Saturday, December 15, 2007
Monday, December 10, 2007
The Long Tail concept
The business concept named as “The Long Tail” derives from a statistical XY graphic when charting popularity of products sold (line X) against the variety of products (line Y). The products hits on sale occupy a narrow space on line Y while it peaks the numbers on line X. However, the stretching of the curve on line Y shows a real demand for niche products, as shown on the graph below:
The Long Tail graph identifies an important demand curve by showing that the total volume of low popularity items exceeds or may exceed the volume of high popularity items.
The Long Tail concept provides a consistent and endeavoring changing on the relationship among all links of mostly of market chains. Numerous challenges come up when an attempt to connect all those links of the above mentioned chain is put on place.
1) How a producer of a non popular specific good will find the clients out there which he knows they exist, show its products, create a demand for it and deliver it at an acceptable price?
2) How consumers avid for being away from mass products would find those would suit better their needs and expectations?
The Players on the Long Tail
The Long Tail business market opportunity is divided into three categories:
1) Long Tail Aggregators (that include both the head and tail of content and products)
2) Niche suppliers/producers (who get aggregate by someone else)
3) Filters (which help people find what they want)
The e-technology which has been experienced an unstoppable innovative constantly development is the key reason, if not for the appearance, but certainly for the stretching of the size of the tail.
New players turned up to make useful and, most of all, accessible all the range e-technology can provide to narrow distances between producers, consumers and its prior unknown room for business.
The first good example of how e-technology helps and creates new demands comes from Amazon.com which has significant portion of its books sales coming from obscure titles that is not found, for instance, on Barnes and Nobles, one of the biggest traditional book retailers of the world. The aggregation of this huge list of niches client driven products comes as a substantial extra source of revenues followed by an insignificant increase of its fixed costs. That is the key supply side factor which determines whether a sales distribution has a Long Tail is the cost of inventory storage and distribution. Where inventory storage and distribution costs are insignificant, it becomes economically viable to sell relatively unpopular products.
The Long Tail is a potential market and, as the examples illustrate, the distribution and sales channel opportunities created by the Internet often enable businesses to tap into that market successfully.
The so-called Market is formed by an unimaginable variety of niches of clients that are now able to purchase goods that they don’t even know it might exist. These specific groups, or niches, have their own particularities, their own desires, their own dreams which might become consumption dreams. Only if appropriate products and in an efficient way of commercialization are for them offered.
For instance, people in the south-east Asia might love been the chance to buy Brazilian songs composed by south-eastern Asian descendents, which they would never know its existence. Imagine the good feelings it may arise on those customers seeing their culture influencing and/or being influenced on the world music. Definitely this sort of product wouldn’t become very popular elsewhere, but at least, somewhere for some ones.
Another example, that fits my own business project to be developed after MBA conclusion, would be offer to European tourists an small, unique, charming bungalows structure hotel on a marvelous beach in Brazil where their 5 senses would be instigated to the extreme. A place where each detail, among dozens out of do not fit here being mentioned, as the internal decoration of the room would be selected to achieve prior mentioned purpose and those very ones items would be available to be purchased (like local sophisticated crafts) for the clients who had had unforgettable moments there. Again, this is a product to be offered for a very specific niche which will give value and will pay for it. I will need to be able to find the right tools, software and people, the so-called Filters to find the public for the product I will be bring to the market soon.
From the customers side ought to become easier the ’how to use’ tools which will guide clients to the products they really would like to consume. As tools we may consider software and people, which act as ‘Filters’ in order to facilitate this process.
There are reasonable sorts of Filters available off and online, like blogs, clients and costumers reviews and recommendations, playlists, Google measure, etc.
The questions are:
1) What are the correct drivers to be used in choosing each of these Filters?
2) Are they reliable enough?
The answer lay on the bed of your own experience. If someone is encouraged by a Filter to consume a specific product or to consume through a specific aggregator, he must say loud out his words. Each one must become a Filter himself by making own reviewing on blogs, magazines, and websites. The Long Tail is formed by millions of people who need information before anything else. Each consumer must understand that he has now become one of the tools others can make use of.
Sustainability and Scalability
Most of the world’s well known and described players such as Netflix.com, Amazon.com, ITunes fall into the first of three described categories, aggregation.
A paradox seems to rise from the examples given:
The Long Tail is all about the shift from hits to niches. But aren't all those aggregators "hits"? They're not only the largest players in their category, but they seem to be getting even larger, gaining market share at the expense of their competitors. Is there something about aggregators that tends to favor a few big winners, even as the other two categories fragment into a million niches of varying size?
The major of all examples is Google which in a sense is a classic Long Tail aggregator, one that uses great filtering (its Page Rank algorithms) to improve the s/n ratio of the tail. And not just one tail. They aggregate the tail of information, the tail of advertisers and the tail of publishers.
