Anatomy of the Long Tail: Ordinary People with Extraordinary Tastes Presented by Maria Avraleva To Prof. Dr. Eduard Heindl

Long Tail as a property of online market

Amazon as an example of the effective Long-Tail model 30% of sales are from the category of “unpopular items” (tail) Advantages that Amazon.com takes: Ability to sell rare items; “one-stop shopping” for both mainstream and niche interests Building effective advertisement system Building a powerful recommendation engine.

Recommendation engine Amazon.com: the store will recommend additional items based on a matrix of what other shoppers bought along with the currently selected item.

Eccentricity: two theories 1. Majority of consumers prefer popular offerings; only a minority seeks for niche content 2. Everybody is a bit eccentric, consuming both popular and specialty products. Are people satisfied with a small inventory of goods?

Data Analysis Sharad Goel et al. “Anatomy of the Long Tail: Ordinary People with Extraordinary Tastes”

Data Analysis Results Two main conclusions: 1.A relatively small number of items account for a disproportionally large fraction of total consumption 2.The tail in aggregate is nevertheless heavy. 100 most popular movies – 15% of consumption 3000 most popular movies – still 13% of consumption unmet

Individual Eccentricity To what extent do individuals have niche interests? Given inventory: k most popular items. Find: How many customers are 100% satisfied? 90% satisfied? 100% satisfaction90% satisfaction Netflix: k=300011%63% Yahoo! Music: k = %32%

Cumulative popularity function in different domains % of users satisfied Cumulative Popularity

Rating of niche products

Tail Consumers Large share of audience for popular products consists of relatively light customers; Large share of the audience for niche products consists of relatively heavy customers; Consumers of the most obscure products are also buying the hits. Consumption of long-tail offerings is more prevalent among people who stick to a genre.

Advice to Retailers If the goal is to cater to your heavy customers, broaden your assortment with more niche products. Strictly manage the costs of offering products that will rarely sell. Acquire and manage customers by using your most popular products. Even though obscure products may have a higher profit margin, resist the temptation to direct customers to the tail too often, or you'll risk their dissatisfaction.

Conclusion Vast majority of users are a little bit eccentric (sometimes we all consume tail – items) Convenient one-stop shop for mainstream and niche is provided by “infinite-inventories” Users value specialty items

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