All Those Little Things Can Really Add Up These Days – To Cash

Brandon Sun, March 15, 2007 - David McConkey

Two recent books provide fascinating reading about how the Internet is changing our world. These are The Long Tail and Wikinomics.

The author of The Long Tail: Why the Future of Business is Selling Less of More is Chris Anderson, the editor in chief of Wired magazine.

The “long tail” describes the shape that appears when numbers, such as the quantity of items sold, are plotted on a graph. It swoops down dramatically from left to right. The graph illustrates that a few mainstream products dominate a market. Numerous less popular products sell much less frequently.

Think of a video store. A small number of popular new releases makes up the bulk of the sales. These few films are the short “head” of the graph. Now think of all the rest of the store. This multitude of movies is the “long tail.”

As an example in The Long Tail, Anderson describes the music industry. Wal-Mart is by far the largest music retailer in the United States. A typical Wal-Mart carries 4,500 unique CD titles. Although that might sound like quite a lot, there are actually many more possibilities. Furthermore, 30,000 new albums are released every year.

Now say hello to the Internet and the availability of virtually unlimited variety. As Anderson notes, Amazon carries 800,000 different CDs. Online music retailer Rhapsody has over 1.5 million different tracks.

There is money to be made selling just a few of each of the many, many items along the long tail. On the Internet there is no constraint of limited shelf space. This new reality is shaking up the retail industry, creating whole new businesses, and impacting our culture.

Compared to the choices on the Internet, even the most gigantic big box store is actually quite empty. “Walk into a Wal-Mart and you’re overwhelmed by the abundance and choice,” says Anderson. “Yet look closer and the utter thinness of this cornucopia is revealed.” After all, he points out, “more than 99% of music albums on the market today are not available in Wal-Mart.”

The recording industry has become painfully aware of the force of the Internet. Whole new businesses, however, are blossoming and becoming sustainable in this new “paradise of choice.” Among the winners are web-based music stores such as Apple’s iTunes, as well as, of course, Internet staples like Google, Amazon, and eBay.

Will we welcome or be overwhelmed by this new marketplace? “Online retailers offer variety on a scale unimaginable even a decade ago – millions of products in every possible variant and combination,” notes Anderson.

“But does anyone need this much choice?” he asks. “Can we handle it?”

Anderson refers to a research study that set up outside a food store. Consumers were offered a taste test of either six or 24 types of jams. They were also offered coupons to buy jam at the store. Interestingly, more people tasted with the larger selection, but fewer went on to buy.

Apparently, too much choice actually can discourage buying. To resolve this conundrum, Anderson predicts that we increasingly will seek help in making our selections.

In our daily lives, we will employ more advisers, counsellors, planners, and coaches.

On the Internet, we will use more “filters” such as search engines and online reviews to help us sort out what we want.

Whatever the future picture, however, we’d better get used to it. For example, Amazon and its online retail partners already offer us a choice of more than 1,200 varieties of jam!

Not only commerce, but also culture, is being transformed. Perhaps there will always be a “mainstream,” but in some ways every one of us is a bit of an “oddball.” As examples, cites Anderson, “We may collect strange memorabilia or read esoteric books, hold unusual religious beliefs or wear odd-sized shoes, suffer rare diseases or enjoy obscure movies.”

On the Internet, everyone can find - and find support for - any inclination. “The resulting rise of niche culture will reshape the social landscape,” says Anderson. “People are re-forming into thousands of cultural tribes of interest.”

The Long Tail predicts a more informed, questioning citizenry. “This is the end of spoon-fed orthodoxy and infallible institutions,” says Anderson. We are experiencing “the end of the couch potato era.”

Wikinomics: How Mass Collaboration Changes Everything delves even further into how the Internet is changing business and society. Wikinomics will be the topic of a future column.