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Article

Title: Wag the dog

Author: Staff Article Type: Product Analysis
Source: The Economist, v380 n8485 p77(2) Publication Date: Jul 8, 2006
  ISSN: 0013-0613
URL of Publication: http://www.economist.com

Chris Anderson, editor of 'Wired' magazine, is the author of 'The Long Tail: Why the Future of Business Is Selling Less of More,' which predicts that popular culture and its associated business models will be dramatically changed by the Internet. According to Anderson's 'long tail' theory, Internet companies have endless shelves and extremely large international audiences online that allow them to offer a very large array of products and still be profitable. Anderson argues that obscure and specialized products will advance at the expense of blockbuster 'hits.' He notes a reduction in the number of firms that traditionally determine their revenue-to-sales ratio according to the 80/20 rule. This rule states that the top 20 percent of products contribute to 80 percent of revenues. Ecast, a digital jukebox company, which found that 98 percent of its 10,000 albums sold at least one track every three months, provides an example of the long-tail theory. The experience of Ecast can be expressed in the language of statistics and said to suggest that the products located down in the 'long tail' of a statistical distribution, when added together, can be extremely profitable. The Internet helps consumers find relatively obscure material through reviews and recommendations by other people and by software that analyzes their past selections. Proponents of the long-tail theory say that the entire culture is likely to benefit from this activity, since individuals will have the chance to choose better entertainment from a wider selection. They will avoid what Anderson characterizes as the 'tyranny of the lowest-common-denominator' in popular culture.

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