KEY POINTS:
He didn't invent the concept of the Long Tail but Chris Anderson is certainly the man who best explains the revolutionary economic model which underpins the success of internet giants like Amazon and YouTube.
Yesterday, the author of The Long Tail: Why the Future of Business is Selling Less of More, who also serves as editor-in-chief of Wired magazine, appeared at the Digital Future Summit in Auckland via video conference from San Francisco. He said New Zealand's niche status in the world economy was also its strength in the era of the Long Tail.
It's an era where the "infinite shelf space" of the internet has allowed one-size-fits-all products and marketing to be replaced by "one-size-fits-one", said Anderson, who used a potted history lesson of the mass media to illustrate his point.
"The amazing thing about broadcasting is the marginal cost of reaching a person is zero. There had never been a technology like that," he said of the first commercial radio broadcasts which allowed programmers and advertisers alike to get their message out to an audience of millions.
"This led to top-40 radio, prime time television and the Hollywood blockbuster. It's suppressed a lot of the natural variation and diversity in our culture."
The 20th century, said Anderson, was characterised by this model, which economists would draw in the form of a bell-shaped curve - the majority of consumers lumped in the middle and fed what they're understood to want.
"This is the wrong shape, it's defined by averages. In a world of infinite choice, averages don't matter," said Anderson.
The Long Tail economy instead uses the internet's reach and its virtual nature as a marketplace to serve numerous niche audiences with exactly what they want. Online bookseller Amazon.com was an early example of the Long Tail in action, as it offered thousands of books not available in bricks and mortar bookstores. Auction giant eBay took the concept even further as it created a thriving marketplace of buyers and sellers for pretty much anything.
A 2005 study Anderson did of digital music sales by online retailer Rhapsody showed that 40 per cent of the music sold through the website wasn't available in most music stores.
"By the end of the year, that will be 50-50," said Anderson. "The misses in total are as big as the hits. It shows how wrong we were about who we are and what we want."
Trade Me founder Sam Morgan said the Long Tail was also in action on the local auction website, which will this year turn over $500 million in sales, excluding real estate and motor vehicles.
Morgan said the average price of an item sold was $55, but over half of the items sold for less than $15.
But Anderson said the Long Tail was by no means an online-only concept - it's increasingly being put into action in everyday business, evidenced in the fact that the number of products available on shop shelves in the US has doubled in the last decade.
"The reason everyone is heading down the tail towards the niches is that's where people are willing to pay the most. As people become more affluent and informed consumers, they become more discriminating in their choice," said Anderson.
Here's where New Zealand stood to gain as the nation targeted high-end markets with better quality products.
Displaying from across the Pacific a slide illustrating where internet search giant Google works with open source software developers worldwide, Anderson paused to reflect that New Zealand had been left off the map.
"Google cut off New Zealand, blame them," he said, slightly embarrassed.
But his message was clear - the map had red dots all over the world.
"What's amazing is how many of them are not in Silicon Valley, the talent is widely distributed. They are not Harvard and MIT educated, they come from around the world."
Anderson, who works for major publishing house Conde Naste and whose best-selling book was published by Disney, said the traditional "blockbuster" industry of last century wouldn't die - though TV, Hollywood, newspapers and the music industry would never be the same thanks to the Long Tail.
"It's not the end of the hit but it's the end of the monopoly. We're going to have half the market, the Long Tail's going to have the other half."
