The Long Tail is a concept coined by Chris Anderson in 2004, which explains how companies can succeed by selling niche products online. The Long Tail refers to both the concept and the group of people who demand niche products. It contradicts the Pareto Principle and has proven useful in online business, marketing, and user-driven innovation. Anderson was inspired by Clay Shirky’s essay on power laws and weblogs. The Long Tail benefits online businesses with wider selections.
“The Long Tail” (a proper noun with capital letters) is a concept created by Chris Anderson, editor-in-chief of WIRED magazine, in an October 2004 article. He pointed out that companies are gaining success on the Internet by selling less or more i.e. addressing niche markets. This is different from physical approaches of the past, which offered fewer products that were more popular. His thesis is that as a market evolves, it tends to become both larger in total and more niche-oriented. The way it appears on a chart comparing the popularity and quantity of a product sold has given it the name “The Long Tail.”
Aside from the concept, the “Long Tail” also refers to the group of people who demand niche products. The Long Tail concept can also be applied to free goods, such as blogs, where a few thousand get the most links and inbound traffic and there are millions with only a few. Since its inception, The Long Tail’s concept has proven fertile for application, research and experimentation. It is well known in online business and mass media, but also used in the context of user-driven innovation, microfinance, social networking mechanisms, business models and marketing.
Chris Anderson was partially inspired to propose the concept of The Long Tail by reading a 2003 essay by Clay Shirky, entitled “Power Laws, Weblogs, and Inequality”. His main thesis is that a company’s long tail can exceed the volume of its main products if the distribution channel is large enough. This preferentially benefits online businesses, like Amazon, which tend to have wider selections, than brick-and-mortar retailers like Wal-Mart.
The Long Tail somewhat contradicts the Pareto Principle, which states that 80% of the effects in a given situation arise from 20% of the potential causes. In markets benefiting from The Long Tail, more than 50% of the profit can come from the 90% of the least popular but collectively high volume products.
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