May 29th, 2006
The Long Tail of Revenue 2.0
If the “long tail” is the organizing principle of web/media 2.0, why shouldn’t we expect revenue distribution to follow the same pattern, with a handful of companies (i.e. Google, Yahoo) controlling most of the revenue and the remaining online players fighting over the crumbs? When Google found a way to monetize the long tail through AdSense, it became the “head” of a new long tail. We shouldn’t mistake long tail economics to mean that everyone will get a share of the wealth.
I started thinking about the long tail this week after Publishing 2.0 cleared the (completely arbitrary) bar of 500 blogs linking in:
The number of sites linking here seems both large (after only 5 months of blogging) and extremely small, if you consider that Technorati is tracking 41.4 million blogs. But that was still enough for Publishing 2.0 to break into the (also arbitrary) top 2,500 of Technorati.
If you base the math on 41.4 million blogs, Publishing 2.0 is in the top 0.006% of all blogs based on being linked to by only 0.001% of all blogs! That’s some wacky math.
Out of curiosity, I graphed the number of sites linking to the top 50 blogs in the Technorati Top 100, and sure enough, it follows the long tail pattern:
Again out of curiosity (and too much time on my hands), I graphed a few other online rankings — unique visitors to the top 50 US sites and the top 50 online advertisers — sure enough, long tails:
SOURCE: comScore
SOURCE: TNS Media Intelligence
The one ranking list I most wanted to graph was the top 50 sites by revenue, but of course those data aren’t available. Even public companies like News Corp don’t disclose the revenue of large online properties like MySpace (although I wonder whether MySpace would even be in the top 50 by revenue).
But if you could graph the top 50 sites by revenue (including advertising, fees, etc.), I bet you would find another long tail, with Google, Yahoo, etc. at the head.
Long tail economics means that companies can make a lot of money off the tail, but it doesn’t mean that the tail itself can make any money.
This is of course why Web 2.0 long tail companies have only one strategy — get bought by the head. But unless this beast is going to eat its own tail, that strategy will work for a lucky few, and the rest of the tail will toil on in service to the head’s profits (see AdSense).
Web 2.0 has democratize the Web in terms of voice but not in terms of dollars.
Topics: Business Models | Google | Media Economics | Web 2.0
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I guess it should be no surprise given these calculations that splogs are so prevalent. Thanks to automation, it is as cheap to generate many different splogs as it is to generate one splogs. More splogs = more profit.
Or you simply live off peer production - the labour of the many who don’t know what they should be getting paid. Oh look, it’s AdSense.
“that strategy will work for a lucky few, and the rest of the tail will toil on in service to the head’s profits ”
Yup. And that’s one big reason for blog evangelism - the favored few need a large crowd chasing dreams.
Excellent analysis. The IAB/PWC Internet Advertising Report for 2005 fills in your missing piece - top sites by revenue:
“On-line advertising remains concentrated with the ten leading ad-selling companies, which accounted for 72 percent of total revenues in the fourth quarter of 2005, up from 71 percent reported for fourth quarter of 2004.
“Companies ranked 11th to 25th accounted for 14 percent of revenues for the fourt quarter of 2005.
“Companies ranked 26th to 50th accounted for 10 percent in the fourth quarter of 2005.” http://www.iab.net/resources/adrevenue/pdf/IAB_PwC_2005.pdf
The next question to ask is whether these top sites are capable of generating enough new ad inventory on their own to accommodate the growth in demand. Many in the industry are betting that they can’t do this alone and that the wealth will continue to trickle down and eventually become a steady stream and then a river. Certainly the big media companies have finally caught on and are racing to catch the runoff as it leaves their stagnant offline businesses and finds it way online.
Bennett — I’m with you up to the point where the trickle down of profits becomes a river — the long tail phenomenon suggests that, structurally, it will always be a trickle.
Unless of course you’re a believer in supply-side economics.
