If you would have asked me a few days back what long tail was ? i would have probably not been able to answer. I probably might have started thinking of orangutans or probably other members of the family, the animals that have longer tails than most of their counterparts in the animal kingdom. i don't know how many of us would think that ways but with sheer optimism i feel that i would not be the only one. Come to think of it, is it of relevance who has longer tail ? may be no.
Quite a few of us would have heard about the 80-20 principle. For those who haven't , the 80-20 principle is named after Vilfredo Parteo who showed that in Italy "80 percent of the land was owned by 20 percent of the people " but then later it got spread to all possible generalizations and this is probably true wherever you try to apply it. In the marketing world a few years ago if you asked a music store guy he would say that his 80 present of the sales come from 20 percent of the bands.Does the 80-20 principle still hold good or has it changed with the changing world.
Let us pose a simple question how is an online music store different from the traditional offline one? The instant answer would be you don't get a hard copy of music CD at the online music store, what you get is a soft copy of the song you required. Does it matter whether i listen to the song i like from the CD or from my pc , probably no. Another thing that is different here is that you like a particular song you don't need to buy the whole CD , you just pay for the song that you wanted. Another very important difference is that an offline store requires space .i.e. i cannot afford to have all the bands on my stand because i am paying for every inch of the space. So only the band that will give me good ROI (Return on Investment ) is what i will have in my store, but what about the online store? With the advancement of technology the amount of space required to store a song has gone down amazingly.Therefore on an average computer today i can have almost 1000 million times the songs available in the worlds largest music store. Thus an online music store will not only have the hits but also the songs that could not make to the Hits but were popular ones.
With all the knowledge you have got till now i guess it is the right time to introduce long tails to you. There is a very interesting observation if we look at the sales of an online Music store. As most of us would have imagined the highest selling songs would obviously the Hits, but the interesting point is that the graph drops down after the Hits have been accounted for but it does not drop down to zero even after an extremely large number of songs.These songs never made it to the Hits but were definitely popular among certain sections of society. This continues line is called the long tail. Here if we try to put the 80-20 principle in practice it would not work. The 80 percent of the sales of an online music store does not come from the 2o percent of the songs(HITS) but a huge chunk comes from the songs that never made it to the top.
May be here we have an indication of how things are changing around us. What used to make absolute sense yesterday has become fuzzy. This is how the modern business is shaping up. Are we ready to take the challenges it poses ? Has the market simplified or has it become more complex? Is it heading towards rationality or irrationality , stability or randomness?
Is the entropy decreasing ? well may be its the time we need to look into the questions before we invade the market to find a place for ourselves.
Quite a few of us would have heard about the 80-20 principle. For those who haven't , the 80-20 principle is named after Vilfredo Parteo who showed that in Italy "80 percent of the land was owned by 20 percent of the people " but then later it got spread to all possible generalizations and this is probably true wherever you try to apply it. In the marketing world a few years ago if you asked a music store guy he would say that his 80 present of the sales come from 20 percent of the bands.Does the 80-20 principle still hold good or has it changed with the changing world.
Let us pose a simple question how is an online music store different from the traditional offline one? The instant answer would be you don't get a hard copy of music CD at the online music store, what you get is a soft copy of the song you required. Does it matter whether i listen to the song i like from the CD or from my pc , probably no. Another thing that is different here is that you like a particular song you don't need to buy the whole CD , you just pay for the song that you wanted. Another very important difference is that an offline store requires space .i.e. i cannot afford to have all the bands on my stand because i am paying for every inch of the space. So only the band that will give me good ROI (Return on Investment ) is what i will have in my store, but what about the online store? With the advancement of technology the amount of space required to store a song has gone down amazingly.Therefore on an average computer today i can have almost 1000 million times the songs available in the worlds largest music store. Thus an online music store will not only have the hits but also the songs that could not make to the Hits but were popular ones.
With all the knowledge you have got till now i guess it is the right time to introduce long tails to you. There is a very interesting observation if we look at the sales of an online Music store. As most of us would have imagined the highest selling songs would obviously the Hits, but the interesting point is that the graph drops down after the Hits have been accounted for but it does not drop down to zero even after an extremely large number of songs.These songs never made it to the Hits but were definitely popular among certain sections of society. This continues line is called the long tail. Here if we try to put the 80-20 principle in practice it would not work. The 80 percent of the sales of an online music store does not come from the 2o percent of the songs(HITS) but a huge chunk comes from the songs that never made it to the top.
May be here we have an indication of how things are changing around us. What used to make absolute sense yesterday has become fuzzy. This is how the modern business is shaping up. Are we ready to take the challenges it poses ? Has the market simplified or has it become more complex? Is it heading towards rationality or irrationality , stability or randomness?
Is the entropy decreasing ? well may be its the time we need to look into the questions before we invade the market to find a place for ourselves.
3 comments:
10/10...Nice read :)
In my view the long tails would rather provide stability to the market than instability. The reason why I think so is that, if the big earners face an unforeseen collapse, such a scenario would have little effect on the small players, and these in turn would act as a buoy. Even though their input might not be very significant, it would still BE there.
nice insight into the online music sales industry! .... never knew about the fact that the 'tail' contributes to much of the revenues.. but as far as my belief system goes, 80-20 rule will stay (it's a cornerstone of our society) ... but you could investigate a little more into the 90-10 rule of money!
Just to correct, 80-20 principle wasn't given my McKinsey but by a person Vilfredo Pareto 2 decades before McKinsey even came into existence.
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