In his article “Debunking the Doomsday Scenario” from October 1, 2007, Gary Kim writes about the global telecom services revenue:

Of course, it is worth noting that just 12 companies represent $563 billion, or about 56 percent of the $1 trillion in annual global industry revenues. The next 15 companies generate $151 billion annually, or about 15 percent of total global revenue. Just 27 companies account for 71 percent of global telecom services revenue.

Now we also know that telecoms are having a hard time right now across the globe for different regional reasons, and that in North America alone there are about 2000 telecoms competing. So if 27 companies are the big head accounting for 71% of the revenues, is the long tail dying? Where are the thousands of niche providers that would - according to the long tail theory - make up at least 50% of the revenue?
Gary continues:

Maybe one way to look at matters is that a small number of global players have continued to do well for reasons including requisite scale, despite the travails of many thousands of smaller firms who may well suffer. That at least would explain the apparent disconnect between global growth and the downbeat feelings of many market contestants. The casualties of the telecom and Internet bubble were in the competitive sectors. Hundreds of CLECs went bankrupt.

That is not really what one would suspect according the the Long Tail theory - the idea is that niche content and 1:1 targeting could survive even without the “economy of scale” in said niche. Hm. I started a quick Google search and dug around my archived docs, finding two interesting things (actually a lot more, but you know me….).

The first one is an entry by Nicholas Carr’s Blog Rough Type from December 11, 2005, called “The Piecemeal Economy”. He comments on an article by Daniel Akst in the New York Times about bundling and unbundling, or centralization and decentralization. Akst points out:

Theoretically, all this unbundling will make everyone better off. But one consequence may be to force worthy cultural products to support themselves somehow - without being subsidized by commercial junk.

What Mr. Akst means is that for example an artistically worthy song on a CD album will get published even though it will never be a commercial success by putting it together with a song that will be. Mr. Carr comments:

Rather than promoting the creation of a “long tail” of diverse products, unbundling may end up pushing even more economic rewards to the “hits,” squeezing out a lot of the good stuff.

Critics in the the entry’s comments say that because of the unbundling one could reach a greater market, as people who like the few worthy but non-commercial songs will by the single song, while they would not feel strongly enough to by the whole album. I think that both view points are actually true: I guess at the time of Mr. Carr’s blog entry the importance of targeted or behavioral marketing wasn’t fully there yet. My point is that the unbundling will lead to a more targeted market, that will not support all and every asset, but will allow better cross- and up-selling of niche content within the niche, providing the scale needed to be commercially successful, while still selling commercial content within its (ok, I admit, rather large) niche.

A second interesting little gem is a Forrester Study along these lines, written 15 months later by Jaap Favier on March 8, 2007, is called “The End of Mass Marketing”. With Web x.0 fully in motion, the Long Tail becomes the Thick Tail. Mr. Favier writes:

The early Net was about the marketing “P” of place. Social Computing now gives firms the other “Ps” for success: promotion, product, price, and people via viral campaigns, consumer-generated content, social media, and consumer co-development.

The result is a thicker long tail and a slimmer big head (see figure 1):

• New media such as user generated content within social networks is picking up speed by factor 5 to 10 per quarter while traditional media is fragmenting as well, and digital TV and IPTV are reaching ever-smaller communities.
• Niche brands will rise at the expense of popular brands, not only because of the amount of different products and their advertisement consumers can consume: People only have one set of eyes and ears to absorb ads, and only one wallet with which to purchase goods. The financial barrier for market entry will keep dropping as word-of-mouth marketing and outsourced production spread. Beginning of 2007, vertically integrated firms like Google and Yahoo! saw nimble competitors coming out of the woodwork who tune in to specific audiences and can quickly respond to their demands. Apple was able to capture with one single mobile device 85% of Google’s mobile search within a single year.

As a result, niche brands as a whole will grab a growing part of the consumer goods, media, retail, finance, and telecom markets (see figure 2). The problem with current mass brands is, well, their mass appeal ;) Mr. Favier writes:

Mass brands like Kellogg’s are a mile wide in targeting and an inch deep in relationship, evidenced by the fact that they attract as many clients as nonclients to their site. Such brands are particularly vulnerable to niche brands that market, for example, an organic cereal via interest Web site organicconsumers.org. Kellogg’s can only defend itself by establishing many deep relationships with specific cohorts, for instance by developing community sites around personal and social values jointly with other shallow brands like McDonald’s or Disney.

[...]

Buy emotive properties. Even if all the goodwill and trademarks of Procter & Gamble - a total value of almost $90 billion - vanished, the firm would still have $46 billion in assets that it could deploy to buy emerging, highly emotive brands. As evidenced by the purchase of MySpace ad rights and YouTube, Google has adopted a “buy” strategy to develop deeper consumer relationships - and every other Web startup seems to regard a purchase by Google as their exit strategy now. Who needs a long tail?

The Thick Tail will accelerate the death of the middle market, and create winners and losers in every industry. The long tail as we knew it is dead. And if Hollywood does not wake up quickly and invest in social media concepts and (instead of mangling themselves with writer guild strikes and quarrels about online rights), the big online three - Google, MSN, Yahoo! - will extend their personalization with group features, by offering local search and discussion forums, for instance, and developing “online gated communities” around shared passions and interests. They will cash in with razor-sharp targeting of ads via the enormous range of integrated channels - phone, email, Web, IPTV, digital radio, chat, blogs, you name it - and by offering advertisers market intelligence. Mr. Favier warns:

Their growth will only be limited by consumer privacy concerns — legislators will tighten the rules — and their ability to develop new features themselves, rather than having to pay premium prices for the next 10 YouTube-style acquisitions.