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"The Long Tail" (a proper noun with capital letters) is a concept created by Chris Anderson, editor-in-chief of WIRED magazine, in an October 2004 article. He pointed out that businesses are becoming successful on the Internet by selling less of more -- that is, catering to niche markets. This is different than the brick-and-mortar approaches of the past, which offered fewer products that were more popular. His argument is that as a market evolves, it tends to become both larger in total and more tilted towards niche products. The way this looks on a graph comparing popularity and quantity of a product sold gave it the name "The Long Tail".
Aside from the concept, the "Long Tail" also refers to the group of people who demand niche products. The Long Tail concept can be applied to free goods as well, such as blogs, where a few thousand get most of the incoming links and traffic and there are millions with just a few. Since its proposal, the concept of The Long Tail has proven fertile for application, research, and experimentation. It is well-known in online business and mass media, but also used in the context of user-driven innovation, micro-finance, social network mechanisms, economic models, and marketing.
Chris Anderson was partially inspired to propose the concept of The Long Tail by reading a 2003 essay by Clay Shirky, titled "Power Laws, Weblogs, and Inequality." His primary thesis is that the Long Tail of a business can exceed the volume of its core products if the distribution channel is large enough. This preferentially benefits online businesses, like Amazon, which tend to have larger selections, over brick-and-mortar retailers like Wal-Mart.
The Long Tail somewhat contradicts Pareto's Principle, which asserts that 80% of the effects in any given situation derive from 20% of the potential causes. In markets benefiting from The Long Tail, more than 50% of the profit may derive from 90% of the products which are the least popular but collectively have a large volume.
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