Lecture 7 of a course on social media taught at the University of Winchester. This covers the long tail, what it is and its place in social media. Other lectures in the series consider creative commons, virality, social networking amongst other topics.

1. Lecture 7
The social economics of social media: The Long Tail

2. Introduction
 This week we are going to look at a key aspect
of the economy of social media.
 Previously we have looked at how advertising
has worked across a range of social media
platforms.
 Here we step back from the direct ‘how they
make money’ stuff and look at economic
aspects of the form of social media / web 2.0.
 We will look at:
 The idea of the long tail business model;
 How it differs from previous understandings of
markets;
 How it is expanding out of retail to other areas.

3. Business old and new…
 In any business of a size greater than one or two
people calculations go on to work out what to charge
and what items to sell, stock costs, advertising costs,
staffing etc.
 The larger the business the more complex these
sums become.
 Web 2.0 and social media businesses seem to
operate on a slightly different footing to normal
business.
 It has been noted that they seem to use a different
fundamental principle to the one historically taught
on business courses.
 This new principle draws upon a old idea…

4. Paretos’s Distribution or Power
law
 In 1906 a Vilfredo Pareto noted
that 80% of the land in Italy was
owned by 20% of the population;
similarly he also noted that 80%
of the harvest of garden peas
came from 20% of the pea pods.
 This model of 80% of effects
being determined by 20% of
causes has proven true in many
different areas.
 It has been called the 80/20 rule
or more technically Pareto
Distribution (by Joseph Juran).
 It challenges the assumed
model of distribution.

5. Bell curves
 If we look for the
distribution of
something across a
population we have
(historically) thought
it to be distributed on
a bell curve.
 ?

6. Example…
 I sell shoes.
 I sell 9 types of shoe in
my shoe shop.
 On one day I sell 52
pairs of shoes.
Type Stock code Number Sold
Ladies’ pink fluffy
slippers 9 5
Men’s bed room
slippers 8 5
Kid’s trainers 7 8
Ladies’ red high heels 6 4
Men’s red Cuban heels 5 2
Men’s green slip-ons 4 4
Men’s blue suede 3 6
Men’s brown lace up 2 8
Men’s black lace up 1 10

7. What are my most successful
shoes?
 If I redraw that chart looking at how many
I have sold of that many shoes on that
day…

8. However…
 Lots of things in the real world do not
resemble this curve.
 Pareto and others since have noticed lots
of things that do not.
 Instead then detect a different kind of curve
or relationship between the two quantities.
 This relationship is a one of
‘Exponentiation’ – a form of repeated
multiplication (as multiplication is repeated
addition).
 It is referred to as ‘Power’ – as in ‘raising X to
the power of 3’ = X3

9. Power law
 Power law distributions
are characterised by a
curved ‘drop off’
between the two
values.
 However rather than
just dropping
completely the scale as
a random distribution
would they scale down
to a tail on X that is
infinitely long.

10. Power Laws
 Power Laws describe the relationship
between two factors and have been
noted to fit many things in the human
and natural worlds much better than the
normal or random distribution that the
bell curve predicts.
 Such as?
 Size of earth quakes;
 Size of cities to the number of them;
 Likes of facebook posts

11. ???
 You get a lot of a few, some of many,
and very few of an awful lot.
 How can this help us to understand
social media?
 Or the economics of social media?

12. The long tail…
 Business normally trade by
selling a lot of very little.
 The University Bookshop sells
1900 different titles of books.
 The town shop sells 3300
different titles of books.
 That is all they have space
to stock, (there are lots of
other books in the world) so
they must choose which
books to stock carefully.
 They use market intelligence
for this, knowing who will
come to the shop and why.

13. Shelf space
 It costs to stock.
 For a shop to keep a product in stock it has
to sell a certain amount – this is
determined by the costs of rents (sheer
physical space required to keep a product
on the shelf) staff wages to ensure some
one is there to sell it and other things.
 Every item has to earn its place in an
inventory and the number of times that
product must be sold to earn its place is
carefully calculated.

14. EG my shoe shop
 Why would I keep Type 5?
 I only sold two pairs, but I have to keep
all the sizes in stock.
 I would be wiser to focus on my best
sellers – what is traditionally called ‘the
head’.
 In my case, shoe type number 1.
 The things that sell the most.
 Thus the University book shop only has
space for 1900 titles – it has to choose
them carefully.
Type Number Sold
9 5
8 5
7 8
6 4
5 2
4 4
3 6
2 8
1 10

15. Tradition
 This has been the traditional
retail plan, sell a lot of very
little.
 Think of film releases:
 A multiplex with 6 screens,
changing all its films every week
can realistically show 300 films
per year. There are at least 600
film released in the UK each
year so many never get shown.
 Clothes, books, cars, etc. etc.
 If you want to make money
sell a lot of very little – the
‘head’ of the ‘market’.

16. But…
 The advent of digitisation of media
means storage is not a problem for
music, film and written material.
 The internet often means delivery not a
problem for these.
 Search technology means finding who
stocks it is much less a problem.
 Out of town huge warehouses also
mean stocking lots of lines is no longer a
problem.

17. Suddenly…
 The long tail of the
market looks a lot
better.
 Amazon, Itunes, Netflix
etc etc…
 Indeed the size of the
long tail is actually
bigger than the
traditional market
sector.
 It is perfectly viable to
specialise in serving
this market.

18. Services offered over the
internet
 Effects are to ‘fracture’ a market.
 Previously safest way was to make a
standardised product to sell the same thing
to millions.
 Long tail model is far smaller numbers of
sales of individualised goods.
 Mass markets can be broken up.
 A consequence of this is the undercutting
by cheap mass production was countered
to a degree.

19. Moreover…
 This approach is also tied to free content creation -
offering niche texts to the market by not being tied to
a geography though content dissemination –
facilitated by advertising.
 There are an estimated 1.3 million websites that are
niche content dissemination sites that are financially
viable through google sense advertising
 This is excluding youtube channels.
 These have very widely distributed and often small
(50,000 impressions per month or less) niche
markets
 But enough of depth of interest to attract advertising.

20. Content creation…
 Content creation is the emerging focus
of long tail research –
 How it functions in relation to driving traffic
etc.
 Also how it circulates – virality
 And how it is legitimated – CC licences…
 That’s for next week…