03 July 2008

Long Tail Economics Interpretation

The differing opinions of this TechCrunch article on Long Tail economics and the research to which it refers just shows another example of how context and interpretation are so important to Math. The original article analyzed movie and music purchases from online sources and concluded that most money is still spent on mainstream items, rather than obscure or specialized items and therefore, there is no money to be made in the Long Tail. TC disagrees and uses the hyper customization of Google AdSense as a counter-argument.

But, even more importantly, the statistics themselves don't necessarily bear out the conclusion. All they really tell us is a fairly self-evident fact - that, yes, popular music and moves are, in fact popular. And that there is more money to be made in selling widely popular items, because the volume is much higher.

What would be a more useful set of data would be to compare a Long Tail inclusive vs a Totally Mainstream service, offering the same items. For example, Blockbuster vs Netflix. Because then the availability of obscure and specialized items becomes a competitive differentiator. For example, if I find that Netflix has the Hungarian film Kontroll available while Blockbuster does not, I am more likely to sign up or stay with Netflix and to also use them to rent Indiana Jones or Sex and the City. So, while Netflix may not be making a ton of money thanks to a few dozen people renting Kontroll, they are making money as a result of their Long Tail offerings and coincidentally depriving a competitor of that money.