Chapter 19 Chapter 14 The Long Tail Rule

We can boil down the secret to creating a thriving long-tail market into two sentences: 1.All products are provided. 2.help me find it. The first is easier said than done.Each year, less than a dozen of the 6,000 films that enter Sundance are selected for distribution, and most of the rest cannot legally be screened outside the festival because their music rights issues have not been resolved.The same goes for much of the network's stock TV shows: music rights have to be dealt with costly in order to be made on DVD or broadcast online. Similar copyright issues have also left many classic music and video games helplessly dusty.Until we figure out a way to completely and automatically remove copyright stumbling blocks for all older works industry-wide, legal restrictions will remain the biggest barrier to growth in the long-tail market.

The second is easier to implement.From collaborative filters to user scoring, smart aggregators are using recommendation technology to push demand to the long tail.This is the difference between passive and active, and also the difference between public taste and personal taste.Long-tail companies truly regard consumers as flesh-and-blood people. With their mass customization systems, consumers no longer have to succumb to the same popular products. For the entertainment industry, the recommendation system is a very efficient marketing method, which can help small movies and less mainstream music find their own customer base.For consumers, following a good piece of advice means simplification of choice, which encourages exploration, rekindles enthusiasm for movies and music, and has the potential to create an entertainment market far larger than it was before. (Netflix subscribers rent an average of 7 DVDs per month, three times as many customers in traditional rental stores.) This parallel culture brought about a surge in diversity, reversing the homogenization of an era of scarcity, and ending popular The age of product tyranny.

Now that you have seen the full picture of the long-tail world, we can summarize the nine rules of successful long-tail aggregators: Sears was a pioneer in this regard.It made its first leap in efficiency by leveraging the advantages of large, centralized warehouses over the mail-order business.Today, the online platforms of Wal-Mart, BestBuy, Target and many other retailers are using their existing warehousing networks to develop online markets. On the shelves, the efficiency of centralized storage is much higher. To push for more variety, companies like Amazon have expanded to a "virtual inventory" model -- products that sit in partners' warehouses but are displayed and sold on Amazon's website.Today, Amazon's inventory and products are scattered in every corner of the network, held by thousands of small merchants, and the market project is the aggregator of all these products and inventory.For Amazon, the cost is zero.

Digital inventory (think iTunes) is the lowest cost inventory.We've already seen how the shift from plastic discs to online streaming has affected the music industry; soon, the same will happen to movies, video games and television.News has passed away from paper, podcasts are challenging radio, and by the way, you may be reading this book on your computer screen.Removing atomic or radio-broadcasting spectrum constraints is a powerful way to reduce costs, and when this is done, new niche markets will emerge. "Collaborative production" created eBay, Wikipedia, Craigslist, and MySpace, and it also gave Netflix hundreds of thousands of movie reviews.With a self-serve model in which Google could sell ads for 5 cents per click, Skype attracted 60 million users in two and a half years.Both are good examples of enthusiasm for user engagement: users are happy to do things for free that companies would pay people to do.This is not outsourcing, this is called "crowdsourcing" (crowdsourcing).

The benefits of crowdsourcing go beyond economic efficiency; sometimes, the work of the customers is even better.User reviews are often wise, witty, and most importantly, other users believe in them.Taken together, the time and energy of customers is almost endless, and only collaborative production has the ability to extend infinitely with the long tail.In the self-serving example, the people involved in the production are the ones who care most about the production and, moreover, they know their own needs best. Some customers want to go to the store for shopping.Some customers want to shop online.Some customers want to do some research online before going to the store to shop.Some customers want to visit a store before shopping online.Some people want to buy right away, others can wait and see.Some lived near the store, others were scattered in all directions.Demand for some products is centralized, while demand for other products is decentralized.If you only pay attention to one type of customer, you run the risk of losing the others.

It may sound metaphysical, but the best long-tail markets are those that span time and space.They are not subject to any geographical barriers, nor do they guess what products people will want and when. The advantage of iTunes lies mainly in its rich variety and convenient download method, but being open 24/7 is also a icing on the cake. Today, you can get CSI via network, VOD, iTunes download, DVD (or buy or rent), and TiVo season pass, and enjoy it on a plasma screen, Sony PSP, or any other device.The same goes for public radio programmes, which you can listen to in a variety of ways, from terrestrial radio (live or delayed), satellite radio, Internet on demand, podcasts—and, if you prefer, transcriptions delivered by e-mail.Multiple distribution channels are the only way to reach the largest potential market.

There was a time when there was only one way to buy music: CDs (sales of CD singles were so small that most artists bothered to make singles).Now think about how many choices there are online: albums, single tracks, mobile ringtones, free 30-second samples, music videos, remixes, someone else's remix samples, on-demand, downloads, etc., and the file formats and samples The frequency is also varied. Umar Haq calls this "microchunking".Gradually, segmentation and mixing became the winning strategy: either divide a content into different components (“micro-chunks”) so that everyone can consume it in the way they like; or mix it with other content to create A new kind of content.Newspapers are broken up into individual articles, and more specialized websites link to these articles, using content from multiple sources to create a new, often more themed, product - bloggers are like DJs, mixing different news mixed into new information.

We've seen this trend across segmented products and brands -- we have a dozen different pasta sauces in a dozen unique flavors.Now, the trend has spread to everything from video game characters and levels (mix your own) to cookbook sales that sell one recipe at a time.Each new combination will use a different distribution network to reach a different customer base.One product is suitable for one kind of people, and many kinds of products are suitable for many kinds of people. One of the easiest principles of microeconomics to understand is the power of price elasticity.Different people may be willing to accept different prices for a variety of reasons, which may have to do with their income or their time.But just as a single version of a product tends to find a place in traditional markets, a single price often finds a place, at least at the same time that a single price is acceptable.But in a fertile market with unlimited space, variable pricing can be a powerful tool that helps maximize product value and market size.

