Pages

vendredi 27 juin 2008

Turning the Tail: from Long Tail to Big Tail

Turning the Tail: from Long Tail to Big Tail

Inverser la traîne - Passer de la longue traîne à la grande traîne (French version)

Turning the tail...

* * *

In a seminal article titled The Long Tail, published in October 2004 on Wired, Chris Anderson described a new niche strategy where it became possible to sell large numbers of unique items in relatively small quantities.


In fact, what would have been uneconomic in brick and mortar businesses was becoming possible AND profitable thanks to the Internet.

This concept of the “long tail” flourished and now applies to many other situations, such as domain names, for example, as well as (and especially) advertising. In particular since Google’s impressive conceptual – and commercial – innovation with the famous pair AdWords-AdSense.

In an interesting post on this matter, Scott Karp does an excellent job explaining wherein lies the innovation: factoring relevance into the auction model!

Let me explain: from 1999 to 2001, AdWords operated on a CPM basis, or cost per thousand impressions, the fee structure in fashion at the time, where advertisers were billed based on the number of impressions of their ads.

However, as Sergey Brin himself said, “It didn’t generate much money”.

In his book, The Search, John Battelle tells us that income from AdWords rose to about $85 million in 2001, while Overture earned $288 million the same year with its auction model operating on a CPC basis (cost per click, or the amount an advertiser pays for each click on its ad).
An auction system enables the advertiser to determine the cost per click incurred when users visit its site as a sponsored link. The starting bid is set at 0.15 $ per click. When the visitor enters keywords that were bid on, the search engine results page offers sponsored links, with the highest bidder’s site at the top of the list.
But Google couldn’t simply use Overture’s business model, unless they wanted a lawsuit. Even so, the lawsuit still happened and lasted more than two years, until the parties came to an agreement and dropped the suit.

However, it’s the essential difference between the two systems that enabled Google to defend itself and avoid a sentence: where Overture automatically linked the top ranking in the results to the highest bid value, Google introduced the idea of relevance, or rather popularity, with clickthrough rate (CTR), whose official definition is:
the number of clicks your ad receives divided by the number of times your ad is shown (impressions).
In other words, the bid value now became just a component, factored by the applicable clickthrough rate. John Battelle explains it the most clearly:
(A)ssume further that Accountant One is willing to pay $1.00 per click, Accountant Two $1.25, and Accountant Three $1.50. On Overture's service, Accountant Three would be listed first, followed by Accountant Two, and so on. The same would be true on Google's service, but only until the service has enough time to monitor clickthrough rates for all three ads. If Accountant One, who paid $1.00 per click, was drawing more clickthroughs than Accountant Three, then Accoun- tant One would graduate to the top spot, despite his lower bid.
A tiny innovation, but it took Google from $85 million in revenue in 2001 to billions just 7 years later!

And that’s not all: since apparently no one as improved upon it, most of the major Internet players are still looking for a decent business model.

In fact, this notion of relevance is also at the source of PageRank, at the heart of Google’s success. They go hand in hand. A search marketer cuts to the chase: If you don't provide the results, you don't get the money...

Now, the other reason for mass adoption of Google’s advertising services is... the long tail, as John Battelle rightly describes (emphasis mine):
You think Amazon's got scale? You think eBay is huge? Mere drops in the bucket. Amazon's 2000 revenues were around $2.76 billion. But the Neil Moncreifs of the world, taken together, drove more than $25 billion across the Net that same year, according to U.S. government figures. That's the power of the Internet: it's a beast with a very, very long tail. The head-eBay, Amazon, Yahoo-may get all the attention, but the real story is in the tail.
The power of the Internet is in the tail!

This is how Google achieved such amazing success. It was the only one to match advertisers’ needs with the fuel they required in abundance on the Internet: RELEVANT content. With an innovative ad server that enables millions of small sites and blogs to monetize their content, or at least to hope to...

But where Yahoo! had a presence since the beginning – since well before Google and before running astray – today Jerry Yang's abdication hands Google 90% of the advertising pie practically on a silver platter (if antitrust authorities accept it... even as advertisers already devote about 70% of their search budgets to Google!). All the other ad servers combined share the remaining 10%.

Even so, in 2008 no one has any illusions anymore (as Emmanuel Parody commented caustically: AdSense paying for content? That’s a joke...) and UGC, even if it continues to be created at full tilt, is no longer monetized like it should be (has it ever been?). Leaving millions of content creators fed up with their content be reused and monetized by the Web giants without any satisfactory form of payment or revenue sharing. [Top]

* * *

Turning the tail

A disruption in this success story is possible, however: it would just require turning the tail, to move from the long tail of UGC to the big tail, represented by the yellow part in the graph:


(no, This is not a pipe!)

To illustrate my idea, in a predictable imbalance predicted indeed by Clay Shirky in 2003, the analysis of 433 blogs ranked by number of incoming links illustrated the concept of the long tail nicely, with at the head:
  1. top two sites accounted for fully 5% of the inbound links between them,
  2. top dozen (less than 3% of the total) accounted for 20% of the inbound links, and
  3. top 50 blogs (not quite 12%) accounted for 50% of such links.

Now imagine an analysis of not 433 blogs, but tens of millions of blogs, sites, social network pages, etc.

Then you will understand that the head (the green part), which we will arbitrarily say equals 30% of sites/blogs/pages that would form the network’s core in the good old bow-tie theory (i.e., the core of most interconnected sites where the most links and traffic converge and are shared), no longer cuts it when the UGC mainstream now forms not the long tail, but the big tail of the Web, rather predominant today.

There is the real issue for UGC and the creators behind it: they lack representation: Everyone is mooching off their content to monetize it better than everyone else, but nobody really monetizes it at its fair value.

In fact, currently only the head attracts advertisers, while the tail is left to Google, which takes full advantage of it without fearing the inconsistencies...

My prediction is that the first player who succeeds in doing what Google did five years ago with AdSense, this time adapting relevance and fair revenue sharing for UGC, will introduce an even more formidable break with the past, with the added blessing of content creators, who are obviously the most harmed in and by the current system.

Turning the tail, moving from the long tail to the big tail, is the Internet’s next big challenge. Steve Ballmer himself says nothing less :
At the end of the day, this is about the ad platform. This is not about just any one of the applications. The most important application for the foreseeable future is search.
So we have all the data for the problem, and the first ad server that creates the RELEVANT mix to match advertisers’ needs on one side with the legitimate monetization expectations of content creators on the other side (matching the inventory of the latter based on the message of the former), will win the jackpot. Even if there are still a few unknowns.

It just has to be an ad... equate match! ;-) [Top]


Partager sur Facebook

, , , , , , , , , ,

Aucun commentaire: