be interesting businesses for the foreseeable future.
Excellent piece. The conversation about the long tail has drifted quite a bit, this should help return focus.
Outside of media markets, there are examples where the aggregator may enable a jump from obscurity to hit -- but the hit may be short lived. In software, new aggregator platforms -- such as salesforce's AppForce -- promise (we'll see) to reduce the barriers to small software vendors to get their wares built, sold to, and deployed for customers.
It seems entirely possible that a small ISV could have a previously impossible hit with a modestly scoped, broadly applicable feature that salesforce itself has not brought to market. In the old world of ERP/CRM alliances, such a mini-app could never carry its costs.
Interestingly, the salesforce platform goes beyond Amazon et. al. in reducing the normal long-tail sales, marketing, and distribution costs. It significantly changes the economics of content creation and use -- by providing an application platform, hosting infrastructure and cheap access to a complementary product. Put another way, text and music already have standards for content creation (book, browser, cd, mp3). Enterprise software, not so much.
The challenge, of course, is that a modest, popular feature could easily be subsumed in the next release of salesforce's core applications. Not surprising, as sustainable advantage doesn't flow from something unless it is hard.
Thanks for the consistently interesting posts.
Posted by: vLS | 12/14/2005 at 10:39 AM
The question of who makes the money off of long tail content is truly an interesting one. The economics of current brick and mortar long tail businesses (such as used/rare book stores, antique shops) capitalize on the scarcity of the content in question (out of print book, rare vase,etc.) to command a premium price and do not have to share revenues/royalties with the original author/creator of the content.
The economics of the long tail e-business model may not be as completting; as scarcity will not be as big an issue for digital conent for it can easily be duplicated - unlike say a vintage vinyl album or first edition book. This along with the cost to build and maintain the storage platforms for this content and the greater ability of the original authors/creators to track sales and extract royalties/commissions from the content distributor could break the business model. That is unless the sellers are somehow able to convince the buyers that the download of that obscure song from iTunes or that v1.0 eBook or program is worth more than the songs, books or programs that are current and/or more popular.
Posted by: clalonde | 12/14/2005 at 10:55 AM
this is a great post. i have been following the long tail for awhile and i believe you are spot on. i have also been involved in a company i believe satiates both aggregation and filtering (at the user level) better than any other play in the market. its called clipmarks and i recommend highly. forget bookmarks or favorite!? clip and collect the SPECIFIC stuff you care about on a page. and if u add to the public engine you are participating in the first social engine created entirely by its users from the ground up (scalable) containing ONLY the content the users care about. NO MORE CLUTTER! sorry for promotion but iam a believer...
Posted by: adam moskowitz | 12/14/2005 at 11:23 AM
I can't disagree from an investor (or even entrepreneur) perspective, but from a content creator's perspective the reason that there even is a "long tail" is that the threshold for success is so much lower. Music is the obvious example -- sure, most musicians would love to be in the hit portion of the tail, but just making a living would be considered a success for most of the musicians out on the long tail. Look at what EBay has done with even non-digital goods -- lots of folks making what they consider "good money" even if those amounts aren't interesting (unaggregated) to investors or the types of entrepreneurs that are looking for investment. The point being that to make aggregated money in a long tail business, one needs to be thinking of ways to help those out on the tail realize their own versions of success -- picture moving the tail graph (or at least most of it) up a couple notches on the y-axis as a result of your business -- each point on the tail gets their small win, and you get your aggregated big win. I suspect that the biggest long tail success stories will be those who really do create a rising tide phenomenon rather than just find ways to aggregate/filter without bringing at least some value to those who make up the tail.
Posted by: ndintenfass | 12/14/2005 at 08:55 PM
Nice post except your missing a 'big' piece to the puzzle or should I say the 'biggest' piece. You've got two of the three. Nice work.
The best investors will see what others don't.