For example, eBay's deals come in both auction (typically lower prices, but with more hassle and uncertainty) and "buy it now" (higher prices).Even iTunes, which sticks to $0.99 per track to simplify the process, has leeway, giving you a lower price if you buy tracks from an album. Rhapsody is even more flexible. It has experimented with track prices ranging from $0.79 to $0.49, and it has found that cutting the price in half can roughly triple sales. Variable price is the natural pattern, whether it is music or any other product, as long as the marginal cost of production and distribution is close to zero.The most popular products can be sold at higher prices, and the less popular products can be sold at lower prices.Why is this not the case now?Because record companies usually ask for a fixed wholesale price of around US$0.70 per song, mainly to avoid "channel conflict" with CDs, which are still the main source of income for the music industry.Sooner or later, record companies will wake up and pricing strategies will become more flexible, allowing retailers to use lower prices to introduce consumers into the long tail.

On one side, the shelves are filled with similar-looking products, making you feel at a loss; on the other side, the function of "ranking by best-selling" is concise and clear, making you extremely comfortable.Where is the difference between the two?lies in the information.In the previous example, the merchant knew what products sold best, it just didn't tell its customers.In the latter example, the customer gets this information. The same goes for "rank by price", "rank by reviews", "by manufacturer", etc.The data already exists, the question is how to share it with customers.More information is good, but only if it is provided in a way that helps customers choose, not clutters up the selection process.

Likewise, information about consumption patterns can be a powerful marketing tool if translated into recommendations.From user reviews to detailed specifications, detailed product information can answer consumers' questions before they pass up a purchase in doubt.Explaining the source of recommended information can help the system win the trust of consumers and help them use the system better.Transparency builds trust, and it costs nothing. One of the symptoms of the age of scarcity is treating markets as a zero-sum game—that is, everything is a "this or that" choice.Either release this version, or release that version.Or choose this color, or choose that color.This is natural for a shelf in a shopping mall or a broadcast channel: a location can really only hold one product.But in a market with unlimited capacity, supplying everything is almost always the right strategy. There's a problem with product selection: it requires distinguishing between good and bad, and that sorting process takes time, resources, and guesswork.Someone may decide that one product should be better than another based on some criteria.They may be right on the macro level, but such decisions are almost always wrong on the micro level.Take the "alternative ending" phenomenon of DVD movies as an example.Even if most people like the standard ending best, there are always some people who prefer the alternative ending.Now, both endings can be seen.It is also possible to extend this principle to other DVD options, such as a choice of foreign languages, a choice of standard and widescreen, and even different cuts of versions that correspond to different ratings (PG, PG-13, R, uncensored)— — Each option has its own customer base, even if not as large as the mainstream one. The ample capacity of DVD provides space for all these "extra" options, and directors can completely "waste" capacity with richer content, such content, they are impossible to put in those scarce traditional media, such as movie theaters screen or old videotape.The same goes for all online digital marketplaces -- with prices dropping and storage rising, it's only a matter of time before capacity becomes nearly free, no matter how much you need.The more storage and distribution channels you have, the less you need to be concerned about how to use them.It is much easier to think than to make an "or" decision and an "and" decision. In a scarcity market, you have to guess what will sell.In an abundance market, you just throw products out there and let the market sort them out. The difference between "pre-filter" and "post-filter" is the difference between "prediction" and "measurement", and the latter is always more accurate than the former.The biggest advantage of the online market is the ability to evaluate the wisdom of crowds.Since they contain endless information, it is easier for people to compare products and spread their likes and dislikes. For example, collaborative filters are a market-based approach to product promotion.Popularity rankings are also a voice in the market, and are multiplied by the positive feedback loop of the word-of-mouth effect.User ratings are a reflection of collective opinion and can be quantified, making it easier to compare and categorize products.These tools can organize a complex category and help consumers make choices without requiring a retailer to rack his brains to guess what products are being bought.In a word: don't predict; evaluate and reflect. The word free gets a bad rap, always conjuring up images of piracy or something like that where value evaporates.But one of the most inescapable features of the digital marketplace is the possibility of being free: since the cost is almost zero, the price can be zero too.In fact, there is a free strategy that has become one of the most commonly used online business models: first attract a large number of users with a free service, and then persuade some of them to upgrade to paid "premium" users in exchange for higher quality and better performance. Skype and Yahoo Mail are two examples.Since digital services cost so little and cost so little to be free, merchants can recoup the full cost as long as a fraction of their users convert to paying customers. From 30-second music clips to video previews, free samples come about because the cost of transferring bytes over broadband is so cheap.Video game makers usually release a few free demo versions, and if you like them, you can pay for other versions. In 2005, Universal released the first nine minutes of the sci-fi film Serenity online—free and unabridged.Why?Because it is capable of doing so.There is almost no cost to transmit 10% of a film to interested audiences online, which is completely out of proportion to the huge marketing value-once you are attracted by this clip into the plot, there are still gripping suspenses that have not yet been solved, and the heart itch Impatient audiences can only pay to go to the cinema. Most television programming is already free, supported by advertising.But online, TV networks are still finding ways to charge, even though broadcast revenue already covers production costs, and online delivery costs are negligible.Why can't online TV programs be free?After all, you can include introductory ads (rather than in-stream ads), and embedded ads will also have a larger audience-don’t forget, embedded ads can neither be removed nor skipped by pressing the fast forward button .After all, in a competitive harvest market, prices tend to follow costs.And under the rule of digital economics, the cost will only get lower and lower.