But Scott, isn’t one of the benefits of Web-based media that the costs (and of course the barriers to entry too) are so low? Therefore it should be possible to make a decent living even from a relatively puny long-tail payback sort of equation. No?
Mathew, a “decent living” is fine if you’re just looking to quit your day job and aren’t particularly ambition. But I’m guessing that’s no much consolation to the armies of Web 2.0 entrepreneurs looking to grow a business, not to mention the Old Media companies hoping to salvage their businesses by moving online.
I think even “making a decent living” from “a relatively puny long-tail payback sort of equation” is extraordinarily difficult. Low barriers to entry cut both ways.
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Publishing 2.0: The Long Tail of Revenue 2.0
Hi Scott,
Perhaps more than 500 blogs would link to you if you had a blogroll beneath your “browse by categories.” Personally, while I know that you link to others in posts, it was a tough call to add a link to your blog from my own knowing that you had no means of reciprocating, even if you ever wanted to.
Just my $0.02,
~G~
year in a row that revenue reaches double-digit billions. Considering Google’s dominance of the industry, it may not be far-fetched to consider that Google is poised to snare around $10 billion of that revenue. Publishing 2.0 blogger Scott Karpposted his opinion that revenue distribution of online ad dollars would mimic the “long tail” of Web 2.0 site popularity:
[…] Publishing 2.0 blogger Scott Karp posted his opinion that revenue distribution of online ad dollars would mimic the “long tail” of Web 2.0 site popularity […]
year in a row that revenue reaches double-digit billions. Considering Google’s dominance of the industry, it may not be far-fetched to consider that Google is poised to snare around $10 billion of that revenue. Publishing 2.0 blogger Scott Karpposted his opinion that revenue distribution of online ad dollars would mimic the “long tail” of Web 2.0 site popularity:
[…] Publishing 2.0 » The Long Tail of Revenue 2.0 (tags: business revenue web2.0) […]
[…] The Long Tail: A Motive Force for Web 2.0, Makes Its Official Debut « H » email link Chris Anderson, Editor-in-Chief of Wired Magazine, has been discussing a concept he calls The Long Tail for quite some time now. Many of you have no doubt been reading his excellent blog on the subject, and now finally his long-awaited book about this key Web 2.0 business model has been published. The actual launch day was just over a week ago (some great coverage of this by Chris), yet The Long Tail has long since emerged into the collective consciousness of business and technology thought leaders everywhere. It was even prominently cited in Tim O’Reilly’s seminal essay on What Is Web 2.0 (top of page two), where he gives the concept a lot of credit for creating some of the Web’s major successes:"Overture and Google’s success came from an understanding of what Chris Anderson refers to as "the long tail," the collective power of the small sites that make up the bulk of the web’s content." - Tim O’ReillyFor those who haven’t been tracking it, The Long Tail essentially describes the mass servicing of micromarkets, which is primarily made possible, even cost effective, by the delivery system of the Web itself. This is what the subtitle of the book puts another way as Why The Future of Business is Selling Less of More. And it’s not some obscure buzzword, I’ve found The Long Tail to be an indispensable short hand in describing certain concepts and trends we see emerging in business and the Web these days. For example, I’ve described Amazon’s innovative Mechanical Turk as a yet another one of their brilliant "long tail" plays. So too how The Long Tail of enterprise software demand is finally being tapped using Web 2.0 technologies to cost effectively serve previously underserved portions of the enterprise which couldn’t previously justify the the expense, most notably in articles on ZDNet and here. And I’m far from being the only one. The term is a popular in the blogosphere in general and is frequently a hot topic of discussion. And while sometimes the term does feel overused or misapplied - and still makes all-too-frequent appearance in marketing slides - it has serious legs in being the only catchy and effective descriptor of an otherwise seemingly obscure