What Google has done is to find and monetize the Long Tails of both advertisers and publishers. These include millions of small companies and individuals who may never have advertised before, at least in commercial scale. But Google ads are self-service, cheap, and performance based (pay-per-click), which all combine to dramatically lower the barrier to entry.
Matching these advertisers are hundreds of thousands of previously sub-scale "publishers", from blogs to niche commercial sites. Most are too small to have their own ad sales business, but they can now run relevant Google ads by just adding a few lines of HTML to their site. About half of Google's business now comes from such "partners", rather than from ads sold against search results themselves.
Eric Schmidt, Google's CEO, explained how these millions of small-to-midsized customers represent a huge new Long Tail ad market. "The surprising thing about The Long Tail is just how long the tail is, and how many businesses haven't been served by traditional advertising sales," he said. Google now has revenues of more than $1 billion a quarter, a least half of which is made up of Long Tail advertisers by this definition. This is, needless to say, just a glimpse of what's still to come.
Certainly we can assure this model is scalable and sustainable on long term, based on what was mentioned above, in addition to information disclosed by JupiterResearch in its 2005 study named ‘The Four Horsemen’ stating that retail and travel, which are the most developed long tail markets will continue to be the top categories through 2009. The researchers predict both markets will almost double in size over the next four years, with travel increasing from $54 billion to $91 billion and online retail growing from $66 billion in 2004 to $130 billion in 2009.
Examples of already established search engines devoted to retail include Shopping.com and Shopzilla.com, with many more start-up engines like Become.com (a search engine devoted specifically to comparison shopping) expected to launch in the next 18 months. Travel search engines like Yahoo's FareChase, Kayak.com, SideStep and Mobissimo have also begun to make an impact in recent months.
Below are the links for 2 of these mentioned competitors who provides searching and comparison of the best available deals for travels customers, as flights, hotels, car rentals, cruises, etc.
http://farechase.yahoo.com/
http://www.kayak.com/
Source of Political and Cultural changes
The Long Tail has possible implications for culture and politics. Where the opportunity cost of inventory storage and distribution is high, only the most popular products are sold. But where the Long Tail works, minority tastes are catered to, and individuals are offered greater choice. In situations where popularity is currently determined by the lowest common denominator, a Long Tail model may lead to improvement in a society's level of culture.
The example of how television programs can be split through the HDTV technology allows the sector now to widen the variety of its broadcastings programs towards previously ignored groups which become profitable demographics with this new niche appeals in the long tail.. As the opportunity cost goes down with more channels and smaller niches, the choice of TV programs grows and greater cultural diversity rises as long as there is money in it.
The Long Tail has made possible a flowering of creativity across all fields of human endeavour. One example of this is YouTube, where thousands of diverse videos, whose content, production value or lack of popularity make them inappropriate for traditional television, are easily accessible to a wide range of viewers. Such tremendous new possibilities narrow dramatically political attempt of information mass strategy application, and at the very same time it reduces the monopolist cultural influence dominant over people around the world hunger for information.
Stretching - My own Business
As pointed previously I have as goal to build and manage my own small boutique hotel by the beach with innumerous differentiation qualities. I expect to have this hotel ranked in a separate category from the regulars of the sector, focus on a very specific niche of special people who value its differentiations.
Besides the construction, architectural, gardening and service concepts developed to achieve its side segmentation; a major issue will be to find these customers I believe are out there.
My first thoughts marketing strategy are driven to use as many Filters as I be able to find. Having the marketing concept designed and a first class interactive website put in place, I will make all of specialized magazines and websites be aware of the product arrived. In sequence a list of reviews and recommendations will be distributed among selected people, acting as professional of the sector. Specific and dedicated online communities, which are being spreading out to exchange reliable reviewing and information between them will be focused as well.
The growth of base client list will necessarily being related to become myself client of aggregators of travel market, like Expedia.com, Venere.com, Bookings.com and etc.
I don’t expect, however I see how I could expand the hotel revenues sources after have being recognized as for its distinction. After become a reference, the web site hotel might be used to apply ad widgets within the connection with, the aggregators who are there primarily to sell rooms occupancy). Also, the business could be value added by becoming a re-seller of the producers of decoration crafts and art pieces that will be desired elsewhere.
The starting point to sell occupancy in a larger scale will be through the aggregators. That will happen after the launching of the project, having sector respected specialists invited to feel the experience of environment and concept by themselves.
These actions will be followed by a close following of the comments and reviews which will start to pop up from place to place. Engine tools to find it will be implemented as well as marketing strategy to give a follow up to this.There is no magic on creation a growth model for this project. It will follow the belief on the reality of the existence of customers for everyone within the Long Tail curve and the applying those above mentioned tools (aggregators and Filters) to make the
rate of occupancy increase from at least 30% on the first year to any number close to 70% by the next 2 to 3 years.
