Marketing Classroom: Understanding the Long Tail to play small and win big

Most people know what the long tail means, but few actually acknowledge its why. So in this post you’re not only going to know its meaning, but also the reason why you either have to take over a market or focus on small group of people—that’s how you thrive in today’s economy.

The Long Tail

Back in 2004 Chris Anderson published an article called The Long Tail (and expanded it into a book). It’s a distribution of the market in terms of sales–analyzing it in terms of popularity and products. Even though this distribution can be analized in several parts, you just need to understand three points:

  1. Head: (orange area) this is the mass market. This is where everybody fights to get a spot in, because it looks sexy in terms of volume. Here you aim to appeal everybody. These are the best-seller lists, top 10 movies, …

  2. Something in the middle: (orange-blue area) this is the market for products that are not for everyone, but it’s still a big chunk of the market. These market requires you to push your products to it, with a high risk of being ignored. But, if it works, it’s a good home run.

  3. The Long Tail: (blue area) this is filled with small markets on a huge range of products. Here the winners are the ones who own the long tail (Amazon, YouTube, Netflix…), but there are ways to play small and win big.

Before the Internet it didn’t make sense to talk about the long-tail. Back when there were only a few channels on TV you only got to watch those. In fact, back then the long tail didn’t exist because there was a limited amount of inventory. Mass media for a mass audience.
Of course a company wouldn’t choose to serve a tiny slice of the market. It wasn’t profitable. So everybody aimed (and some still do…) to the short head.
However, when the Internet showed up the amount of inventory was unlimited, and consequently, a short supply of attention.
The losers are the ones that desperately want to maintain their spot on the short head.
Here to understand the whole picture let’s flip this thing:
Long Tail Flipped
The long tail now looks huge, right? It’s a big chunk of the market!
You win with the long tail if (1) you take over all the market (like Amazon, YouTube, Netflix…) or (2) you focus on a small market, a niche—a small group that either pays you with money or with attention. That’s it.

1. Owning the Long Tail.

TV worked well before the Internet, but that model doesn’t work today—you can’t thrive just by focusing on the short head. It’s a competitive market where you can’t win.
On the other hand, YouTube owns all of it. They have almost everything from the short head but their secret resides on the long tail. Why? Because half their revenue (in $) comes from it. Just like Amazon—in terms of books—makes half their revenue from books you won’t ever find in a bookstore or in The New York Times best-seller list. Does it sell only one copy? Fine, they want it anyway. And the same goes with iTunes, Netflix and other key players.
Aside from subscription models like YouTube TV, YouTube makes money because people pay them with attention. That’s it… but if you own everything that’s a lot of attention.

2. A tiny slice of the market.

The beauty of the long tail is that you can win with small markets.
Since focusing on the short head is a high competitive game and succeeding in the middle is complicated, you have two choices: (1) being the connect door—the one with all the inventory (previous point), or (2) picking a small and profitable niche from the long tail.
You can find a small group of people and own that tiny slice of the market. But you’ve got to keep in mind this question:
Are you aiming at a small and profitable niche market?
When you don’t own the long tail, you can only win by owning a tiny slice of the market, if they pay you with money (or attention) so you can get to keep playing.
This is worth repeting again: you can only win by owning a tiny slice of the market, if they pay you with money (or attention) so you can get to keep playing.
The key point is to find a micro group that desperately wants to hear from you and can’t live without you. But it’s a must that this group is profitable—otherwise you’d be out of the game.
You don’t have to create the next Netflix or Amazon, you can start small and think big. Then you can grow it from there.
Either way, what you’ve got to acknowledge is that mass culture is longer gone, but you can start small and build an asset.