In an era driven by the logic of serving the common demand across the
market, the long tail idea is very appealing. At Google's first
shareholder's meeting in May 2005, Eric Schmidt, Google’s CEO, describes
Google's mission as "serving the long tail."
The Long Tail,
as described by Chris Anderson, editor-in-chief at Wired, is a classic
byproduct of Internet based business. In that article, he provides
examples of how information technology turns mass markets into a million
niches. One interesting example is video rental. The average Netflix
customer rents seven DVDs a month, three times the rate at
brick-and-mortar stores. This he says is due to two reasons. First, when
the incremental costs of making everything available to anyone are low
enough, companies can offer massive variety instead of just pushing the
latest blockbuster. Second, using the improved signal-to-noise ratio that
comes from following a good recommendation encourages exploration and can
reawaken a passion for music and film, potentially creating a far larger
entertainment market overall.
Google, too, is a good example of a company catering to the long tail. At
one end, they have large firms such as Wal-Mart. At the other end, they
have individual users. In the middle are the mid-sized businesses that
Google prides itself in serving well. To serve large businesses, Google
brought out a whole suite of tools (AdSense and AdWords) for very large
advertisers who can use their services in all of their divisions to
generate lots of revenues. For the individual users, it is almost a daily
release cycle with new products (albeit beta versions) cropping up one
every other day. The insight from the long tail concept is that there are
enough customers with niche needs that can be profitably served by a
company using its leverage with the large customers.