Can you make money in the Long Tail?

Well, it depends who "you" are. If you're an aggregator, sure. But if you're like the majority of Long Tail microproducers, direct revenues can be harder to come by. I was reminded by this Valleywag post that one of the most common misunderstandings of the phenomena is that it somehow makes it easy for individuals to translate low popularity into riches. Here's the key part of the post:

I'm beginning to have my doubts about Chris Anderson's long tail, the proposition that cultural boutiques can make a living on the Internet. One disgruntled publisher complains she's owed less than the minimum Google can be bothered to pay her. And, as fast as she makes money, Google lifts the threshold. [She writes:] "When I started with Adsense in late 2004/ early 2005 the minimum was $25. Just when was about to hit the $25 minimum, they raised it to $50. Now that I have $45 in my account, the minimum is $100. Granted, I have a site with very low traffic, but how many website owners are getting screwed by Google? If the long-tail theory holds out, there could be millions of dollars of unpaid Google ads."

First, let's review what the theory actually says. The nutshell version of it is this two-parter: A) if you can dramatically lower the cost of production and distribution, you can offer far more variety. B) given more variety and the tools to easily organize it for individual taste, people will increasingly revel in their differences, rather than settling for their commonalities as in traditional blockbuster culture.

In Long Tail markets, hits lose their monopoly on culture as they share the stage with million of niche products. Minority taste rules.

There are three basic types of participants in Long Tail markets: consumers, aggregators and producers (note that it's possible to be all three; these aren't mutually incompatible). The main effects on each are:

• Consumers. Effect: Largely cultural. People have more choice, so individual taste increasingly satisfied even if the effect is an increasingly fragmented culture. 
• Aggregators. Effect: Largely economic. It's never been easier to assemble vast variety and create tools for organizing it, from search to recommendations. Increased variety plus increased demand for variety equals opportunity. Also note that just as one size doesn't fit all for products, nor does it for aggregators. I think the winner-take-all examples of eBay, Amazon, iTunes and Google are a first-inning phenomena. Specialized niche aggregators (think: vertical search, such as the real estate service Zillow) are on the rise.
• Producers. Effect: Largely non-economic. I responded to a good Nick Carr post on this last year with the following:  "For producers, Long Tail benefits are not primarily about direct revenues. Sure, Google Adsense on the average blog will generate risible returns, and the average band on MySpace probably won't sell enough CDs to pay back their recording costs, much less quit their day jobs. But the ability to unitize such microcelebrity can be significant elsewhere. A blog is a great personal branding vehicle, leading to anything from job offers to consulting gigs. And most band's MySpace pages are intended to bring fans to live shows, which are the market most bands care most about. When you look at the non-monetary economy of reputation, the Long Tail looks a lot more inviting for its inhabitants."

So to answer the publisher quoted by Valleywag, the Long Tail never promised you Adsense riches. If what you're doing has value, it does promise you more attention, reputation and readership. But converting that non-monetary currency to actual money is up to you, and there are as many ways to do that (from better job offers to consulting) as there are people who wish to try.

As for Google sitting on the float on millions of dollars of sub-threshold ad payments, well, Google is the canonical Long Tail aggregator. By capping minimum payments it's clearly found a way to improve the economics of serving the Long Tail of advertiser, advertisement and ad-driven publisher. If that's not what such Long Tail publishers want, that suggests that there's a nice opportunity for a competing ad network that can serve them better. One size doesn't fit all.

Comments

[Joe P]

Adsense is Nonsense.

Making the ads look like the content links on the pages may make people to click on adsense links accidentally, accidental clicks don't convert to orders.

Most of the adsense clicks on blogs sites are simply "i click on your adsense you click on mine", clicks.

Advertisers are big losers!!!!

[Jon]

A good niche aggregator for tv shows is trivialTV.blogspot.com with their episode finder, but I am not sure how they make any money.

http://trivialTV.blogspot.com/

If you are just a search engine, how do you make money if you don't own the content and the owner doesnt have an affiliate program?

_

[Anush Shetty]

Using the personalization/recommender engines you can probably give some very good results. But how will the website make money ?

[Andrew Johnson]

Sorry Joe, you are completely wrong. I make a very good living both from published Adsense and conversion that come through Adwords syndicated on content sites.

Chris, someone is saying the long tail is bogus because they are unable to essentially pick pennies off the street? The long tail isn't about making 25 cents a day. Rather, its about consumers being able to buy *exactly* what they want, no compromises -- and producers using technology to scale production up and out.

Producers who try to meet the needs of 4 or 5 people aren't going to make any money. Its the producers who take advantages of the economies of scale, their own expert knowledge, and are able to reproduce this customization on a larger scale that are the big winners.

Yes, there are some sectors of micro-production that are very difficult, or impossible, for a sole producer to scale up -- but thats not because of lack of consumer demand but rather oversaturation of producers.

