Tuesday, September 19, 2006

The Long Tail of Book Reviews

I read Chris Anderson's The Long Tail book so long ago and it is only now showing up on the blog. When it comes to reviewing the books that I read, for some reason I flash back to junior high school and the task gets put on the back-burner. I'll try to be better. :-)

Anyway, this book was both classic and good. Chris is an excellent writer and captures the material very well. The book had just about the right mix of depth and breadth and I didn't once feel that Chris was just putting words down to fill up the pages -- creating "throw weight", if you will, like many authors tend to do (myself included). Read it. I really enjoyed it.

The book showed up on the New York Times Non-Fiction Top Ten Best Sellers list. Would that make it a hit? As I learned from the book, hits are very rare in the book publishing industry. This one is well deserved. Congratulations!

Enabling commerce to happen in the Long Tail can make the difference between a nice business and a Big Business. The Venture Capital community cares about building Big Businesses. This matters. Some random thoughts on this book and the VC industry:

  • "Seen broadly, it's clear that the story of the Long Tail is really about the economics of abundance -- what happens when the bottlenecks that stand between supply and demand in our culture start to disappear and everything becomes available to everyone." And: "Bottom line: A Long Tail is just culture unfiltered by economic scarcity."

    To me, this is what's most interesting. This is the first time in history that we have started to remove significant friction around some fundamental supply-and-demand economics. Fascinating stuff. And, the stats certainly show that the hits are still where the big money is made. However, the revenue from the Long Tail is certainly surprising everyone. It is not insignificant.

  • "Google, for instance, makes most of its money not from huge corporate advertisers, but from small ones (the Long Tail of advertising)." And: "Google aggregates the Long Tail of advertising (small- and medium-sized advertisers and publishers that make their money from advertising)."

    Google is not a search company. They are an advertising placement company. They've built a pretty good engine for matching advertisers to Long Tail (user-generated) content and share the profits with those users that are driving hits. I love it. Google does not have an architectural lock on the Long Tail constituency, though. That's their weakest link. More later when I review The Search.

  • "But even stars make flops, so the studios, labels, and networks employ a portfolio approach to spread their risk. Like venture capitalists, they spread their bets over a number of projects, investing in each one enough money to give it a fighting chance at becoming a hit."

    Certainly gets you thinking about The Long Tail of Venture Capital, doesn't it? I've been spending a fair amount of time thinking about this myself. And, in some ways, I think it is starting to happen, and there are some parallels between what we see in the movie studios and what is happening in the startup/VC community. In the studios, we see (previous) mega-stars like Mel Gibson and Tom Cruise, who have personally amassed sufficient capital that they can fund their own projects and bring them to the masses (now, don't get me started on those two fellows here -- we're keeping this about the changing business models). It's getting cheaper to create a movie product (almost the democratization of the tools) and the big names can attract the required distribution and marketing to pull it off now. The established studios probably don't like that. Oh, well.

    In the VC world, we see something parallel happening. Folks like Perry Wu, formerly of ComVentures, have amassed sufficient capital that they can fund their own projects and bring them to the masses. It's getting much cheaper to incubate a startup, and Perry is wise to bring the ones that interest him to market (definitely a democratization of the talent and tools). The established VC firms may not like that. Oh, well.

  • "In an age of abundance in the form of everything from Moore's law (the observation that computer price/performance doubles every eighteen months) to its equivalent in storage and bandwidth, this is a problem."

    Sorry, Chris. Stick to marketing. That's not what Moore's Law say, and appears to be a pretty common mis-conception. I'm surprised the editors missed that one.

  • "Although there may be near infinite selection of all media, there is still a scarcity of human attention and hours in the day. Our disposable income is limited." And: "Infinite choice equals ultimate fragmentation."

    Aha! At last we find that there really is Economics 101 at work -- it has just moved to a different place. The game that is now afoot is battling for our attention in a somewhat friction-less world. Whoever gets our attention, and the ecosystems they build around that, is the one that makes the money in our new economy.

  • "More than 724,000 Americans report that eBay is their primary or secondary source of income, according to an ACNielsen study in 2005. [...] On average, each eBay-based business employs nine staffers, and almost half of those businesses earn more than three-quarters of their income through the site. It's the ultimate small-business aggregator."

    THAT is a Long Tail business. One in which the constituents can make enough money to survive, or to feed their ProAm passions.

  • KitchenAid section: About the only part of the book that I hated. There's no (business-model) long-tail there, only selection beyond what we're used to. Delete it.

Enough from me. Go read the book and make your own conclusions. It will get you to think.

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