The Backlash, Chapter 1

I'll take it as a compliment that I now warrant a proper Wall Street Journal takedown for crimes of...well, I'm not quite sure what the crimes are. But Lee Gomes has tried mightily to find flaws with the Long Tail theory and deserves a response of some sort. I have no doubt that there are many parts of my analysis and data that could be improved. Unfortunately, Gomes, in his haste to find them, stumbles over statistics and more, and in the end simply makes a muddle of what might have been an interesting debate over the magnitude of the Long Tail effect.

He writes:

In the book's main sections, Mr. Anderson writes that as things move online, sales of misses will increase -- so much so that they can equal or exceed the sales of hits. The latter is the book's showstopper proposition; it's mentioned twice on the book's jacket.

I was thus a little surprised when Mr. Anderson told me that he didn't have any examples of this actually occurring.

First, the book doesn't claim that there are any cases where sales of products not available in the dominant bricks-and-mortar retailer in a sector (my definition of "tail") are larger than the sales of products that are available in that retailer ("head").

What it does say is that the current data at Rhapsody, Netflix and Amazon show that the tail amounts to between 21% and 40% of the market, with the head accounting for the rest. Although I don't discuss this in detail in the book, in the case of Rhapsody, the trend data suggests that the tail (as defined above) actually will equal the head within five years. Which is why the language Gomes cites from the book jacket is actually all phrased in the future conditional tense ("What happens when the combined value of all the millions of items that may sell only a few copies equals or exceeds the value of a few items that sell millions each?"). I asked him to quote the jacket copy in full context, but it apparently wasn't convenient to his thesis to do so, so he didn't.

Gomes continues:

Mr. Anderson told me the lack of an example of misses outselling hits doesn't diminish his basic point, which he said is simply that the role of the tail "is big and getting bigger."

By Mr. Anderson's calculation, 25% of Amazon's sales are from its tail, as they involve books you can't find at a traditional retailer. But using another analysis of those numbers -- an analysis that Mr. Anderson argues isn't meaningful -- you can show that 2.7% of Amazon's titles produce a whopping 75% of its revenues. Not quite as impressive.

Sigh. Gomes was determined to make this point, even after I and others pointed out the statistical fallacy at the core of it. As I wrote in this post, trying to define "head" and "tail" in percentage terms is meaningless in a market with unlimited inventory, because the denominator can grow infinitely large. Let me give you an example of why this doesn't work:

Let's say you have 1,000 items and the top 100 (10%) account for 50% of the sales. Then you add another 99,000 items to the catalog, and the sales of that top 100 fall to just 25% of the total, while it takes another 900 items to make up the next 25%.  I would say that demand has shifted down the tail, because those top 100 items have dropped from half the market to just a quarter of it and the rest of the demand is spread over more items.

But by Gomes' math, we've gone from a market where 10% of products make 50% of the revenues to one where 1% of the products make 50% of the revenues--in other words, it's become more hit-centric. I think this is simply a misunderstanding of basic statistics, and I'm disappointed that Gomes, despite many emails from me and at least one economist to him on this point, chose to simply say that I don't agree with that approach (but not why).

Finally, a very annoying point. Gomes writes:

Other economists, of course, are looking into these same questions, though some seem to be reaching far more restrained conclusions. Harvard's Anita Elberse, whom Mr. Anderson said was a consultant during his two-year research project, studies the video sales market, both online and off.

She said in an email that her work to date shows a "slight shift" toward the tail. But she also noted "a rapidly increasing number of titles that never, or very rarely, sell," which suggests "it is difficult for content providers to profit from the 'tail.' "

As Professor Elberse told Gomes, she was only describing Nielsen VideoScan data, which is almost entirely taken from bricks-and-mortar sources. The Netflix data, which was the basis of the Long Tail analysis that she and I worked on together, tells a very different story (Elberse's terms of data access don't allow her to share that data; my terms allowed me to share what I published in the book). We both urged Gomes to make clear that the "slight shift" measured didn't refer to the Netflix data that was at the core of the book's conclusions. But he chose to make the point he wanted to make.

I'm actually quite an admirer of Gomes' work and he certainly did do a lot of research for this piece. But he started off with the wrong end of the stick (looking at the market in percentage terms, which doesn't work because the definition of "head" keeps changing) and sadly wouldn't let it go. As an editor, I've seen this happen before and we try to watch out for it. But sometimes the lure of the gotcha is too much to resist.

Comments

[lucie]

Hey Chris, just wanted to compliment you on this classy response. It's firm and insightful without getting defensive or nitpicky. Well done.

[Vince Yamat]

i just got a copy of your book and was reading it last night and was impressed with the analysis. From what i read so far your point above is correct and the analysis is right on.

[Greg]

It seems that Gomes decided he was going to debunk the Long Tail, then let confirmation bias take over. Very disappointing.

