Questioning the Long Tail (is Amazon.com a long-tail business?)

I'm a big believer in the power of the Long Tail, but after reading this post on Bnoopy,  I've got a few questions (see my original comments at the end of the post).

Quoting Bnoopy (by the way, wtf is a Bnoopy??):

57% of Amazon’s sales come from books you can’t even buy at a Barnes and Noble (to be fair, there is some skepticism around this number voiced here). This runs totally counter to the traditional 80/20 rule in retailing – that 80% of your sales come from 20% of your inventory. In Amazon’s case, 57% of their book revenue comes from 0% of Barnes and Nobles inventory.

First things first, turns on that 57% is more like 25-30% (says Jeff Bezos). Secondly, does this really "run totally counter to the traditional 80-20 rule"?

I don't think it does at all - or at least, you can't say that it does just by comparing Amazon's and Barnes & Noble's inventory. What does the fact that 30% of Amazon's sales come from books that are unavailable at B&N mean?

If you look at Amazon's inventory (~2.3M books), they have about 400K books available in their top 20%. While at the same time, B&N only has 130K books period. So Amazon could have well over 100% of its sales come outside of B&N's inventory and yet still not be outside of their top 20%.

Is that correct or am I missing something?

Comments

[Chris Anderson]

Adam,

Your post popped up on my technorati filter feed, and I just wanted to quickly answer your question. I was probably a bit sloppy in my use of the 80-20 rule, so I understand the confusion. In my original piece, I used one interpretation found in retail: all the *profit* (not revenues) comes from the top 20% of sales. The point being that if you can bring the marginal costs of warehousing and distribution down far enough (as is especially the case for digital products delivered online), the margins on even the small sellers can be as high as the hits. And thus the Long Tail can, in aggregate, be as profitable as the head.

I should probably post a on this on my own blog, since I'm sure others were unclear on the point, too.

[josh pugh]

Adam

very interesting, but i think the bnoopy blogger is overlooking one detail. for the long tail markets of music, books, movies (etc), the buyer is unable (legally at least) to recreate the sounds, words, etc that he is looking for. and thus when amazon or another company is the best way for him to find what he wants, he can buy it. Different people have different interests and this process is repeated over and over and thus the long tail phenomenon (which i admittedly had never heard of until i read your blog). However, with software, it seems that people are creative and smart enough to create (using excel, access or even a programming language) a program if they need it. The difference being, if i want to see the newest Hillary Duff movie, I have to rent or buy it, but if i want a database to track large number of clients i may be able to create it with some forethought and creativity. of course, maybe i should just lay off the crackpipe.

[adam]

First off, thanks for the clarification Chris (great surprise to get an answer direct from the source) and I agree that the companies that will benefit the most from the long tail are those who have digital products delivered online - iTMS, Netflix soon (hopefully), etc..

Secondly, I think you got it right about software Josh (possibly due to the help of the crackpipe??) - if homemade software works 'good enough' it's just not worth it to spend money on a professional solution - unless Bnoopy can prove the ROI otherwise. (ps - that new Hillary Duff movie totally sucked ;)

for more info on the long tail, I'd definitely recommend Chris' blog: http://longtail.typepad.com/

and check out his latest post on the 80/20 rule:
http://longtail.typepad.com/the_long_tail/2005/03/8020cracked.html