The phrase “The Long Tail” was first coined by Chris Anderson in an October 2004 article “The Long Tail” to describe the business and economic model of internet companies like Amazon and Netflix whose sales revenue from selling only a few copies of millions of items was comparable to sales from selling millions of copies each of the few most popular items. The striking feature about this new “long tail economy” was that a significant portion of business sales resulted from items that wouldn’t even be sold by traditional brick-and-mortar stores found in the physical world.

Anderson suggested that the collective sales from products that sell only in small volumes (and that would never be sold by a brick-and-mortar store) could exceed the sales from the most popular products. Anderson extended his work into a book “The Long Tail: Why the Future of Business Is Selling Less of More.” The research article “From Niches to Riches: Anatomy of the Long Tail” states that about 30% to 40% of Amazon’s book sales are in books that wouldn’t be found in a typical brick-and-mortar store; while a typical brick-and-mortar store might stocks between 40,000-100,000 titles, Amazon sells nearly 3 million titles. The article examines both supply side and demand side drivers of the long tail phenomenon.

On the supply side, internet businesses like Amazon can utilize central warehousing facilities to sell pretty much everything whereas traditional stores are limited by shelf space and therefore find it feasible to stock only popular items that sell in large volumes. Anderson stated in his article that one of the constraints for businesses in the physical world (like movie theaters, DVD rental stores etc.) is the need to find local audiences. As an example, he mentioned the “plight of Bollywood in America”, despite their being 1.7 million Indians in the US, the top-rated film Lagaan “opened on just two screens, and it was one of only a handful of Indian films to get any US distribution at all. In the tyranny of physical space, an audience too thinly spread is the same as no audience at all.”

On the demand side, search engines, recommendations, and content-based advertising help consumers find products in the long tail. The internet has helped in connecting supply and demand of niche products in this long tail economy.

Amazon’s Associate program is a form of content-based advertising that attempts to take advantage of the long tail phenomenon; website owners that sign up for this program place links to Amazon products on their website and receive a percentage of the sales if their ads result in a purchase on Amazon. This drives traffic to products in the long tail because the multitude of websites that cater to small niche communities direct traffic to products that are highly relevant for the specific community. Google AdSense similarly places the most relevant ads on a webpage in accordance with the content of the page. Content-based advertising is thus a salient feature of the long-tail economy.