This is where the borderline between hobby and job exists. A musician who wishes to take part in the long tail has to do more than play 2 gigs a month at a local bar and sell burned CDs for $1. If that musician rather chooses to meet the wide demands of music consumers (lessons, custom written music, creation of tools for other musicians, running a music website/forum/blog, etc.) then they can flourish monetarily in the long tail -- made possible through the internet which connects the entire world together.

Any producer who is complaining about taking months to make $100 clearly does not understand the long tail.

[Steve Weber]

My hunch is that the publisher quoted by Valleywag does not have top-tier content, and that is the source of the frustration.

Rather than whine about being screwed by Google, we should figure out a way to thrive without Google. Then we will win, and Google will lose.

Google is in a great position now, but content wins. If Google makes it a habit of screwing content creators, Google will lose.

[Crosbie Fitch]

It is possible that the total nickel&dime revenue unpaid due to not meeting a threshold could be of a similar magnitude to the revenue actually paid.

Remember, there's also the long tail of advertisers.

A contrived example...

Let's say there are 100 large advertisers who exceed the threshold with revenues of over $100 each (say avg $500), whereas there are 100,000 small advertisers with revenues less than $100 (say avg $50).

Paid revenue: $50,000
Unpaid revenue: $5,000,000

I think that could significantly encourage the raising of any threshold, such that it remains optimally at the 'heel' of the long tail.

It may also mean that the fee per click is a tad out of line with the notional cost or payout per click, i.e. the effective markup is far larger than any official commission.

I presume this is all pretty obvious to the adsense cognoscenti.

The bulk of advertising is done by the unpaid long tail, and the only ones who do get paid are those who could probably get paid directly anyway.

[Olivier]

Hi Chris,

Thanks for this post and for your book. So, what your saying is that producers of content cannot make money in the long tail with their production only. The creators of the Coke/Mentos claim that they made $30,000 wit their video being viewed 3 million times. Am I the only one to think it is very little for such an audience? Some shows produced for an audience of 3 million on TV cost several hundred thousand dollars. So, does it mean that the views are currently under-valued online, or that the cost of TV advertising will collapse in the next few years? If so, if advertising cannot pay for quality content, what will the aggregators aggregate when there is no new content available?

If I can see the value for a band to share free music and make money in concerts, I am not sure I see how it could work for fiction.

[Mike Abundo]

Personally, I can't wait for ad spend to shift from mass media to micromedia.

Then the real fun begins.

[james]

thanks for the book, chris and i couldn't agree with you more on this post. as a microcontent producer with my little blog, my main goal is simply to keep my disparate friends up to date on what i am up and share things i like with them.

and hey, if someone with the same interests as me happens to wander by and read what i have to say, great.

i never actually even thought of making money at it, but put the adsense ads up after reading your book more as an experiment that anything.

[John]

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[jeff paul]

well i must say the way you showing people how to make money with internet is just awesome and i had dun reading it . great job

[christi pemberton]

This the problem...

We talk about what people can or can't do in a very blanketed way....but, you many on here are forgetting one basic thing. If you want to make money, you need to have a business head. You can be expressive, but a lot of people I know can express themselves, that does not mean they can be a money generator. You need to know how to market you and what you got.

Can you make money from long tail? Most certainly you can. What is holding bloggers back from making monetizing their blog....a lack in the right mixture of creativity, marketing, reaching an up-tapped need of your readers that can translate into dollars, and lack of making your brand something so cool and so accommodating that your audience will pay for it. We pay for useless stuff everyday, even in this economy. We pay for food that we don't need...because we want to taste something good so much that it can overrule our conservative budget.

Many of us blog, but many of us do not know how to marry the creative and the expressive part of us with a good solid business head. It is more than just putting something up for purchase, or ask for advertising....you have to know how to hustle your brand. Think of it this way, most start up businesses fail for a variety of reasons (not the right time, not the right product, not organized enough, lack of customer service, not connecting with a customer need that will compel them to buy your product etc.). Yet, I have seen people who can sell anything, they had to know how reach their customer's sweet spot.

The internet is the new market place, everyone can try to make money...everyone will try to be a business person...but, fewer people will achieve that because no matter what......in any business and any thing where you need to get a large group of people on your side....you need to have a good sense of marketing who you are and what you represent. I can go to any website to read cool stuff on fashion...but, what makes you stand out....can you market you, can your brand help me to achieve to my hopes and dreams, is your brand attractive enough, magnetic enough?

Now ,on my blog site...I am trying out a variety of ways to build traffic...I am testing the waters. The site is simple, has some bugs, but certainly in a beta testing mode. My job is to learn more about my audience and what I can do to help make their lives beyond enjoyable, save them time in reaching that joy, and offer them something that only a person with my mixture of creativity, business, and personality can give them. Right now, it is about organizing and getting a solid structure to my online home.