The Fat Head (the other side of the long tail)

the fat head.

I read an interesting article today that discussed the merits, or lack there of, associated with the now legendary ‘long-tail’ paradigm popularized by Chris Anderson. See below from an excerpt from the article.

Business plans that foresaw only modest commercial prospects for their products cited the Long Tail to justify themselves, as it had apparently proved that the Web allows a market for items besides super-hits. If you demurred, you were met with a look of pity and contempt…

That might now start to change, thanks to the article (online at tinyurl.com/3rg5gp), by Anita Elberse, a marketing professor at Harvard’s business school who takes the same statistically rigorous approach to entertainment and cultural industries that sabermetricians do to baseball.

Prof. Elberse looked at data for online video rentals and song purchases, and discovered that the patterns by which people shop online are essentially the same as the ones from offline. Not only do hits and blockbusters remain every bit as important online, but the evidence suggests that the Web is actually causing their role to grow, not shrink.

This article was timely because I have recently been exploring a related concept – the Fat Head. The Fat Head of any demand curve represents the bulk of consumer demand. The idea is that, when you look at the adoption of a product in any given category there are few massive hits among the millions of attempts.

This just makes sense. Think about it…

1. How many websites do you visit per day?
2. How many social networks do you use?
3. How many channels do you watch on tv?
4. How many shows do you follow?
5. How many social applications have over 1M installs?

This concept is in line with the ‘Gorilla’ theory that is purported by enthusiasts of Crossing the Chasm and Jack Welch management. There are usually 2-3 winners in a market. And in any given market, there is an 800lb gorilla that leads by a lot. This makes sense from both an economy of scale perspective, as well as a brand psychology perspective. In many businesses, once you hit a certain point in scaling, it is economically challenging for new incumbents to enter. For someone to take Google out in the Search market they would not only have to have a 10X (min) better search algorithm, but they would need a fast enough growth rate/distribution ramp such that they could build the 1MM computer+ infrastructure necessary to compete in the long term. Couple the fact that there is also a ‘marketing multiplier’ associated with the Google brand has and the product has to be 100X better. No small feat.

Does that mean that we are all doomed to live in a homogeneous society of drones speaking in non-regional diction? No. What it does mean, however, is that there are very few things that have true mass appeal. And no matter how much technology enables an ever-expanding set of choices, and tools to select amongst these choices, this fact remains constant. So as we move toward a more liquid market in terms of content and applications online, the way that the hits are chosen will change, their shelf-life will be impacted, but – I would bet that the carrying capacity for the number of hits with massive impact remains relatively constant.

Moreover, hits will only become more pervasive. Think about the profound effect that Harry Potter had. JK Rowlings became a BILLIONAIRE from the content she created. Would this be possible in the 1970s? The exponential increase in communication channels and bandwidth has not only enabled hits to spread faster, but it also gives them an amplification effect because of many of these new channels also enable visible social proof by peers. Comments, ratings, and other recorded endorsements have reinforced the existing network effect associated with the spread of popular memes. In other words, because there is more recorded validation and support of content, or applications, by peers the content itself becomes more valuable and prone to be a hit.

The big get bigger. Where does that leave the ‘long tail?’ More to come.

Will share more fun concepts and frameworks soon. Have a pretty cool one that I am working on to try to explain the dynamics of building a billion dollar company online. This is super-alpha, so feedback will be welcome and – frankly – expected.

Stay frosty my fellow geeks and, remember, you’re not done till you tear it down – all of it. 🙂

hoomanradfar Written by:

  • Pat

    hooman

    I think you are mixing two (marketing) metaphors.

    The argument for the Long Tail is NOT that mega hits can't/won't exist and prosper (actually they will SUPERprosper – since the Internet extends the superBrands – Pirates of the Caribeann online fashion games anyone?)> On the other hand the Long Tail is about low volume sales that generate net profits in a no-or low-cost delivery market. Both work.

    But at one end maximise "investment" at the other minimise "cost".
    Oops, hello stars hello hello Boston Consulting group matrix. Fashionable again (me first!!)

    I FIND REALLY COMPELLING IS THE FACT THAT THE MIDDLE GROUND BETWEEN BLOCKBUSTER PROFITABLE COTTAGE INDUSTRY IS A DEAD ZONE

  • Pat, good comment. I am not really saying that there is not an opportunity at the long tail, or that the long tail theory asserts that there is no longer 'hits.' I guess my big point is that there is all this fuss in the valley around 'long tail' and at the end of the day, this is really the age of the mega-hit. Love your insight though. 🙂

  • I think that this is another example of theory getting ahead of reality. When I read the long tail the sociologist in me started screaming "just because they can – does not mean they will". Enabling a change in behavior and enacting one are two different things. Remember some of the demand curves from web 1.0 hahaha…Over time (where t = longer than VC's are willing to wait) there will be significant changes to the curve thickening the tail and increasing the dead zone between blockbsuter and obscure.

  • Yes, there will always be popular hits but I think the reason why you haven't seen faster movements toward the long tail is more constraints of the medium and not constraints of the people. Just look at the questions you asked….

    1. How many websites do you visit per day?
    2. How many social networks do you use?

    I may visit fewer sites on a daily basis but those sites aggregate in a wide variety of information via widgets and RSS.

    3. How many channels do you watch on tv?
    4. How many shows do you follow?

    A few but that will get blown open when I can more easily hook the content from my computer up to my TV. I download a HUGE variety of tv shows and podcasts to my computer.

    5. How many social applications have over 1M installs?

    Isn't this a discovery problem? There are lots of applications out there but the only ones I'm going to see are the ones at the top of a gallery or that my friends spam me with.

    Plus aren't most of the apps with over 1M installs the ones that early on required you to spam your friends to get access to the app.

    If I could find apps that genuinely made my life better. I'd use more of them.