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The Long Tail = Consumer Play?

By now everyone reading this space has probably heard of the Long Tail, which began as a Wired article, is now a blog and will become a book. As my colleague described it this morning, it’s potentially “the most important and influential piece of writing in understanding the next emerging socioeconomic phenomenon.”

While the implications of this theory are broad, when I think of them in the context of software, I nearly always equate it to some sort of consumer play. As we hear time and time again around this time of year when the holiday retail numbers trickle in, consumers are 2/3’s of the economy. That’s why the IBM/Lenovo deal still puzzles me, as does IBM’s absolute refusal to play in the consumer space at all.

I’m certainly not a financial analyst, and don’t pretend to have a good handle on the marketing and launch costs involved in such an effort, but I tend to side with Jonathan Schwartz when he says that “true power in the IT industry is moving out of the enterprise, and into the hands of ever younger consumers.” The financial analysts tell us that IBM’s PC division was essentially a money losing or at best break-even proposition. That may be, but you’re telling me that consumers weren’t a massively untapped market for the Thinkpad?

If you accept the hypothesis that a consumer strategy is at least important, if not critical, it certainly would appear to give Microsoft an edge – depending on what you perceive Google’s ambitions to be. It’s also interesting how rarely you’ll hear Sun making noise anymore about how “we don’t serve consumers.”

Case in point, what do you think the familiarity and comfort levels are with new employees with Notes, which few employees will have seen, vs Outlook, which many have run at home for years? Several months ago, I had the administrator for a state archive tell me how much he wished Microsoft had a records management product. Why? Because, he said, everyone uses their stuff at home and I don’t have to explain everything to them.

This is by necessity (gotta head home to pack), a rather oversimplified analysis of the situation, but I do think it’s fair to say that if the Long Tail tells me anything, it’s that a good consumer strategy will be important, sooner rather than later.

Categories: Trends & Observations.

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3 Responses

  1. I haven't read the long tail article, but I think what you saying about the consumer space makes sense. Corporate customers are consumers at some point.

    If they fell comfortable with windows, they will likely go to Microsoft for other "corporate" software, because that's what they know. They don't realize there is a huge difference between their laptop and the data center. What they know is Microsoft.

  2. Socioeconomically, the long tail isn't served by a PC. It's served by devices affordable to people sitting out on the tail – and with a billion mobile/wireless devices shipped last year alone, far more powerful than my first Mac, I can't imagine how a PC supplier is going to be better positioned to monetize the tail than either a network operator, or branded media service.

    That's not to suggest there isn't good money to serving the tails through a PC (witness eBay, whose business seems to be all about serving tails), it's more that Microsoft is likely a lesser threat to them than companies with a far stronger relationship to the tails themselves (like Google) – independent of whether Google is accessed through a PC, a phone, or a set top box.

  3. Christopher: Exactly. The consumer touchpoints are, in my view, tremendously underemphasized by the 'enterprise' system providers. particularly if you believe – as I do – that the boundaries between consumer and enterprise are blurring.

    Jonathan: From a socioeconomic standpoint, you're absolutely correct. The PC's price and form factor are essentially a gating factor on a tail play. The numbers bear you out as well, with hundreds of millions of devices in play already, and their capability improving every day. Many, if not most of today's PDAs are more powerful than the "state-of-the-art" PII 400mhz Dell desktop I bought in '97, which sits on my desk at work dutifully chugging away.

    So then, in a pure interpretation of the Long Tail vision, the PC is indeed a bad example. But a couple of counterpoints:

    1. Cost: the right supplier and system, as AOL, Linspire, Sun, and Wal-Mart among others have demonstrated, can bring down the cost of the PC to a range competitive with higher end handhelds – even when the latter are subsidized by the carriers in the form of a subscription fee. They can't match the fully subsidized no-cost proposition of the less functional handsets – yet – but I don't think it's too much of a stretch to imagine that happening in the near future as the hardware costs come down. Maybe it's even a Sun play via the new Sun Ray gear, who knows.

    2. Form Factor: as powerful as the latest generation of gadgets gets, I still think the form factor is an obstacle to many of today's network services. Mainly, it's the lack of a keyboard and an adequate voice recognition alternative. Even on the devices that have them – like the Treo – I believe it's still too much of a compromise to replace the PC for every day use. Don't get me wrong – I think you're correct that they are the true Long Tail play, and as we go further out the tail people are far more likely to have a mobile device than a PC, but I still think there's room for a PC-style device. Maybe it's a PC, maybe it's a Sun Ray, but the form factor – large display, full-sized keyboard – for the extended browing experience is simply better. Or maybe I'm simply showing my ignorance of the latest devices from Japan.

    Despite those objections, however, I think the mobile is probably the device to look towards. In the original entry when I tied the Long Tail to a consumer play, mostly what I'm doing is distilling it down to a simple volume equation. IBM, in particular, had – in my view – a tremendously untapped volume opportunity in the consumer market, and further, I do think that if PC manufacturers can reduce the cost sufficiently they could be a true Long Tail opportunity. Perhaps not in the same class as the handset, but an opportunity nonetheless.

    The question then becomes how do they reduce the cost sufficiently? IBM has apparently decided they could not via manufacturing efficiencies, and I have to think they know what they're doing. So what's the play? Perhaps a relationship with the carriers, who then can subsidize the cost of the PCs for network capability. This has been tried in various forms, of course, and was not particularly successful but give it a year or so. One or two years down the line, if Verizon was to offer me a 100 dollar laptop in exchange for a 2 or 3 year nation-wide EV-DO subscription, I'd think about it.

    Which brings us back to – who's sitting pretty? The network operators, for one. I heard you make the same argument on the Gillmor Gang, and given that I agreed with it then I agree with it now.

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