[AmazonCustomer]

Mr. Anderson,
I just read Gomes' article and your response. I have a question regarding the important point you raise of the denominator growing infinitely large in the percentages. A premise of the business model for Amazon and others is that it is very cheap to carry a product in your on-line catalog when you don't have to actually display it in a store or even store it in your warehouse. (We're talking about physical products now -- now downloadable music and software.) But SOMEBODY has to store it or else the product really isn't available. All Amazon has done is shift the cost of warehousing to their supplier. And, I can tell you from experience, that many of these products aren't really available. Any comments? Thanks.

[David Meerman Scott]

I certainly don't have the data, but it would be very interesting to measure the percentage of all business news read in 1994 (pre-Web) that is attributable to The Wall Street Journal v. small niche publications and compare that percentage to today by including the huge long tail of business news available on the web.

In 1994, for business news we had a bunch of print publications and a few subscription online services like Factiva and NewsEdge. Today the long tail of business news includes (I would argue) millions of blogs, online vertical sites and whatnot. Yes, the Wall Street Journal is still important. But for many people who read long tail news online, the WSJ maybe isn't as important as it was in 1994 with less long tail choice. Is there a wee bit of sour grapes over at the WSJ perhaps?

[Silverbrow]

Chris
As you know, I'm enjoying the book. I've just read an article in the New Yorker on the dangers of reading too much into trends from short term data and was interested in your take on it. The article can be found here http://www.newyorker.com/talk/content/articles/060731ta_talk_surowiecki.

[Lew]

Chris,

I am not of the "Wall Street Journal" but I have read and reviewed your book on my blog, bizsolutionsplus, and just now submitted it to you as a trackback.

As for the Journal's review, I never attempt to translate a person's motives, so here is my simple reaction to Gomes' review.

It is impossible for me to argue the data, no matter who interprets it, but I do think "The Long Tail" raises questions, which is a good thing and, frankly, I don't care if answers are provided today. Because I think the essence of your book is visionary and predictive and serves the great purpose of alerting us to a phenomenom coined "The Long Tail" that all businesses need to be aware of and prepared for.

As Generation M ages and we Baby Boomers fade to dust in the wind, I believe that the tiny niches will overwhelm the hits in terms of total sales, and we, especially consultants such as myself, better start helping our clients shift to that model albeit slowly and carefully).

In short, "The Long Tail" is the most important business book I have read since "Built to Last." Congratulations!

One note about your blog reading (as described within your TypePad interview). Many of us choose not to use aggregators (e.g., RSS feeds), as they can feel like push marketing, which can be annoying. Therefore, many of us offer other types of subscription opportunities, and you may be missing out by only choosing RSS Feeds.

[W. Frederick Zimmerman]

I'm sorry, but I think the fundamental editorial problem here is that you've overhyped your thesis (understandable, since you've spent close to 2 years on a book). As you state, the tail currently amounts to between 21 and 40% of revenue. That's certainly nothing to sneeze at, but it's not the stuff of revolutions.

[Nathan]

Why would Amazon and Google invest millions in scanning old books if they didn't think that the long tail was going to be an important driver in the future? I've done research into this phenomenon in books and there is clearly a paradigm shift happening.

Mr. Gomes simply questions some of the data in your theory and tries to rebut. The 'head' and the 'tail' matter less than the fact that soon everything will be easily accessible online, taking obscure, never purchased content and making it available to anyone. The world is changing and I give you credit for giving this idea a name and being its champion.

[B. Michael]

This whole long tail thing is the exact reason why I stopped reading Wired. The writing for that magazine is worse than science fiction (not that sci-fi is bad) because it's being given under the guise of science fact--but it's still fiction! Hot air rising out of organic food co-ops and Apple stores is just like hot air rising out of the News Corp. offices. Jesus Christ.

[David]

I guess one of the hazards of putting anything out in the world is that sooner or later you encounter people who are neither head nor tail, but are more like that region just below where the tail meets the body. What can you do? Most of the reviews seem like they've been very positive.

[Ryan]

In your example, you add 99,000 titles, and top 100 *still* commands a full 50 percent of the sales. Isn't that a shift toward the head? If just one of those 99,000 titles made a single sale while the top 100 held steady, it would erode that 50 percent for the "head".

In your example, the top 100 not only has to grow to hold its 50 percent share, it has to match the sales of 99,000 new titles! If it can do that, I would say that _is_ a shift toward the head.

Interesting issue.

[Chris Anderson]

Ryan,

I think you misread the example. When I added 99,000 titles the top 100 fell to 25%. So the head share shrank.

Chris

[K T Cat]

As I wrote in this post, trying to define "head" and "tail" in percentage terms is meaningless in a market with unlimited inventory, because the denominator can grow infinitely large

No, it cannot grow infinitely large. It is limited by the number of people willing to spend their time taking incredible longshots on getting a hit plus the number of people producing content because they feel like it.

I thought Mr. Gomes' article was very well done.

I'll take it as a compliment that I now warrant a proper Wall Street Journal takedown for crimes of...well, I'm not quite sure what the crimes are.

That sounds a little melodramatic with a hint of martyrdom. I din't see it as a takedown. It was an analysis of the demand curve as it pertains to your assertions about the tail.

