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October 07, 2004
The long tail of ecommerce
In February, Dave Sifry talked about blog popularity by link count, which his company Technorati tracks:
"Everybody talks about the power law. Fuck it, I've got the data." All the power law says is that when it's easy to publish that you'll have a relatively small number of things (compared to the entire space of options) which are linked to by a lot of people. The important part is not the top 100 (bfd) but what happens in the top 100k when there are five inbound links, which is significant because it means that there is still a community for people.
Here's what's interesting. If this was broadcast and only the big guys mattered, the graph would look the same. But what we're seeing is that the aggregate number of links in the lower portion of the graph greatly outnumber the links into the top 100. There are lots more little clusters than big clusters.
(I haven't been able to find a transcription of the actual talk, so I'm quoting notes.)
In April, David Weinberger wrote an article arguing that the blogosphere isn't an echo chamber for this reason:
David Sifry, the creator of Technorati.com, a site that indexes and ranks 1.6 million weblogs, points out that even though there is a power curve, if you rank blogs by how many sites link to them, the 100,000th blog has five links pointing at it. Five isn't a thousand, but it still means that five people with sites think enough of that 100,000th blog to recommend it to others. Presumably, that site is important to a small cluster of people. That's a readership that didn't exist before the Net. Further, if you add together all of the blogs in the "tail" of the power curve, it's a hell of a lot of blogs and a hell of a lot of readers. So, while the head of the power curve feels familiar to us because it's essentially a bunch of online columnists, the long tail is something new and unfamiliar: a galaxy of people who are finding constellations of readers, ready for ideas and conversation.
It turns out, though, that the internet is enabling long-tail popularity to take off in many different spheres. Wired just published an article entitled "The Long Tail", which talks about aggregate popularity in power-law distributed populations such as songs, books, and movies.
What's really amazing about the Long Tail is the sheer size of it. Combine enough nonhits on the Long Tail and you've got a market bigger than the hits. Take books: The average Barnes & Noble carries 130,000 titles. Yet more than half of Amazon's book sales come from outside its top 130,000 titles. Consider the implication: If the Amazon statistics are any guide, the market for books that are not even sold in the average bookstore is larger than the market for those that are (...). In other words, the potential book market may be twice as big as it appears to be, if only we can get over the economics of scarcity. Venture capitalist and former music industry consultant Kevin Laws puts it this way: "The biggest money is in the smallest sales."
The Wired article talks about how this phenomenon makes eBay and Amazon much better than traditional books-and-mortar equivalents, who can't afford to stock nearly as many items. What if we take that to the next level? eBay's auction model works for a pretty broad spectrum of person-to-person transactions, maybe broader than any other kind of transaction, but there are surely more transactions that can't fit into eBay's model than those that can.
Imagine a fully decentralized eBay-like marketplace, where eBay would just be the biggest participant among many others; where you have the freedom to build any search facility, any reputation system, any auction terms you like --- and participate seamlessly in transactions with millions of other people, but without having to use eBay's one-size-fits-all terms. eBay could make more money in this marketplace than by going it alone, and many transactions eBay doesn't even consider supporting could take place in the same context.
Posted by kragen at October 7, 2004 02:45 PM