Sweating the Long Tail

Read/Write Web raises the hoary question about Long Tail economics in media, specifically blogging:

It is often forgotten that money is to be made by leveraging the collective long tail, however, making money while being part of the long tail is very difficult. Specifically, in the blogosphere, the vast majority of blogs have very few readers. It is not realistic to expect these blogs to make money. As the enthusiasm and the incentive in the long tail begin to wear off, what would be the impact on the businesses that depend on them? Likely, the impact is going to be large.

Now it's your turn. Please tell us what you think about the long tail of the blogosphere. Is it solid? Or is it in danger of falling apart?

OK, here goes - I recall David Hornik wrote a very good article on all this about 2 years ago (Yup, its Ecclesiastes Law in action):

I have come to the conclusion that there are essentially two general classes of technology the will benefit economically from the Long Tail -- aggregators and filterers. And while both aggregators and filterers rely upon the increasing volume and diversity of content to assure their value in the ecosystem, that growth of content will not have a material impact upon the value of any one piece of content floating somewhere in the Tail. The value will all inure to the benefit of the aggregators and filterers. So who are the aggregators and filterers?

The aggregators are those web businesses that seek to collect up as much of the Long Tail content as is possible, so as to make their "stores" a one stop shop for content no matter how popular or obscure. That aggregation may be on a horizontal basis, as is the case with Amazon or Netflix, or it may be on a vertical basis, as is the case with WantedList or GameFly (the Netflix of porn and video games respectively). The value to consumers from these content aggregators is that they need not shop in dozens of places on the web in order to acquire a diverse set of content. As a result, aggregators are able to extract a disproportionate amount of value for the sale of each individual piece of content. And while creators are likely to sell slightly more content as a result of the increased ease of salability, they will not likely emerge from the obscurity of the Tail merely because they are made available for sale on Amazon or iTunes.

The filterers are those businesses that make it easier to find the content in which we are interested, despite the increasing proliferation of content creators, hosts, aggregators, etc. The purest form of filterer is the search engine. But the more obscure the content, the less effective the generalized search engine will be. Thus, I have been pitched on an increasingly large number of vertical search engines that use their thematic focus (shopping, real estate, employment, etc.) as a proxy to increase search effectiveness. And I have also seen an increasing variety of clever technical solutions to help filter the myriad of available content (for example, Pandora uses professional musicians analyzing songs based upon a standard set of characteristics and Delicious and Flickr use forms of end user tagging to characterize a disparate set of content). Again, while these different filtering technologies may make it slightly more likely that an end user finds his or her way to a piece of obscure content, it will not likely be sufficient to catapult an artist into the mainstream. The beneficiary of the filtering is the end user and the filterer, not the content owner per se.

So, how does the Long Tailed Blogger earn a crust in this world? I think the Read/Write guys underplay 3 major things in their hypothesis:

(i) The Long Tail is not a recent phenomenon, Inventory Theory has had it for at least 100 years - what is different is that the 'Net has reduced Filtering costs to near zero, and also Aggregating / Stock holding costs by at least 2 orders of magnitude. Put simply, this means that a whole new range of content creation - including blogging - moves from uneconomic to marginal, even profitable.

(ii) By definition, if this content is then found, the value in the long tail is increased, as that found content starts to increase its market share. This may be new money, it may be substitution from the "fat head", but it is new value created. Read/Write Web itself is an example of this.

(iii) How does u makes ur money? Quite a few niche blogs are making money in other ways - showcasing capability to market other services (consultancy in our case, for example) is a typical offset blog business model. Other blogs are there to reduce cost, rather than gain revenue.

In our view, one of the main shoes yet to drop here is that online advertising has not yet managed to monetize the time / attention it already occupies. Don't want to go into the why, but consider this example - we are a small UK technology strategy blog, c 200,000 impressions pm. A year ago we had 2,000. Costs of production are now almost entirely time based. We currently make no money except for influencing potential clients. But, as a magazine publishing friend has pointed out, that's the equivalent circulation attention of a small niche publication that in "dead tree world" would make a useful living. At some point the money will follow the attention - it has to - in fact the history of all new media is that the money follows the audiences, but there is a time lag.

We may not make money - new ecosystems are always littered with casualties of business experiments - but the big picture is blogs = time, time = money, and better aggregation and filtering pushes attention into the long tail.