Tuesday, September 2, 2008

Coin Flip

I just came across this article in the WSJ -- Study Refutes Niche Theory Spawned by Web.

The author, Lee Gomes, cites research from Anita Elberse, a marketing professor at Harvard Business School, that supposedly flies in the face of Chris Anderson's Long Tail theory.

Cliff Notes

Essentially, the Long Tail theory argues that the rise of the Internet and unlimited shelf space means that blockbuster hits are less important as it is now commercially viable to store and sell niche products/content that may appeal to small audiences.

Heads or Tails?

Per Gomes, "Prof. Elberse looked at data for online video rentals and song purchases, and discovered that the patterns by which people shop online are essentially the same as the ones from offline. Not only do hits and blockbusters remain every bit as important online, but the evidence suggests that the Web is actually causing their role to grow, not shrink."

Long Winded

Gomes then launches into an "I told you so" rant saying that he's been skeptical of the Long Tail theory all along as it was a largely self-serving theory drummed up by techies and bloggers for techies and bloggers.

Not an Either/Or Proposition

I don't see how this new research discredits the Long Tail theory. As far as I know, Chris Anderson never proclaimed the death of the blockbuster. Rather, he said companies no longer needed to focus on producing blockbusters (or selling only blockbusters) because there was now room for alternatives of every shape and size at the end of the tail.

Anderson also never suggested that companies should focus on producing only niche products/content. Rather, he argued that companies that aggregated all the niches out there (eg, Amazon, iTunes, Google) would have success in the digital economy.

Have Your Cake and Eat it Too

The bottom line is that people want both blockbusters and niches.

Blockbusters definitely have a place in today's society. As Elberse observes, "We like experiencing the same things that other people are experiencing -- and the mere fact that other people are experiencing and liking something makes us like it even more."

But people also like being able to access products/content that meet the unique preferences they may only share with a few others.

These concepts are not mutually exclusive. Amazon has a bestsellers list and great search and recommendation technology to help you find niche products. iTunes features its mainstream artist of the week while allowing you to find the most obscure B-side track. Google generates revenue from Fortune 500 advertisers and mom and pops alike.

The Sky is Falling, the Sky is Falling

At the end of the day, people (especially bloggers and journalists) seem to flock to dramatic story-lines like moths to the flame.

Everyone hailed the Long Tail as the end of the “old way” of doing business. Now, Harvard research is being trumpeted to show “old is new again.”

As the pendulum swings back and forth, the answer lies somewhere in the middle.

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