statistical anomaly. Thus, I say ignore The Long Tail at your peril; fortunes will continues to be won and lost over how well it’s understood and exploited. Here’s a big congratulations to Chris for so diligently and effectively bringing all of us this epiphany.Other great coverage of The Long Tail recently:- Don’t Get Confused By The Long Tail - Matthew Hurst- Wagging The Tail - Jon Howard- The Wrong Tail: A Checklist for Long Tail Implementations - Guy Kawasaki- The Long Tail of Revenue 2.0 - Scott Karp- The Economist does The Long Tail - Chris AndersonChris also made a terrific appearance on National Public Radio earlier this week and the audiocast is now available online. It offers an extremely informative and entertraining overview of the concept, including the homage Budweiser paid to Chris’ concept with the creation of their Long Tail Libations brand. If this doesn’t indicate that The Long Tail is entering mainstream consciousness, nothing will. So study The Long Tail, add it to your arsenal of New Internet business models (along with Gaining Control over Hard to Recreate Data Sources, Encouraging Unintended Uses, Applications as Platforms, and Customer Self-Service), and use them to create some terrific next generation Web businesses.Can you think of any interesting new real-world examples of The Long Tail?posted Thursday, 20 July 2006 Web 2.0 is about participation! Visitors are strongly encouraged to leave comments on Web 2.0 topics You are not logged in. Click for reasons to login/register. However, if you do not wish to create an account then that’s ok; you can still leave a comment to this blog. If you fill in the email field, it will not be displayed with your comment. It allows the blog-owner to contact you should they wish. […]
Other great coverage of The Long Tail recently: - Don’t Get Confused By The Long Tail - Matthew Hurst - Wagging The Tail - Jon Howard - The Wrong Tail: A Checklist for Long Tail Implementations - Guy Kawasaki - The Long Tail of Revenue 2.0 - Scott Karp - The Economist does The Long Tail - Chris Anderson Chris also made a terrific appearance on National Public Radio earlier this week and the audiocast is now available online. It offers an extremely informative and entertraining
Publishing 2.0 » The Long Tail of Revenue 2.0
[…] The Long Tail: A Motive Force for Web 2.0, Makes Its Official DebutChris Anderson, Editor-in-Chief of Wired Magazine, has been discussing a concept he calls The Long Tail for quite some time now. Many of you have no doubt been reading his excellent blog on the subject, and now finally his long-awaited book about this key Web 2.0 business model has been published. The actual launch day was just over a week ago (some great coverage of this by Chris), yet The Long Tail has long since emerged into the collective consciousness of business and technology thought leaders everywhere. It was even prominently cited in Tim O’Reilly’s seminal essay on What Is Web 2.0 (top of page two), where he gives the concept a lot of credit for creating some of the Web’s major successes:"Overture and Google’s success came from an understanding of what Chris Anderson refers to as "the long tail," the collective power of the small sites that make up the bulk of the web’s content." - Tim O’ReillyFor those who haven’t been tracking it, The Long Tail essentially describes the mass servicing of micromarkets, which is primarily made possible, even cost effective, by the delivery system of the Web itself. This is what the subtitle of the book puts another way as Why The Future of Business is Selling Less of More. And it’s not some obscure buzzword, I’ve found The Long Tail to be an indispensable short hand in describing certain concepts and trends we see emerging in business and the Web these days. For example, I’ve described Amazon’s innovative Mechanical Turk as a yet another one of their brilliant "long tail" plays. So too how The Long Tail of enterprise software demand is finally being tapped using Web 2.0 technologies to cost effectively serve previously underserved portions of the enterprise which couldn’t previously justify the the expense, most notably in articles on ZDNet and here. And I’m far from being the only one. The term is a popular in the blogosphere in general and is frequently a hot topic of discussion. And while sometimes the term does feel overused or misapplied - and still makes all-too-frequent