It’s funny that we are studying The Long Tail business model in this class, because I just wrote about its effect on the “prehistoric” music industry, in an article last year. It’s amazing how Chris Anderson predicted the decline in revenue for giant record labels not too long before it actually happened. Large labels began losing out to independent artists or small labels in the music charts.
The Long Tail asks the question, “Do you try to sell a generic product to a large audience with inconsistent buying habits? Or do you sell a specific product geared toward a specific audience who has a very consistent buying habit?” Do you sell to the casual listeners of rock music, or do you try to sell to the diehard fans of Radiohead?
The Long Tail article that Chris Anderson wrote for Wired (Anderson, 2004), states that this “niche marketing” is the future of sales, and will be much more successful than trying to shell out, for lack of a better term, generic crap. He believes that the more obscure the niche, the more persistent the audience is, and will be more willing to purchase those niche products. This causes marketers and businesses to try to get a deeper understand of an audience and what their specific tastes are, instead of bundling them up into generic groups.
Anderson brings up the idea of how “free” may be the new business model. The cost of products and technology is constantly declining, and a lot of them are almost impossible to even charge for. He mentions bandwidth, storage, and processing as three technologies that we use everyday that are becoming too cheap, and that it is almost expected that these will be given away for free (Anderson, 2008). Google is a prime example of an extremely profitable and successful company that gives everything away for free. Or look at the thousands of free apps on our smart phones and tablets. Anderson looks at “free” as an inevitablity for any digital business model:
“Every industry that becomes digital, eventually becomes free.”
Just as independent artists and labels are emerging at the money-makers in the music industry, small, start-up developers are banking in the tech industry (Anderson, 2009). The most obvious example would be app developers. Apple may develop their own apps, but some of the most popular apps of the last few years have been from virtually unknown developers. The guys at Rovio Entertainment (who created Angry Birds), started out as just three Finnish college students. Since its launch in 2009, Angry Birds has been downloaded over 1 BILLION times. That’s unheard of in the gaming community by such a small company. Or look at Instagram. A camera app developed by two guys from San Francisco, launched in 2010 for the iPhone, and was just bought out by Facebook in 2012 for $1 billion.
We can see a huge shift, due mainly to the easy access of technology, in the typical business model. The audience has become more fractured than ever, independent developers are becoming cash-cows, and the idea of “free” seems to be the best way to make money in the digital environment.