SOCIAL MEDIA

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

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.

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…

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.

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.

?

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 8Ladies’ 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

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…

Bell curve

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

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.

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

??? 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?

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.

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.

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 58 57 86 45 24 43 62 81 10

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’.

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.

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.

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.

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.

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 – viralityAnd how it is legitimated – CC licences…That’s for next week…