The Long Tail For Quants

As regular readers know, I studiously avoid a lot of what I consider to be "blogosphere" hype - including the term blogosphere and such favorites as folksonomies and tags. However, the "Long Tail" remains a particularly powerful concept for me, in part because it ties directly into the business models of the likes of Netflix and Amazon rather than just a generic "linkiness is good." Yes, the partilly ego-boo-driven reviews on IMDB, and Amaon, and Netflix are part of what make the Long Tail possible - as Irving Wlawdawsky-Berger describes in the comments to this post - but it's the sales themselves that are the Long Tail.

That makes data like this which quantizes the Long Tail particularly valuable. Individual data points that are arrived at in indirect ways are always a bit suspect, but there's an increasing body of research that indicates a Long Tail at online retailers like Amazon - in this case meaning titles ranking below the top 100K (or roughly comparable to large brick-and-mortar inventory - of in the vicinity of a quarter to a third of total sales. The latest data corrects earlier figures which indicated a possibly (much) higher number, but even a quarter of Amazon sales is still a substantial number if they can be delivered with modest incremental per-unit cost. (I also suspect that, at least relative to the Harry Potter books of the world, thee's a bit less discounting competition on the Long Tail which should at least partially offset higher costs associated with lower volumes. With purely digital goods, the Long Tail comes even closer to pure gravy.)