The Tail Wagging the Net
There has been a lot of discussion about The New York Times' acquisition of About.com. The most interesting to me is the observation that traditional media publishers are realizing that in order to grow on the Internet they will have to embrace the growth of niche content, or what many fondly call "the long tail of the Web." The growth of the tail and the shift of mainstream consumers' reading to the tail is very significant because it will require publishers and marketers alike to get skilled at aggregating reach by adding up targeted volume rather than mainly concentrating on high volume, untargeted places. It also means that power is now shifting away from those who control distribution in favor of those who embrace fragmentation and learn to aggregate reach.
First let's define the tail. The Web, like most networks, has a peculiar behavior: it doesn't follow standard bell curve distributions where most people's activities are very similar (for example if you plot out people's heights you get a bell curve with lots of five- and six-foot people and no 20-foot giants). The Web, on the other hand, follows a power law distribution where you get one or two sites with a ton of traffic (like MSN or Yahoo!), and then 10 or 20 sites each with one tenth the traffic of those two, and 100 or 200 sites each with 100th of the traffic, etc. In such a curve the distribution tapers off slowly into the sunset, and is called a tail. What is most intriguing about this long tail is that if you add up all the traffic at the end of it, you get a lot of traffic -- and more importantly, a lot of very rich, specific user behavior.
Now that we know what the long tail is, why do we care? Because the biggest winners on the Web have all learned how to make a lot of money by aggregating the activity in the long tail. Amazon is a great example of this. Amazon lists several million books for sale while a bricks and mortar bookstore may have only 100,000 books because of very real inventory constraints. These inventory constraints force the offline bookstore to stay away from the tail of the curve and instead choose only the most popular titles from Amazon's list of several million. In essence, the offline bookstore is betting only on the interests we all share - and that is what drives their sales. The interesting thing about Amazon's sales is that more than half of its book sales come from outside its top 100,000 books. This means that when the constraints of inventory are relaxed, appealing to consumers' diversity produces more revenue than appealing to consumers' similarities. Other companies like Google, Netflix, and iTunes have seen the same phenomenon. The trick is that their business models allow them to make money on the diversity of interests by aggregating sales, not by averaging out interests.
The same dynamic works for the benefit of publishers. Publishers would make just as much money selling their top few audience segments as they would if they could aggregate many of their niche segments. On a typical site, a publisher might sell a small number of sections, which all their customers compete for, let's say 50 for simplicity. At Google, however, there are probably several hundred thousand keywords that are bid on. I would guess that Google makes at least as much revenue on the keywords which aren't in the top 50 as they do on the keywords in the top 50. The trick for Google was that they found a way to aggregate sales to advertisers' different needs rather than averaging out their needs. The advertiser also benefits from this because; instead of being forced to accept just one general (or untargeted) keyword to reach its entire audience, the advertiser can choose several hundred precise keywords to reach that audience.
Back to the About.com example: an increasing portion of people's time is being spent on trusted niche content that is in the long tail of the Web. Blogs are the best example of this and the micro-sites at About.com are close approximations. It turns out that more than a third of people's time online is spent in the last third of the tail. This is huge because it means that mass media fragmentation isn't just a trend where people are shifting from three major TV channels to 200 cable channels; rather it is akin to the complete shattering of a of glass window. We should forget trying to glue the pieces back together and embrace the fragmentation because there is great value to be had in those shards.
You shouldn't be surprised by my response on how to do that: behavioral targeting. Behavioral targeting offers a way to aggregate mass in a permanently fragmented world. The unifying thread is no longer the large number of places a person visits, but the smaller, more relevant interests they hold. With behavioral targeting, we can be extremely granular about people's interests, and we can create volume by targeting those interests to reach people wherever they are across the Internet. Although the logistics for pulling this off on the CPM side are difficult, we are beginning to see some publishers use behavioral targeting to pull this off. Rather than buy one large contextual placement or even one large behavioral audience, some advertisers are running campaigns that aggregate dozens of niche audience segments that together deliver the large targeted audience they need.
We are witnessing a transformation in the way marketers will develop scale. Rather than averaging out our tastes and reaching us through a few channels, marketers will increasingly focus on the long tail and aggregate niche interests in order to build scale.
Omar Tawakol is senior vice president of Marketing for Revenue Science. He can be reached at email@example.com.