A long tail business model involves selling many varieties of niche products, each in small quantities. This is a sharp contrast to conventional business models which focus on selling large quantities of a few best-selling products.
This concept was postulated by Chris Anderson in 2004. According to him, products with low demand (i.e., niche products) can collectively make up a market share large enough to compete with a small number of bestsellers. However, this can happen only when the distribution channel of niche products is large.
This observation was based on his experience of working in the media industry. As he worked in the media industry, he observed this pattern there. The long tail Business model has become a viable option in the media industry mainly due to technological innovation. It has allowed individuals to access tools to produce music, videos and software at a much lower cost than was previously possible.
The Internet has made the distribution of digital content easier by reducing the costs of communication and transaction. This has generated a market for niche products. For example, many content creators who post videos on YouTube also produce more specialized content for Patreon, where their viewers can directly pay them to enjoy their content.
Moreover, powerful search engines like Google and Bing make it easier for buyers and sellers to find each other. Recommendation systems, which are used by Google as well as social media platforms like Facebook and YouTube, recommend products to users based on their preferences. This also helps to link the buyers and sellers of niche products.
Some of the most renowned companies in the world use a long tail business model to sell their niche offerings. Platforms like Ebay and Amazon have suppliers who sell almost all types of products-regular and niche. This enables buyers to easily find niche products.
Netflix is another example of the successful implementation of a long tail model. When a subscriber searches for a show or movie on Netflix which is unavailable, Netflix will recommend movies/shows with similar themes which were unknown to the subscriber but may interest him/her anyways.
These examples prove that, thanks to technological innovation, long tail business models are viable in presence of large distribution channels.
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