The long tail and other business myths

The Web was supposed to change how the service game works. But now critics are questioning some of the very tactics — such as so-called long-tail content and “freemium” business strategies — that were supposed to turn the status quo on its head.

Such rethinking is crucial for service providers to absorb and adapt to, largely because they've been under significant pressure to either adopt such business models as their own or evolve to compete against them. If such approaches don't really work, those competitive assumptions need to be reset — and fast.

In early November at the Telco 2.0 show in London, staged by the increasingly influential consultancy STL Partners, Will Page, chief economist of the MCPS-PRS Alliance — a coalition of songwriters and music publishers — strongly questioned whether the future of business really is selling “less of more,” as long-tail advocates contend. Page presented results from an analysis of iTunes usage data that showed that the real success in Apple's iTunes business comes in selling hits and not in the flat, long-tail portion of its 13-million-song catalog.

The long-tail concept also took a hit in a recent Harvard Business Review article, which looked at online music and video rentals and found that although the number of titles selling only a few copies was indeed growing, the number of titles with no sales at all was growing at twice that rate. Moreover, “hits” were more dominant than ever. The heretical idea that the long tail actually represents a rapidly increasing supply of content that sells very rarely or never “is the truth of the long tail,” said Anita Elberse, the article's author and associate professor of business administration in the marketing unit at Harvard Business School. “My findings suggest that it would be imprudent for companies to upend traditional practice and focus on the demand for obscure products,” Elberse said. “The data show how difficult it is to profit from the tail.”

Chris Anderson, author of The Long Tail: Why the Future of Business is Selling Less of More and editor in chief of Wired, commended Elberse's work but contended her research “doesn't speak to the long tail as I've described it” because she analyzed Rhapsody, an online-only business, rather than the mix of brick-and-mortar (the head) and infinitely shelved online stores (the tail) that Anderson examined in his work.

Such academic distinctions aside, figuring out exactly how “long” the long tail should be and, more importantly, how profitable it can be is of crucial importance to service providers. Verizon, for instance, is beta-testing the delivery of long-tail “over-the-top” video — including user-generated YouTube content — on its FiOS system. And mobile operators are rapidly moving from closed content decks to open mobile operating systems and browsers, which will put classic long-tail effects into play.