Today Chris Anderson (of the Long Tail book fame and Wired) is giving a talk at PARC. Here are my live notes:
being away from the medium carried a cost.
- can't be too tall or too short
long tail distribution
- outcome of network effects, preferential effects
- word of mouth, tend to amplify
distribution channel limits
- most effective use of the channel - example: blockbuster
- only a small # of entities pass thru that filter
But the internet has an infinite shelf-space.
- [what about limited attention?]
- first time, we actually have data that can measure what people really want. Since consumers can choose instead of the middlemen / distributors choosing for us.
3 rules of long tail
- if you can lower cost of distribution, you can offer more stuff / variety.
- more variety means the ability to satisfy more minority taste, and address more granular markets
- “vanishing point of relevance away from me.”
- there is a lot of room at the bottom and all of the most interesting things come from the most unexpected places.
The new growth market
total inventory: 4.5m tracks, walmart 55k tracks
90k dvd, blockbuster 3k
5m books, 100k barnes and noble
- rhapsody, netflix, amazon, have sales of 45%, 25%, 30% respectively not in the traditional market
A market for diversity out there
long tail ablation division
2007 products micro-brew,
- shift in our culture toward more discriminating tastes
- more affluent - more discriminating
one size fits all to one size fits me
just in time sales - bar codes - shipping in smaller units
- more variety but no more inventory costs
- more information technology, allowed them to figure out where to stock glutton-free beer “redbridge”
- it's the end of blockbuster. No, It's just the end of the monopoly.
- you can make money in the long tail. people create things other than for money.
- long tail is full of crap. (sturgeon's law) absolutely true. but it doesn't matter
production quality is not the point; people care about relevance more than quality.
- say's law: the hits are becoming more important than ever.
- surrounded by curves that have long-tails [sourceforge example] log-log scale plot
something special about the power law
you have a test everytime you plot
Joe kraus - the focus has been on dozens of milliion markets, now millions of dozens
next book: free
- we don't have good economic theory about free
- king gillete, invented the cross-subsidy model for razors
- king of free!
the future, circa 1954
- it is not too much to expect that our children will enjoy electrical energy in their homes too cheap to meter.
- trojan nuclear plant, portland, oregon.
- thought experiment: too cheap to meter is right.
how to waste transistors
- c:\> command line
- alan kay, xerox parc, we should waste by drawing icons, GUI, democratize PCs
- honeywell kitchen computer, recipe card management
- make technology cheaper, more ubiq., easier to use
- all you can eat web hosting, yahoo! webhosting, feb 6, 2008.
IT establishment has not internalized the notion of “free”.
- stuck in broadcast mode
- lonelygirl15, everyone loves raymond, only reason why this happened is because there is no standard on YouTube.
- surprising things are going to emerge.
for the first time in history, complexity is free
- econ 101: in a competitive market, price falls to the marginal cost
storage price (per GB)
- 2002, yahoo $30 year for 25MB
- 2004 offers 1GB for free
- 2007 offers unlimited free
webmail is done.
“round down” - if the unitary cost of something is approaching zero, treat it as zero and sell something else.
- how are you going to compete with free?
a taxonomy of 'free':
- cross-subsidy (razors)
- ad-supported (media)
- “freemium” (upselling; old model: give away 1% to sell 99%; new model: give away 99% to sell 1%)
- “digital economics” (underlying cost of manufacturing and distributioin dropped near zero)
- “labor exchange” (consumers create something of value in exchange for free goods or services, GOOG-411 train their algorithm on voice recognition)
[our MT work, Luis von Ahn]
- gift economy (wikipedia)
understanding it here is a big deal of the last decade
Every abundance create is a scarcity of attention and reputation
- attention, traffic, ads
- reputation, links pageranks, traffic to ads
- attention economies
redefine the business you're in:
- Prince - free inside - prince's new album in the Daily Mail
- RyanAir - flew for 5 euros - make money from cargo, ads, car rental, sandwiches, gambling (like free drinks in las vegas)
- second life - being in the game is free - land in it is not
scarcity - ROI model
abundance - we'll figure it out
scarcity - everything is forbidden unless it is premitted
abundance - everything is permitted unless it is forbidden
scarcity - paternalism (we know what is best)
abundance - egalitarianism
- scarcity - top down
- abundance - bottom-up
- scarcity - command and control
- abundance - out of control
Q: environment? disposable culture?