Classroom Companion: Business

Reference
International Telecommunications Union. (2012). Final acts: world conference on international tele-
communications, Dubai.
 
Chapter 15 · Standards

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© The Author(s), under exclusive license to Springer Nature 
Switzerland AG 2021
H. Øverby, J. A. Audestad, Introduction to Digital Economics, 
Classroom Companion: Business,
https://doi.org/10.1007/978-3-030-78237-5_16
231
The Long Tail
Contents
16.1 
 Origin of the Concept: Amazon 
and the Long Tail – 232
16.2 
 Internet and the Long
Tail – 233
16.3 
 Numerical Analysis of the Long 
Tail – 235
16.4 
 Conclusions – 239
 References – 241
16

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232
16
 
n Learning Objectives
After completing this chapter, you should be able to:
5
Understand the concept of long tail distributions.
5
Identify the existence of long tails in a particular digital service.
5
Evaluate the effect of the long tail on revenues.
16.1 
 Origin of the Concept: Amazon and the Long Tail
The long tail refers to goods and services that are in low demand individually but 
collectively constitute to substantial sales. The term was coined by Chris Anderson 
in his 2006 book, The Long Tail: Why the Future of Business is Selling Less of More 
(Anderson, 
2006
). Traditionally, such goods and services have been too expensive 
for a seller to offer to its customers. Let us take a bookstore as an example. A 
physical bookstore can accommodate a limited number of books, typically, between 
10,000 and 100,000 books. This is because the bookstore has finite space for stor-
ing and displaying books. A bookstore offers and displays books that are believed 
to sell in large quantities, thereby reducing storage costs and maximizing revenues. 
Books believed to have few sales are not offered since the cost of holding such 
books does not match the forecasted revenues they may generate.
A digital bookstore does not have the same limitations as a traditional book-
store. Millions of titles can be stored in a single server and be available for anyone 
from anywhere. Bestsellers do not take up more space than the rarest titles. The 
same applies to all types of digital goods such as music, films, and video shows.
Amazon can offer millions of different books on its e-commerce channel. This 
is achieved as a combination of large and well-organized warehouses containing 
printed books, digitally stored books, on-demand printing, third-party mediation, 
and personalized advertising based on search and purchase history of the custom-
ers. The most popular books sold by Amazon are printed in advance and stored 
physically in large, efficient, and automated warehouses. These warehouses may 
hold what is termed “the head” of Amazon’s products; that is, the books that sell 
the most. Other books—both bestsellers and books which are low in demand—are 
supplied by Amazon as e-books or are printed on demand. E-books are stored 
digitally, and there is almost no cost for Amazon to add an e-book to its inventory 
(again an example of zero marginal cost). On-demand printing means that Amazon 
offers physical books to customers by printing them when they are ordered by the 
consumer. Amazon is also a multisided platform (MSP) and mediates between 
third-party sellers (bookstores or authors) and customers; that is, other bookstores 
and authors use Amazon’s digital marketplace to offer their books for sale (Hanks, 
2017
). These bookstores may be niche stores offering books that are low in demand. 
This arrangement expands Amazon’s supply of books. Finally, Amazon may use 
the search and buying history of the customers to suggest other books, including 
rare books, which may interest the buyer.
The sum of these supply mechanisms results in Amazon being able to offer mil-
lions of books to the customers. The bestsellers are sold by Amazon directly by