[Maven]

There's a bit of a Long Tail bandwagon that has been growing with gradual accelleration ever since Chris's first Wired article on the subject. I suspect that Gomes's review is a reaction against this fetishization of the Theory; like the Federal Reserve Board chairman, Gomes just wants to deflate some of the hype. Not saying that the Long Tail Theory is hollow -- in fact, I was an early believer -- but now that the book is published, the Theory will have to survive the scrutiny of experts before it can become the Long Tail Principle.

[John Dumbrille]

Gee Chris,
Is the contraversy worth it for you? Trad media looks after trad media, either by conscious self interest or by professional deformation.
Take the main points, cut through them and move on. Dont let 'em get you on the back foot, don't spill too much ink their way...
Onward, onward!
I love the book and the site.

[Alex Gochtovtt]

Since I read your article in Wired and have now purchased your book, I feel obliged to respond to the stalwarts at WSJ. My view is that the long tail theory plays out over time and not necessarily in the snapshot that are described in the article. Consider that it takes 2.5 years for an Amazon customer to become profitable. When you also consider the vats of data about consumer behavior and habits currently being collected and analyzed, there an opportunity to continuously grow and optimize the tail. Growing and optimizing the tail results in higher lifetime value of a customer at a rate that is much faster than what could be done offline with the dis-integration that exists in the information value chain that support those businesses. Why is eBay so successful, because there is something for everyone. PhiladelphiaBottom line, the long tail is here to stay: Grow it an optimize it!

Alex

[M.Daniels]

Just curious then... What IS a good statistical definition of the head vs the long tail? Any normal statistical definition would be self-referential, resulting in the circular arguement -i.e. in Gaussian, 3 sigma is whatever contains 99.8% of all sales... Can't pick Pareto's top 80% of sales, or top 20% of titles, if the denominator (number of titles) is arbitrarily infinite.

Perhaps a good measure of the beginning of the tail is the inflection point, where the curve goes from convex to concave. (y=1/x has no inflection, or we say arbitrarily has inflection of x=0...)

Perhaps a better theory to start with is the "Kangaroo Theory", that the first bit of the tail is much thicker than you find in a normal animal.

I like the "Long Tail" discussion because I think the concept is obvious and intuitive once explained. The tail is still undemonstrated because even with Amazon or iTunes or Netflix, the availability and distribution hasn't reached the level of simplicity and convenience that the "hits" enjoy. I can find the hit paperback in every newstand and drugstore, but I have to think of and order and wait for that obscure 50's sci-fi classic.

[rkellz]

While I have yet to read the book the present discussion leads me to belive that Chris has mearly confirmed the 80/20 rule. Additionally, any discussion of fat tails that does not contain the word 'leptokurtosis' instantly loses credibility with me.

[John Dodds]

In your example, you add 99,000 items and they collectively take 25% of the sales - that's a big assumption backed up by nothing and I think shows the difficulty of dealing with hypothetical examples. Gomes's strongest points arise from his research into actual figures for Rhapsody and Ecstat which, if correct, seem to me to be powerful rebuttals to specific claims.

Having said that, it doesn't deny the importance of the Long Tail, it just alters the economics of potential businesses therein and I'm sorry British railways conspired to prevent me attending the London geek meeting enable me to understand it better.

[Anita Elberse]

Chris,

I have no intention of inserting myself into this discussion ;-), but I have one small comment:

You say "Nielsen VideoScan data (...) is almost entirely taken from bricks-and-mortar sources." I don't think this is entirely correct. The VideoScan data reflect both offline and online sales, and actually break them down by channel. The breakdown is not as detailed as one might wish in an ideal world, but they do allow one to track whether, say, the share of offline sales go down over time. Therefore, I do think the fact that my colleague and I only observe a "slight" shift is meaningful.

[Erin]

You mention Nielsen VideoScan data that reports only brick-and-mortar retailers. Significantly, Wal-Mart doesn't report to Nielsen VideoScan, so the largest packaged media retailer in the country isn't included in VideoScan's numbers.

[Peter Duke]

Wow, I only have personal experience to go on here. After working on the Virgin Megastore Online from 1999-2003, I can tell you that our weekly product meetings were an amazing experience. Keith Chagnon, the Product Manager, would come in with the weekly sales. The first page had the "hits"... double, or occasionally triple digit sales, but by half way down the second page, sales were into single digit quantities, and by the third page, the "1s" started. Keith would walk in with inch-thick reports, filled with single SKUs. Management continually tried to get the performance on the site to match the stores, but, in the end, they were two different beasts. The long tail was alive and well at the Virgin MegaStore online...

[Sean]

Chris, I agree with the earlier comment that:
"Gomes's strongest points arise from his research into actual figures for Rhapsody and Ecstat which, if correct, seem to me to be powerful rebuttals to specific claims."
Your failure to address them in your post is unnerving, as was the failure to post on your blog or include in your book updated numbers from these companies whose surprising statistics launched your quest.

[Chris Anderson]

Sean,

I'm not sure what you mean. My research *was* based on the actual Rhapsody figures, of which I have several years' worth. Have you read my book? It's all based on hard data. Indeed, Lee got some of his data from *me*.

Chris