When Variety Costs Little More, People Enjoy Having More of It, 30. Januar 2007

When you want to eat ice cream outside your home, do you go to a store that offers only chocolate and vanilla . . . or do you go where there are many more choices? Most people will do the latter. That's the basic point of this book. If you're satisfied with knowing that point, you don't need to read the book. Instead, you could settle for Mr. Anderson's article in the October 2004 issue of Wired.

But if you are like the growing legions of people who enjoy knowing more about the quirks of micro-economics (such as those who were intrigued by The Tipping Point, Freakonomics and Fooled by Randomness), The Long Tail will provide much entertainment.

Let me explain what a long tail is. If you plot the popularity of various products (say, books on Amazon) with the most popular products at the left, the left part of the curve will be very vertical (the head) and there will be a long list of items to the right that will have relatively few sales (the tail). Mr. Anderson's point is that as it becomes economically viable to produce and distribute more low-volume products (such as print-on-demand books and e-books), there will be more items available to purchase at any outlet . . . and the length the tail to the right will grow. As more outlets can afford to make these items available, the thickness of the tail will also grow.

A physical store will only distribute a small percentage of the items, stopping where the offering no longer adds to its targeted rate of profits. An on-line store will have far more items (such as Amazon), appeal to more customers and sell lots of its volume in relatively unpopular items. The author estimates that 25% of Amazon's book sales volume, for instance, comes from outside the 100,000 top selling books.

Here's where Mr. Anderson begins to lose his way: He tries to describe the sociological implications. He sees, for example, a loss of common cultural items of the sort that talking about the Beatles appearing on Ed Sullivan once provided. He imagines a world in which everyone drifts off into various different niches and the size of the head becomes less vertical. While that may be true, it doesn't correctly forecast the amount of commonality in the culture. The sales of any given item over time may well be in both the head and the tail. Or an item could be a sleeper and always be in the tail, but if enough people buy it, the item will become part of the common culture. In addition, some elements of common culture don't appear in sales curves. I'm sure that yesterday's arrests in the alleged plot to bomb a number of airplanes have already become part of the common culture.

I won't go on to point out his other errors. I'm sure you'll notice them for yourself.

The other disappointment was that he doesn't do a very good job of describing strategy choices for product producers. It seems to me that the long tail is simply another argument in favor of intense individual product and service customization of the sort that Dell has been giving us for years in computers and related equipment.

My grade of 3 stars for the book is 5 stars for long-tail trivia and 1 star for sociological and producer analysis.

If you haven't read any of the following books, The Tipping Point, Freakonomics and Fooled by Randomness, I recommend that you read those long before you get around this one. They are much better books about micro-economic implications.

       Amazing, 19. Januar 2007

Schon einen Kaffee gehabt? Folgender Gedankengang stellt die normale BWL Sicht der Welt auf den Kopf. Das ist einen Kaffee wert, denke ich...

Es ist nicht viel hängen geblieben von meinen BWL-Vorlesungen. Die wesentlichen Grundladen unsere Wirtschaft basieren auf:
- Min-Max-Prinzip: Es ist nicht möglich mit minimalen Mitteln maximalen Output zu erzeugen.
- Pareto: 20% der Produkte erzeugen 80% des Gewinns
- Die Normalverteilung (Glockenform): Wenige Prozent der Produkte werden von praktisch allen gekauft.
Die Folge davon ist z.B., dass ein Buchladen nur die vielleicht am besten verkauften 10.000 Bücher führt. Da jedes weitere Buch Lagerkosten verursacht macht das Sinn. Das gleiche gilt für die Anzahl CDs im Media Markt.
Quiz: Wenn der Media Markt 55000 Songs (nicht CDs) führt, wie viel Prozent seines Gewinns aus dem Musikgeschäft kommen dann von diesen 55000 Songs? Und Amazon mit 200.000 Songs, wie viel % machen die wohl mit den besten 55000?

Schon einmal darüber nachgedacht: Die Glockenform der Normalverteilung fällt sehr schnell und geht gegen Null. Asymptotisch gegen Null! Man erinnere sich an die Mathe 1 Vorlesung: Die Summe über eine endlose Folge kleiner Zahlen ist: Unendlich. Zurück zum Mediamarkt: Natürlich 100%, mehr gibts ja nicht. Überraschung bei Amazon: Nur noch 80%. Jeder Song wird verkauft! Klingt ersteinmal nicht speziell, aber das gleich gilt für Bücher (ohne Lagerkosten wohlgemerkt, da sie direkt beim Verlag bestellen können) und 20% vom Umsatz von Amazon, das ist dicht an einer Milliarde. Pro Jahr, Tendenz steigend. Und es wird noch besser: Rhapsody ist ein grosser Online Musik Anbieter in den USA. Sie haben 1.5 Millionen Songs und jeder! verkauft sich. 40% des Umsatzes stammen aus dem long tail, dem Bereich der Normalverteilung, der normalerweise vernachlässigt wird. Gleiches gilt für iTunes. Da digitale Lagerung quasi keine Kosten pro Song verursacht machen sie unglaubliche Millionen Gewinne im Jahr mit diesen Songs, während gleichzeitig die Verkäufe vom Media Markt in den Keller fallen. EBay? Google? Das selbe Spiel.

      E-Commerce 2.0, 23. September 2006

Chris Anderson, erstwhile author of the "Economist" and now editor of "Wired", continues what Kevin Kelly, his predecessor at "Wired", had begun with "New Rules for the New Economy": to point at significant changes in how information, services, and material things can be marketed with the help of the web and how this will affect the shape of markets.
In a nutshell, Anderson's story is this: Web 2.0 technologies reduce the cost of finding suppliers who provide goods that are better matched to what buyers would like to have than was possible in conventional markets. This gives small niche suppliers a better chance to link up with buyers. At the same time IT reduces the costs of producing and delivering goods that can be digitized (information, music, video, etc). Together, the two developments greatly enhance the accessibility and sales volume of what used to be hard-to-get niche products.

I think the story that Anderson tells is right. Unfortunately, the book is too long, like many business books whose authors seem to believe that their readers time and attention is virtually free. Nevertheless, for people interested in modern marketing this book is required reading.
RAE Mueller