Sunday, March 20, 2005

The hidden costs of the long tail

Yesterday I reported on Chris Anderson, author of the "Long Tail" feature in October 2004's Wired, and the upcoming book he has coming out on the subject, along with a blog. Well, today Kevin Laws of Hewlett Packard posts a cautionary supplement to the theory, concerning the sometimes hidden costs that come with a long-tail purchase. Once you've gotten rid of the monetary cost of an object, he argues - that is, once something is cheap enough that you've definitely decided that you're going to buy it - you still have to deal with two major other costs of purchasing, neither measured in monetary figures. First there is the search cost - the time and effort it took to actually find the thing you're going to buy; then there is the psychic cost - how easy or painful it is to let go of that money, in order to own this object.

For the long-tail theory to work correctly, he argues, a company must slash these search and psychic costs as much as the monetary ones. Amazon wouldn't work as a long-tail company, for example, if they didn't also make it so incredibly easy to find the exact thing you're looking for; or offer the official and fan reviews of products right on their order pages; or offer a sophisticated suggestion system, giving you just three or four very high-quality recommendations based on what it is you're currently looking at, along with your past buying history. If you offer a million things very cheaply, but then make it difficult to actually sort the list, he argues, in effect it's like not offering the million things cheaply to begin with.

This has other implications outside of traditional business issues, too. Like, he argues how the concept of micropayments is inherently flawed as well, because people don't like being reminded every single day that they're paying for something. Like video companies and cellphone services have shown us, subscription models are getting increasingly popular in our society, where a flat fee is simply paid and the benefits enjoyed limitlessly, without ever having to think about how much you're paying until the next month's flat-fee bill rolls around. These hidden costs can also be applied to blog pages as well, and specifically the habit of so many bloggers to run so much crap along the edges of their pages; as Mr. Laws argues, you might as well not be running any at all, because the overwhelming amount of choices stymies people from making any kind of decision.

I'm finding this whole theory of the long tail to be quite fascinating, to tell you the truth, because I see implications that could be transferred to this arts center I'm trying to open here in Chicago right now. Frankly, our entire business is going to be based around the long tail - we'll be publishing books, producing live shows, sponsoring classes, accepting members, printing merchandise, pressing CDs, and never having to make very much money on any one of these things on their own, so will be able to instead concentrate on highlighting underground artists. Mr. Laws has given me some things to think about, though; like how to best filter this information to our future customer base, so that the amount of options don't literally overwhelm them into inaction. It's an intriguing challenge, I admit. (Thanks to the always excellent Nick Wilson at Threadwatch for pointing this out.)