Chapter 7 of “The Long Tail” discusses the power of online word of mouth and how this force is altering the marketplace and companies business models. We are in an era of radical change where individuals trust each other more (at least when it comes to consumer choices). Peer to peer opinion trumps mass media’s force-fed schemes. Anderson describes how the collective now controls the message, which produces an enigma: how to drive demand in this kind of environment? Chapter 7 is also devoted to outlining different techniques Anderson offers as solutions. As consumers we have been conditioned to “buy” into a hit driven economy, but that premise is rapidly changing. Scholars doing research in this area coined the term “referral web” to express how the Internet gives people the authority to tap into networks to help make decisions. Word of mouth, recommendation systems, and collaborative filtering are influential resources that increasingly guide and assist consumer purchases. Technology has shifted the balance of power. Anderson’s message focuses on the economics of abundance and how the long tail’s backbone of unlimited selection produces changes in consumer consumption. The way producers market goods and services is also changing in an attempt to garner consumer attention.
Chapter 8 dives into the economics of the long tail and focuses more on the concepts of scarcity, abundance, powerlaw distributions and the slow extinction of the 80/20 Rule (Pareto’s Law). Anderson used a helpful analogy to describe the difference between the short head and the long tail. The “carrying capacity” (or available positions) in the short head is limited. However, the niches in the long tail are endless…and also endlessly ignored by the commercial mainstream. The 80/20 Rule simply suggests that 20 percent of x accounts for 80 percent of y. The most obvious manifestation of this is when 20 percent of products account for 80 percent of the revenues. Anderson points out serious flaws to the 80/20 Rule: it’s never exactly 80/20, the percentages account for different things which means they don’t need to add up to 100, and there’s also no standard convention on how to express the relationship. This relates to the long tail phenomenon because long tail economics challenge the basic assumptions of 80/20. Anderson explains that in the long tail “products may not account for most of the sales, but because they’re often cheaper to acquire, they can be very profitable, as long as inventory costs are kept close to zero” (p 134). The point is while the 80/20 rule still exists it has lost it’s traction in the long tail market. Chapter 8 concludes with Anderson’s attempts at answering questions that came up during his explanation of long tail economics.
Chapter 9 explores the short head— an area of the graph that as Anderson quips “like it or not, is here to stay.” Anderson posits that cities are the long tail of urban space because dense populations help foster concentrated demands. The reason, as urban theorist Jane Jacobs claims, is because large cities produce environments where niches can thrive. Specialist stores with unique collections are overwhelming dwarfed by big chain stores. Anderson describes this as the Wal-Mart effect. The seemingly overabundance of choice in Wal-Mart is quite deceiving, because while the mega-store appears to be a warehouse of unlimited supply this is not the case. Wal-Mart’s shelves are guided by the commercial mainstream which lacks the depth of niches. The chapter concludes with the dangers of “hitism” and a prologue to the delusion of “too much choice” a topic which will be discussed in more detail in chapter 10.
Hinchliffe’s piece discusses the rise of social media (blogs, wikis, and other participatory media) as a result of the Internet. Hinchliffe argues in favor of the democratizing power of these tools. He praises their ability to connect people and enable anyone to join the conversation. Although, time and access are two requirements for joining the wealth of networks that exist online. He boldly argues that “social media platforms are the most powerful form of media yet created.” The article deconstructs the emergence and rise of mass social media and its ability to fuel bottom-up influence by shifting institutional control to the hands of the consumer. Social media has contributed to the grassroots revolution that continues to impact the way we do business. Some of the players may be the same but the rules have changed.
