The Long Tail of Web Applications

Listening to National Public Radio (NPR) the other night, I was intrigued by an author, Chris Anderson who coined the term “the long tail” of sales in his book: The Long Tail: Why the Future of Business is Selling Less of More. Chris used an arbitrary online music (by the song) retailer, and quoted something like 95% of the inventory of the eTailer has sold at least one copy, and something like 85% of the revenue is from the things that represent the bottom 85% of the inventory... this means that the OLD 80:20 rule (80% of revenue addressed by the to 20% of products) may now be proven wrong by the channel dis-intermediation offered by the Internet.

Translating this into something that I'm passionate about, Utility Computing, may mean that the revenue that utility providers should be chasing might not come from the “block buster hits” = the applications that people fund having built today, but rather from the 80% of applications not yet invented because the communities that they would benefit are so small that today's assembly techniques prevent their development (from a revenue/margin justified business position). Today, because of Utility Computing providers (pay-as-you-drink), productivity enhancing languages like Ruby, and dynamic application assembly techniques (“mashup” seems to be the word de vogue), perhaps UC should be banking on some of the enabling technologies to broaden the field of available applications... something unique for everyone vs. one size fits all.

Comments:

Suppose 85% of units sold are in the bottom 85% of lines. Then each line must sell exactly the same number of units. While I don't doubt the existence of long tails, presumably the revenue figure comes about from excessive mark-ups on anything outside of the mainstream.

Posted by Tom Hawtin on July 23, 2006 at 01:18 AM EDT #

Sure, I see what you are saying Tom, but the article is alluding to the fact that once the warehousing, stocking, replenishment costs trend to 0... which is what Sun Grid does with automated provisioning, monitoring and management, then the profit is there because the cost of sales is so much lower. In theory, it would cost little more to service a high volume transaction than a low volume transaction. So no talk of margins / profit, that's obviously for the service offering entity, but rather the fact that if I could make it as cheap for a 1 person shop to run their custom SAP as a 10,000 person shop, then all of a sudden all of those 1 person shops could become customers.

Posted by Dan Hushon on July 23, 2006 at 03:39 PM EDT #

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