Giants crush you. Even in fairy tales
it's rare
to find
a nurturing giant
even lady giants
are tough critters. And there
are lots
of giants
on the web; all
the world's biggest offline companies
plus the web's home-grown efforts
- Google, Amazon
and the like.
So how
can you, sitting in your fabled pajamas at
the kitchen table
make money against
that lot? Well, until recently there was no way
to really explain what everyone was telling
you based
on instinct, self-interest
or outright ignorance: there is room
for everyone on
the web.
It's called
the long tail:
the economics of abundance'
and its guru is
the editor
of Wired Magazine Chris Anderson. Now don't
let that put you
off, this is fascinating stuff! The summary is simple: regular offline
business is ruled by scarcity, digital business
simply isn't!
Take a record store. They have so many feet of shelves
and each CD takes
up say half an
inch. Result,
the store can
only carry so many
CDs. So what do they do? They carry the ones that
sell the most the hits.'
Now take
iTunes: there is literally no
limit to the
inventory iTunes can carry. It sits in digital form and could be
every song in every version ever
recorded! The same is true of books: which is why Google is trying to snaffle them all first, and Apple is driving into video.
So what has this to do with you? Well two
things: first the big web marketers have discovered that
if you offer everything, "everything sells something!" Hence the term
long tail.
Imagine the profile of a mouse standing on her back legs nose pointing in the air! The body of the mouse is the hits' with the biggest
hit being the nose. The tail of the mouse (infinitely long) is the sales of everything else. The regular record store holds inventory corresponding to the body of the mouse. But, if you hold the inventory
for free and
it costs nothing to deliver it, then any sale out of the tail is pure profit! Wow! That's the economics of abundance: and it's only right now being understood.
But, I hear you object, that's records, books, and videos. True,
but the same applies to everything where the restrictions of scarcity
are removed.
What's eBay but a long tail of gazillions of real
things? What's Amazon, the long tail of books and anything else they can get their hands
on? So it continues the used
book business after languishing for decades is booming after the dispersed and happenstance inventories held by individual stores were linked together into a
single online database. The books are still in the stores, but the sales are global!
Now if you are an Amazon,
or a Salesforce.com in software, or any of the other aggregators' of the long
tail', you have five problems:
1.
You need to put together the technology to hold the inventory and disperse it expensive and technically
finnicky, but straightforward
2.
You need to
create the
tools that customers can use to search the long tail which is VERY long.
Search engines, recommendations, reviews all kinds of tools are emerging to provide filters at no cost to the company once they are in place.
3. You need to get your hands on the longest tail you can. Easier now Apple has broken through with the record
industry, but really difficult if you
want to have a long tail of TV shows because of the problem of tracing
down the
music rights. Google may be in a battle, but the stakes in the ancient
book long tail are huge hence its determination to scan everything ever published.
4. You need to capture the emerging long tail. These are the products and
creative offerings that have not yet been conceived. You do this by giving
away the tools of creation. Give away (virtually) the software to create new
music and provide a guaranteed market.
5. You need to meet the sales needs of the provider whether they are trying to make a go of it commercially or doing it for reasons of
personal satisfaction. Put your
book on Amazon and you can go in and tweak the marketing and this is just the beginning.
So what are the implications for web home-based businesses?
It means first you can expect sales no matter if you are
1st or 5,000th on the tail.
It means you can find a place on the web through an aggregator for what ever you produce.
It means that
multiple channels of distribution are
opening that can have different roles in your mix. Let's take a concrete example, that new book you just wrote.
* Well you could
sell it yourself in electronic form, or
* Convert it into a physical book at Lulu (a 'tail' of self-pubished
books) and end up with electronic and soft/hard copy versions yielding a higher net return.
* Lulu will submit it to Ingrams the book wholesalers and so it will find its way to the long tails run by Amazon, Barnes & Noble and the rest for a different, lower return but a much higher exposure and access to the recommendations system.
* You could sell it through Clickbank a long tail of Affiliates and make
50% margin.
* Finally, you can sell or liquidate it through eBay!
If you have something to offer, a tail is emerging that you can
join. And most
important, it's in everyone's interest to keep the tail growing. On the web we have invented the nurturing giant'. To
me that spells perpetual opportunity!
And that's no fairy story!
Michael Kay is Research Director of HBB Research a business school based research program
looking at web home-based business. He is the lead author of HBB Research's recent Report: The Gold
Rush. To For more on The Gold Rush and to get your free subscription to HBB Insights, the ideas newsletter of HBB Research, go to
http://www.hbbresearch.com/.
