samedi 15 décembre 2007
mardi 11 décembre 2007
e-business "Long Tail" Assignment N°1
The "Long Tail" business, is a new business model not only focusing on "blockbusters" (few products for many people), but also on the hard-to-find items (many products for few people).
This concept is comming from a well-known statistical disribution law where high-amplitude population is followed by a low-amplitude population which gradually "tails off". In many cases the low-amplitude events (the long tail) can make up the majority of the graph.
This law was mainly introduced and applied on e-business models by Chris Anderson in his book : The Long Tail: Why the Future of Business is Selling Less of More (2006).
As an evidence, customers appreciate these new businesses selling items they couldn't find before, or at least were "hard-to-find", as well as suppliers who had to deal with "hard-to-sell" products. This is a very good example of a business achieving the meating of the offer (supply) and the demand, which is since Jean-Baptiste Say the core issue of a good business model. But this model is not only doing that, it also increases the number of customers, it is making the market bigger by working out the "long tail" part of the business. The market is twice as big as it may seem. Where in a usual business you have 20% hits with a concentrated audience (Pareto principle), in this one you can have 99% hits with a spread audience (Vann Adib). The "Long Tail" hits are cheaper to buy, but can be sold the same price than a regular hit, which is a good revenue source. (Examples : Rhapsody.com; Amazon.com; Netflix.com; google.com (small advertisers); e-bay.com (niche and one-off products) See related links).
The concept of searching customer by customer can be applied to any kind of business, and not only on the web. This concept is also known as Microbusiness, or Niche business, where there a millions of markets selling a dozens. A good offline example is the one of this Irish company "Ashes to Ireland", a business that offer to scatter the ash remains of your loved one off the Wexford coast or at other locations in Ireland.
But the business is focusing online, and many examples exists, as well as emerging ones, like Software Microbusiness. (See Related Blog). As the Web3.0 is coming up, the intelligent surch engines will soon be democratized. But the Long Tail can also work the other why, finding suppliers, like googleads, where for example any blog creator can earn money showing ads on his blog.
Is this business sustainable? A business is considered to be sustainable when it is able to generate profits in middle/long term, which usually means being able to maintain growth. In the long tail business, the aim is to work out the largest market possible, using techniques like the BSE (Britney Spears Effects), also illustrated by the "Customers who bought this also bought...". This should allow a permanent growth of the market, with very low investments. My opinion is that this business is sustainable as long as the surch for new customers is automatically done by a software. The product can be offline, but the way to find the demand has to be online to assure a sustainble development.
If I had to run such a business, I would use the same software techniques to increase my customers, but I also would use traditionnal advertisment, to make people know that I am able to satisfy 100% of my customers, by finding their needs, even the one they hadn't thought of. The target would be to have 100% of the people connected to the web round the world as customers. In order to increase my revenue source, I would apply this principle on different products and services, as it is a complete transposable principle. To limit the investments I would not sell off-line products, only virtual products and services.
Long Tail business does not seem to be a trend, but a real sustainable business model. The real question is : Is it going to live as an independent model, or is it going to be integrated in the existing online marketplaces? (ex: alibaba.com)
This concept is comming from a well-known statistical disribution law where high-amplitude population is followed by a low-amplitude population which gradually "tails off". In many cases the low-amplitude events (the long tail) can make up the majority of the graph.
This law was mainly introduced and applied on e-business models by Chris Anderson in his book : The Long Tail: Why the Future of Business is Selling Less of More (2006).
As an evidence, customers appreciate these new businesses selling items they couldn't find before, or at least were "hard-to-find", as well as suppliers who had to deal with "hard-to-sell" products. This is a very good example of a business achieving the meating of the offer (supply) and the demand, which is since Jean-Baptiste Say the core issue of a good business model. But this model is not only doing that, it also increases the number of customers, it is making the market bigger by working out the "long tail" part of the business. The market is twice as big as it may seem. Where in a usual business you have 20% hits with a concentrated audience (Pareto principle), in this one you can have 99% hits with a spread audience (Vann Adib). The "Long Tail" hits are cheaper to buy, but can be sold the same price than a regular hit, which is a good revenue source. (Examples : Rhapsody.com; Amazon.com; Netflix.com; google.com (small advertisers); e-bay.com (niche and one-off products) See related links).
The concept of searching customer by customer can be applied to any kind of business, and not only on the web. This concept is also known as Microbusiness, or Niche business, where there a millions of markets selling a dozens. A good offline example is the one of this Irish company "Ashes to Ireland", a business that offer to scatter the ash remains of your loved one off the Wexford coast or at other locations in Ireland.
But the business is focusing online, and many examples exists, as well as emerging ones, like Software Microbusiness. (See Related Blog). As the Web3.0 is coming up, the intelligent surch engines will soon be democratized. But the Long Tail can also work the other why, finding suppliers, like googleads, where for example any blog creator can earn money showing ads on his blog.
Is this business sustainable? A business is considered to be sustainable when it is able to generate profits in middle/long term, which usually means being able to maintain growth. In the long tail business, the aim is to work out the largest market possible, using techniques like the BSE (Britney Spears Effects), also illustrated by the "Customers who bought this also bought...". This should allow a permanent growth of the market, with very low investments. My opinion is that this business is sustainable as long as the surch for new customers is automatically done by a software. The product can be offline, but the way to find the demand has to be online to assure a sustainble development.
If I had to run such a business, I would use the same software techniques to increase my customers, but I also would use traditionnal advertisment, to make people know that I am able to satisfy 100% of my customers, by finding their needs, even the one they hadn't thought of. The target would be to have 100% of the people connected to the web round the world as customers. In order to increase my revenue source, I would apply this principle on different products and services, as it is a complete transposable principle. To limit the investments I would not sell off-line products, only virtual products and services.
Long Tail business does not seem to be a trend, but a real sustainable business model. The real question is : Is it going to live as an independent model, or is it going to be integrated in the existing online marketplaces? (ex: alibaba.com)
samedi 1 décembre 2007
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