The Long Tail graph identifies an important demand curve by showing that the total volume of low popularity items exceeds or may exceed the volume of high popularity items.
The Long Tail concept provides a consistent and endeavoring changing on the relationship among all links of mostly of market chains. Numerous challenges come up when an attempt to connect all those links of the above mentioned chain is put on place.
1) How a producer of a non popular specific good will find the clients out there which he knows they exist, show its products, create a demand for it and deliver it at an acceptable price?
2) How consumers avid for being away from mass products would find those would suit better their needs and expectations?
The Players on the Long Tail
The Long Tail business market opportunity is divided into three categories:
1) Long Tail Aggregators (that include both the head and tail of content and products)
2) Niche suppliers/producers (who get aggregate by someone else)
3) Filters (which help people find what they want)
The e-technology which has been experienced an unstoppable innovative constantly development is the key reason, if not for the appearance, but certainly for the stretching of the size of the tail.
New players turned up to make useful and, most of all, accessible all the range e-technology can provide to narrow distances between producers, consumers and its prior unknown room for business.
The first good example of how e-technology helps and creates new demands comes from Amazon.com which has significant portion of its books sales coming from obscure titles that is not found, for instance, on Barnes and Nobles, one of the biggest traditional book retailers of the world. The aggregation of this huge list of niches client driven products comes as a substantial extra source of revenues followed by an insignificant increase of its fixed costs. That is the key supply side factor which determines whether a sales distribution has a Long Tail is the cost of inventory storage and distribution. Where inventory storage and distribution costs are insignificant, it becomes economically viable to sell relatively unpopular products.
The Long Tail is a potential market and, as the examples illustrate, the distribution and sales channel opportunities created by the Internet often enable businesses to tap into that market successfully.
The so-called Market is formed by an unimaginable variety of niches of clients that are now able to purchase goods that they don’t even know it might exist. These specific groups, or niches, have their own particularities, their own desires, their own dreams which might become consumption dreams. Only if appropriate products and in an efficient way of commercialization are for them offered.
For instance, people in the south-east Asia might love been the chance to buy Brazilian songs composed by south-eastern Asian descendents, which they would never know its existence. Imagine the good feelings it may arise on those customers seeing their culture influencing and/or being influenced on the world music. Definitely this sort of product wouldn’t become very popular elsewhere, but at least, somewhere for some ones.
Another example, that fits my own business project to be developed after MBA conclusion, would be offer to European tourists an small, unique, charming bungalows structure hotel on a marvelous beach in Brazil where their 5 senses would be instigated to the extreme. A place where each detail, among dozens out of do not fit here being mentioned, as the internal decoration of the room would be selected to achieve prior mentioned purpose and those very ones items would be available to be purchased (like local sophisticated crafts) for the clients who had had unforgettable moments there. Again, this is a product to be offered for a very specific niche which will give value and will pay for it. I will need to be able to find the right tools, software and people, the so-called Filters to find the public for the product I will be bring to the market soon.
From the customers side ought to become easier the ’how to use’ tools which will guide clients to the products they really would like to consume. As tools we may consider software and people, which act as ‘Filters’ in order to facilitate this process.
There are reasonable sorts of Filters available off and online, like blogs, clients and costumers reviews and recommendations, playlists, Google measure, etc.
The questions are:
1) What are the correct drivers to be used in choosing each of these Filters?
2) Are they reliable enough?
The answer lay on the bed of your own experience. If someone is encouraged by a Filter to consume a specific product or to consume through a specific aggregator, he must say loud out his words. Each one must become a Filter himself by making own reviewing on blogs, magazines, and websites. The Long Tail is formed by millions of people who need information before anything else. Each consumer must understand that he has now become one of the tools others can make use of.
Sustainability and Scalability
Most of the world’s well known and described players such as Netflix.com, Amazon.com, ITunes fall into the first of three described categories, aggregation.
A paradox seems to rise from the examples given:
The Long Tail is all about the shift from hits to niches. But aren't all those aggregators "hits"? They're not only the largest players in their category, but they seem to be getting even larger, gaining market share at the expense of their competitors. Is there something about aggregators that tends to favor a few big winners, even as the other two categories fragment into a million niches of varying size?
The major of all examples is Google which in a sense is a classic Long Tail aggregator, one that uses great filtering (its Page Rank algorithms) to improve the s/n ratio of the tail. And not just one tail. They aggregate the tail of information, the tail of advertisers and the tail of publishers.