Posted by: John Furrier | 12/16/2005 at 03:17 PM
Anothing interesting trend that touches the "long tail" concept is the blurring of the line between media and commerce. A long time ago companies like Digital Entertainment Network and Pseudo Programs tried (and failed) to capitalize on long tail audience value. Back then, they used different jargon -- "thin castles with high walls" comes to mind. The idea was the same, though: if you go after high-value audiences/demos and lock them up, the ad dollars will follow. Now we see Amazon and eBay and others capturing the audience and selling them merchandise. Because they're online, and because they have a digital channel that finally supports rich media, they can develop a media component of their business model -- one that has the potential to be much higher margin than their core model. It'll be interesting to see how aggressively they chase it, and how successfully. Kevin Fortuna
Posted by: Kevin Fortuna | 12/25/2005 at 07:11 AM
The long tail could be here, when we recall how many .com .it .us .net . and, and, the next is coming (if not count that ones still living and forgot right now). The long tail is, jus to show an example in "poli". The long tail is in the world growing by websites made of small business, but also connecteted with the large business, because there's no competition between them. The long tail is into setting something valuable for the people living in the real world, not something valuable only for who like to play with the world.
The long tail is also in the fact that if we don't get an answer on how you do decide to use that fat of the money you receive just to have troubles in where to send it, maybe China, maybe to who knows, you lose the main opportunity The America had in the past Century: to be the wise country in which the good ideas strove. Large, fat, overestimated targets, overfilled bank accounts doesn't help that America I dreamt when I was young, in the fifties of past Century.
Don't ask too much, be able to open. To italians, like me, which support is undoubtable, which too often somebody you spit at, supposing we are all pizzas, mafia, and joking people. It is not, very often, mine is the case; so pay respect, and spend money, and let go your arrogance, that has to be used in other minor causes.
The long tail is in the city, not that jelly you managers of the universe too often send away as the future. I never touched the universe, I touch my neighborhoods. By mean of them, maybe, the whole may be disclosed. Disclose it by mean of a general statement setting that from now and ahead we all must be chained to respect and produce under the same rules, set by someone, is not a wise move, actually. This is science, there's a valid issue, not policy, that's another thing.
The long tail is in respect diversities, connecting them in a net of different hot spots, so to get at the same time something global, together with something localized. Giving both, the local and the global.
Now try to send this idea to Google, just because they have to made it and get profits, either to Microsoft, just because the same, and I will sue you forcing you to pay what I had to pey from since the year 2000, for my idea, for my work I kept up against all odds for six years, helped by nobody. For "poli".
Keep in mind this name. It will grow, very fast; your money available or not. And when Los Angeles, Chicago, New York, Hawaii, Miami, San Francisco (intended as enlarged metropolis served by maps) will be in place, don't ask me for; ask why you once again lost the next step in the internet. Not 1.0 or 2.0 or 3.0. The internet is the tcp/ip (Vinton Cerf teaching me) then is the html (Berners Lee teaching me). Any other trick is open, but sorry the internet is ecaxtly this, and it will be, exactly, this. A packed switching network.
My wishes for an Happy New Year.
Have my best greetings.
Franco Cumpeta
Posted by: Franco Cumpeta | 12/26/2005 at 01:12 PM
I got, finally, a beginning, here; the spot will be populated; either we may do from every other spot in the future. Keep account, thank you.
Posted by: Franco Cumpeta | 12/26/2005 at 01:18 PM
The url is this: (online now - but five years ahead of Google)
http://www.turismo.fvg.it/MB2.0.1/MapBroker.htm?javarel=2
It's not important if it's hidden under my name below. It may be affective to everybody. Stop.
Posted by: Franco Cumpeta | 12/26/2005 at 01:23 PM
This is a great article with many insightful points. A particulary poignant comment by David, "As an aside, I believe that it is difficult to be an aggregator without also being a filterer."
I agree but not with the corollary - you can be a filterer without also being an aggregator. Maybe this was obvious to all readers but a point I hadn't seen in the posts to date.
Posted by: CorpDevDude | 12/29/2005 at 09:38 AM
Hmm, I agree with much of what has been said but I think it depends on context.
Understanding the long tail phenomenon has opened up new business opportunities. The long tail is really a term used to describe a broad distribution. So if you have a site on the Internet, you are part of that broad distribution and hence the "long tail". So while the long tail has opened up new opportunities that take advantage of this distribution, the sites that make up the long tail can still make plenty of money.
In fact, if you have an aggregator/filterer on the Internet that takes advantage of the long tail, then you are also part of the long tail.
It's a recursive and beautiful relationship.
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