Web-based companies such as Amazon.com, Netflix, and Apple iTunes have realized new kinds of profits by selling small volumes of hard-to-find items to a large number of buyers. Author Chris Anderson characterizes the need of bricks-and-mortar businesses, which are constrained by shelf space, to sell large volumes of a small number of popular items, as the "hits" business model.
The Long Tail refers to the populace under the distribution curve who purchase harder-to-find items, and the reachable market size, it is argued, has grown in some cases by a factor of two or three compared with physical retailing locations because of the new long tail dynamics of Web purchasing. A key technological capability that makes the Long Tail model work is the success of data-driven "recommendation engine" software, which uses the aggregated purchasing and browsing patterns of users to guide those who follow them to find items that they may like. Many Amazon book purchases come via this route, and more than 60% of Netflix video rentals come from such recommendations, which drive demand down the long tail.
- ↑ Chris Anderson, The Long Tail: Why the Future of Business is Selling Less of More (2006).
- ↑ P. Resnick & H.R. Varian, Recommender Systems, 40 Comm. of the ACM 56-58 (1997).
- ↑ Netflix ships almost 2 million DVDs per day to its customers, and has more than 2 billion movie ratings contributed by its members about more than 9,000 full-length movies and television episodes.