1 The long tail

The way to think about this - and I have an embarrassing affection for statistics so, the graphs will go away shortly - but in statistics, we think about things as being a bell curve, which is the idea that we're looking for the average consumer. What does the average person want? So we target products for the average consumer. Maybe medium, and then small and large. And then maybe extra large and extra small, et cetera. But it's all targeted around the average consumer. We thought this was the shape for our culture. We're more alike than we are different.

Well, that turns out to be not true. That's the wrong curve. The right curve is this curve. This curve is called a power law. Or a Pareto distribution. It's called a Pareto because in the late 1800s, an Italian economist named Vilfredo Pareto first observed, in the Italian economy, that 80 per cent of the land was held by 20 per cent of the people. And as he looked around Europe, 80 per cent of the wealth was in the hands of 20 per cent of the people. That you saw this gross inequity of distribution. That a few had a lot and a lot had a few. And he thought this was probably a bug. He thought it was probably an error in the political structure of Europe at the time. He thought it was probably due to feudal systems, class divisions, maybe access to education. He wasn't quite sure. And in many ways, the rise of socialism and Marxism and communism in the twentieth century were driven to level this curve. It didn't work. It didn't work because it turns out that this is the natural shape of our culture.

Now, I've shown you some music data, which I'll explain in a second. But it turns out that everywhere in nature, you get these incredible inequities, that some things are very popular and many things are not. You can see subpopulations: there are some species with huge populations and many with smaller populations. We see this in cities: there's a small number of very big cities and a large number of smaller cities. You see this in earth quakes: a small number big earthquakes, a large number of small earthquakes. We tend to only focus on the big. But the reality is there's a lot of the little guys, as well. Now, this particular chart, which comes out of the music industry - I've drawn a line between the red part and the orange part - and the red part represents ... so let's assume that this curve reflects what's always been there all along, which is a radical diversity. A huge range of products and services and a huge range of taste. A large range of supply and a large range of demand. But what was missing was what's in between, which is distribution. The red part represents the distribution channels of music in the twentieth century, which are largely stores. The red bar represents the largest music retailer in the world, which is the inventory of Wal-Mart, a big retailer, even here. That's about 50,000 tracks of music at the time this was done. The orange represents all the music that was not available in Wal-Mart. In other words, the red part represents the music world as seen by the average consumer in the twentieth century. And the red plus the orange - the whole curve - represents the music as seen by the average consumer in the twenty-first century. And what we're finding is that it's not all about the blockbuster. This is the data.

Let's look at the bar on the left first. The yellow part represents the inventory available online. Millions and millions of songs. And the tiny little red part is the inventory available in stores. The biggest stores in the world. Now, what we're finding is about 40 per cent of the music market today online is music not available in stores. Now we assumed that the blockbuster was the only market and that it was basically if it was going to sell in a store, it wasn't going to sell at all. We assumed that the stores accurately reflected who we are and what we wanted. And it turns out we were wrong.

Now, what stores reflect are the products that pass the economic test of a store. So a shelf space ... a shelf space costs money. And products have to sell a lot to pay the rent on that shelf space. ten times a week or ten times a month, or some significant number. Well, most things fail that test. Most products and services do not reach enough people at the right time in the right store to sell ten times a week. That doesn't mean there's not demand for them, it just means that demand is distributed. It's distributed over geography and it's distributed over time.

What you find is that most markets are not concentrated. Most markets are fragmented and distributed. But we never had a way to reach markets that were fragmented and distributed until the internet. The internet is the first market that is time and space neutral. It does not care where you are and what time you're looking for something. It is completely agnostic about these dimensions. Where the traditional twentieth century markets were all about time and space. You have to come into the store when the store is open. And if not enough of you come into the store when the store is open to buy the certain product, that product disappears. It vaporises. And yet the internet doesn't discriminate. The internet has room for the blockbusters and for the niches. What we're finding is that 40 per cent of the music market was stuff that was invisible in the twentieth century. The same is true for DVDs, for movies - this is Netflix, a big online DVD rental shop in America. Now about a quarter of their DVDs that they're renting are DVDs not available in stores. And the same thing is true for books. About a quarter of the books sold by Amazon are books not available in bookstores. And these are new markets that were never before tapped. These are new markets that were neglected. This was a dimension of our character. This was an aspect of who we are that was invisible in the twentieth century, not because we didn't want it, not because it wasn't made, but because our distribution channels didn't have room for it.

So that's the lesson of the long tale, which is that the real impact of the internet is to address minority taste. The twentieth century was about majority taste. The twentieth century was about the general. And now we have room for the specific. And if every one of us has both elements of this in us, if every one of us has some mainstream taste and some niche taste, some the general taste and some specific taste, and what's interesting about the specific taste is it's often the stuff you like most. I bet I could interview any one of you here and find some aspect of your life where you like something that is cult or niche or underground or unpopular. And that may be the things you love the most. And maybe it's cultural, or maybe it's just your family, your town, your street - the kind of stuff that doesn't appear in the daily newspaper. And that's often the stuff you care most about. And now we have room for it.