What Google has done is to find and monetize the Long Tails of both advertisers and publishers. These include millions of small companies and individuals who may never have advertised before, at least in commercial scale. But Google ads are self-service, cheap, and performance based (pay-per-click), which all combine to dramatically lower the barrier to entry.
Matching these advertisers are hundreds of thousands of previously sub-scale "publishers", from blogs to niche commercial sites. Most are too small to have their own ad sales business, but they can now run relevant Google ads by just adding a few lines of HTML to their site. About half of Google's business now comes from such "partners", rather than from ads sold against search results themselves.
Eric Schmidt, Google's CEO, explained how these millions of small-to-midsized customers represent a huge new Long Tail ad market. "The surprising thing about The Long Tail is just how long the tail is, and how many businesses haven't been served by traditional advertising sales," he said. Google now has revenues of more than $1 billion a quarter, a least half of which is made up of Long Tail advertisers by this definition. This is, needless to say, just a glimpse of what's still to come.
Certainly we can assure this model is scalable and sustainable on long term, based on what was mentioned above, in addition to information disclosed by JupiterResearch in its 2005 study named ‘The Four Horsemen’ stating that retail and travel, which are the most developed long tail markets will continue to be the top categories through 2009. The researchers predict both markets will almost double in size over the next four years, with travel increasing from $54 billion to $91 billion and online retail growing from $66 billion in 2004 to $130 billion in 2009.
Examples of already established search engines devoted to retail include Shopping.com and Shopzilla.com, with many more start-up engines like Become.com (a search engine devoted specifically to comparison shopping) expected to launch in the next 18 months. Travel search engines like Yahoo's FareChase, Kayak.com, SideStep and Mobissimo have also begun to make an impact in recent months.
Below are the links for 2 of these mentioned competitors who provides searching and comparison of the best available deals for travels customers, as flights, hotels, car rentals, cruises, etc.
http://farechase.yahoo.com/
http://www.kayak.com/
Source of Political and Cultural changes
The Long Tail has possible implications for culture and politics. Where the opportunity cost of inventory storage and distribution is high, only the most popular products are sold. But where the Long Tail works, minority tastes are catered to, and individuals are offered greater choice. In situations where popularity is currently determined by the lowest common denominator, a Long Tail model may lead to improvement in a society's level of culture.
The example of how television programs can be split through the HDTV technology allows the sector now to widen the variety of its broadcastings programs towards previously ignored groups which become profitable demographics with this new niche appeals in the long tail.. As the opportunity cost goes down with more channels and smaller niches, the choice of TV programs grows and greater cultural diversity rises as long as there is money in it.
The Long Tail has made possible a flowering of creativity across all fields of human endeavour. One example of this is YouTube, where thousands of diverse videos, whose content, production value or lack of popularity make them inappropriate for traditional television, are easily accessible to a wide range of viewers. Such tremendous new possibilities narrow dramatically political attempt of information mass strategy application, and at the very same time it reduces the monopolist cultural influence dominant over people around the world hunger for information.
Stretching - My own Business
As pointed previously I have as goal to build and manage my own small boutique hotel by the beach with innumerous differentiation qualities. I expect to have this hotel ranked in a separate category from the regulars of the sector, focus on a very specific niche of special people who value its differentiations.
Besides the construction, architectural, gardening and service concepts developed to achieve its side segmentation; a major issue will be to find these customers I believe are out there.
My first thoughts marketing strategy are driven to use as many Filters as I be able to find. Having the marketing concept designed and a first class interactive website put in place, I will make all of specialized magazines and websites be aware of the product arrived. In sequence a list of reviews and recommendations will be distributed among selected people, acting as professional of the sector. Specific and dedicated online communities, which are being spreading out to exchange reliable reviewing and information between them will be focused as well.
The growth of base client list will necessarily being related to become myself client of aggregators of travel market, like Expedia.com, Venere.com, Bookings.com and etc.
I don’t expect, however I see how I could expand the hotel revenues sources after have being recognized as for its distinction. After become a reference, the web site hotel might be used to apply ad widgets within the connection with, the aggregators who are there primarily to sell rooms occupancy). Also, the business could be value added by becoming a re-seller of the producers of decoration crafts and art pieces that will be desired elsewhere.
The starting point to sell occupancy in a larger scale will be through the aggregators. That will happen after the launching of the project, having sector respected specialists invited to feel the experience of environment and concept by themselves.
These actions will be followed by a close following of the comments and reviews which will start to pop up from place to place. Engine tools to find it will be implemented as well as marketing strategy to give a follow up to this.There is no magic on creation a growth model for this project. It will follow the belief on the reality of the existence of customers for everyone within the Long Tail curve and the applying those above mentioned tools (aggregators and Filters) to make the
rate of occupancy increase from at least 30% on the first year to any number close to 70% by the next 2 to 3 years.
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