From Niches to Riches
You want a book on cowboy poetry. So while you're out one day, you decide to stop by the big chain bookstore and see what it has. The selection is tiny — no more than a few — and none of them piques your interest. So you go home, get online, search Amazon.com and voilá! 761 book titles and 18 song titles pop up.
Welcome to the Long Tail, a revolutionary idea that's changing consumer behavior, business strategy and society as a whole. Although Wired magazine editor Chris Anderson coined the phrase "The Long Tail," it was research co-authored by Carnegie Mellon Heinz School professor Michael Smith that led to its discovery.
The Long Tail refers to the explosion of niche markets created by the Internet — products largely ignored by brick-and-mortar stores faced with limited shelf space and, therefore, a need to cater to the mainstream fare.
Now everything from rare songs to microbrew beers to political blogs are finding success online, thanks to search engines, virtual stores not limited by physical space and technology that makes instant delivery of digital data such as songs and movies extremely cost-effective.
In a 2003 paper for Management Science, Smith and his colleagues presented a novel finding: the biggest consumer benefit of the Internet was not that increased competition led to lower prices. It's that a huge variety of products were now readily available to more people than ever before — many largely ignored by retail stores before the Internet.
In their follow-up paper, "Niches to Riches: Anatomy of the Long Tail," Smith and his colleagues expanded on that idea. They explained that the tail began to grow as online business activity started to take off in the late 1990s and early 2000s.
And although lower prices were definitely a plus, the real consumer value grew out of "the ability of online merchants to help consumers locate, evaluate and purchase a far wider variety of products than they could through traditional brick-and-mortar channels."
Because of the Long Tail, the Internet has created vast opportunities for small-business owners, writers, artists and anyone who wants to profit from or reach an audience. It has also created a healthy diversity of choice and provided a forum for like-minded people to communicate — through blogs and sites like MySpace.com.
Because of the consumer benefits created through an increase in choice, Smith recommends that lawmakers focus on developing information technology policies that reduce barriers to entry for new companies and encourage the innovation of online technology to help consumers choose wisely.
Related Links: Michael Smith's Website | Heinz School
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