appearance in marketing slides - it has serious legs in being the only catchy and effective descriptor of an otherwise seemingly obscure statistical anomaly. Thus, I say ignore The Long Tail at your peril; fortunes will continues to be won and lost over how well it’s understood and exploited. Here’s a big congratulations to Chris for so diligently and effectively bringing all of us this epiphany.Other great coverage of The Long Tail recently:- Don’t Get Confused By The Long Tail - Matthew Hurst- Wagging The Tail - Jon Howard- The Wrong Tail: A Checklist for Long Tail Implementations - Guy Kawasaki- The Long Tail of Revenue 2.0 - Scott Karp- The Economist does The Long Tail - Chris AndersonChris also made a terrific appearance on National Public Radio earlier this week and the audiocast is now available online. It offers an extremely informative and entertraining overview of the concept, including the homage Budweiser paid to Chris’ concept with the creation of their Long Tail Libations brand. If this doesn’t indicate that The Long Tail is entering mainstream consciousness, nothing will. So study The Long Tail, add it to your arsenal of New Internet business models (along with Gaining Control over Hard to Recreate Data Sources, Encouraging Unintended Uses, Applications as Platforms, and Customer Self-Service), and use them to create some terrific next generation Web businesses.Can you think of any interesting new real-world examples of The Long Tail? […]
Will Immediately Adopt All Aspects Necessary for Significant Business Impact - MSN Money Building Web 2.0 Applications? Think Big. (web2.wsj2.com) Signum sine tinnitu–by Guy Kawasaki: The Wrong Tale: A Checklist for Long-Tail Implementations Publishing 2.0 » The Long Tail of Revenue 2.0 The Long Tail: A Motive Force for Web 2.0, Makes Its Official Debut @ WEB 2.0 JOURNAL Web 2.0 In The News: Social-Network Sites Are Leading a New Tech Boom, Reports Newsweek @ WEB 2.0 JOURNAL The Web 2.0 Trinity: People, Data, and Great Software @ WEB
[…] Last spring I wrote about the Long Tail of Revenue 2.0, observing that the most of the revenue goes to aggregators in the head, and the rest is spread very thinly across an ever growing and ever thinning tail of content creators. Tim O’Reilly has posted a version of this obeservation in The Economics of Disaggregation: …long tail businesses disproportionately benefit the aggregator. While they create new opportunities for content providers “down the tail” who might not otherwise have been noticed, they create even greater collective benefits for the Amazon, the Google, the Netflix, who hosts the entire collection, the dog who wags the tail. […]
Scott Karp at Publishing 2.0 came up with a thought provoking discussion on why content businesses don’t scale any more; together with his discussion on the Long Tail of Revenue, there’s some insights that any Web 2.0 venture needs to think of. Last spring I wrote about the Long Tail of Revenue 2.0, observing that the most of the revenue goes to aggregators in the head, and the rest is spread very thinly across an ever
Scott Karp at Publishing 2.0 came up with a thought provoking discussion on why content businesses don’t scale any more; together with his discussion on the Long Tail of Revenue, there’s some insights that any Web 2.0 venture needs to think of. Last spring I wrote about the Long Tail of Revenue 2.0, observing that the most of the revenue goes to aggregators in the head, and the rest is spread very thinly across an ever
Other great coverage of The Long Tail recently: - Don’t Get Confused By The Long Tail - Matthew Hurst - Wagging The Tail - Jon Howard - The Wrong Tail: A Checklist for Long Tail Implementations - Guy Kawasaki - The Long Tail of Revenue 2.0 - Scott Karp - The Economist does The Long Tail - Chris Anderson - Update: John Hagel does some pentrating analysis of the concepts, post-book release - Update: Lee Gomes of the Wall Street Journal has his take
Other great coverage of The Long Tail recently: - Don’t Get Confused By The Long Tail - Matthew Hurst - Wagging The Tail - Jon Howard - The Wrong Tail: A Checklist for Long Tail Implementations - Guy Kawasaki - The Long Tail of Revenue 2.0 - Scott Karp - The Economist does The Long Tail - Chris Anderson - Update: John Hagel does some pentrating analysis of the concepts, post-book release - Update: Lee Gomes of the Wall Street Journal has his take