2 min read

Capturing Long Tails

Capturing Long Tails

Today I want to unpack an observation I’ve been working through.

I call it, capturing long-tails. It’s a trait I’ve seen in durable companies. And it’s a different take than the widely known network effect that social media companies like Facebook, Twitter and LinkedIn have.

The term long tail in business refers to a large number of products that are sold in small quantities.

It’s a concept that’s loosely related to the Pareto principle, where 20% of the inputs, drive 80% of the results.

Let’s retro fit the observation to some examples.

Spotify has 1.2 million creators. It’s obvious that the popular creators have a disproportionately large number of streams on their hit songs. Back the observation, Spotify has a specific purpose and that’s streaming audio, importantly it captures the long-tail of creators that collectively produce 70 million tracks.

Another similar example is the video streaming business, Netflix. It serves their customers by offering a wide range of entertainment genres and formats like movies, series, documentaries and even specials like standup comedy.

Now Spotify and Netflix are both subscription services that provide entertainment. So let’s look at marketplaces.

Amazon is the second largest ecommerce marketplace after Alibaba. It has 9 million merchants with more than 75 million products. So if you’re looking to buy something online, chances are you’ll do a search on Amazon in the process.

A more specific marketplace example is eBay. In its original form eBay intended to serve people who were looking to buy and sell second hand good online. eBay captured the long-tail of products that are second-hand, from books to cars.

On the mention of cars, let’s go even more specific. So in Australia our leading car marketplace is carsales.com.au. The company does just that, it enables consumers and dealerships to buy and sell cars. It’s ultra specific in its purpose and category. It clearly captures the long tail of all the different car brands, specs, age and condition.

These companies that capture long-tails can be described as distributors. Sure some of the examples like Netflix also produce their own content. Like media companies that produce their own exclusive pieces and employ freelancers like the Wall Street Journal and TMZ.

Now with distribution you also need enablers like mobile phones that allow app stores to exist. Pre-iPhone, phones were basic, you made calls and sent text. Now you can order dinner, check the weather and book movie tickets all on that Uber ride home.

What’s your take? Do you think this observation has merit? Can it be refined?

Find me and let me know through any of the social media platforms on linktr.ee/terencetam

So until next week, peace!