In 2006, Chris Anderson published his theory on how the internet has changed business. He called it the Long Tail:

The theory of the Long Tail is that our culture and economy is increasingly shifting away from a focus on a relatively small number of "hits" (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail. As the costs of production and distribution fall, especially online, there is now less need to lump products and consumers into one-size-fits-all containers. In an era without the constraints of physical shelf space and other bottlenecks of distribution, narrowly-targeted goods and services can be as economically attractive as mainstream fare.

In his book, The Long Tail: Why the Future of Business is Selling Less of More, Anderson then gave the following advice for entrepreneurs to take advantage of the Long Tail: (1) Make it easy for people to find your product, preferably online, and (2) Diversify your product offerings to appeal to small niches that are not being served by the mass market.

Online entrepreneurs ran away with the idea. By targeting what would normally be considered obscure niche markets that are too small for retailers to cater to, these entrepreneurs made fortunes especially with digital products like music, apps, and ebooks. Sell enough 99-cent apps and $7-ebooks, and you can make a nice living. Especially if you have a market of millions delivered by the likes of iTunes and Amazon.

This development was also good news to consumers. Now we can find pretty much whatever we need and want, even if it's not popular enough to justify its mass production.

Make Way for a Type Different Online Success

But I'm seeing the emergence of another type of market. One characterized by relatively fewer big hits, and many more moderate successes. This one has a long tail as well, in the sense that it also appeals to niche, even obscure, markets.

But instead of selling for peanuts, products in this market go for premium prices, anywhere from a couple of hundred to thousands of dollars.

And so instead of a Long Tail, it looks more like a Fat Tail:

Fat Tail of Online Business

Sellers in a Fat Tail industry are able to charge premium prices for two reasons: (1) They skip the aggregators, which frees them from the pricing drivers of platforms like Amazon and iTunes, where only the big hits can charge a premium; and, (2) They offer products/services that people are accustomed to paying a premium for.

Kevin Kelly's concept of having 1,000 true fans each buying at least $100 of your products every year, is an example of the Fat Tail in action.

One industry, in particular, that has a Fat Tail is online courses. I'm not talking about $27-"courses" that are just a bunch of videos thrown together. I'm talking about real education delivered online by independent individuals or groups (not academic institutions). They sell directly to students, and they offer something people are used to paying a premium for: education.

I'm seeing online courses in niche markets as diverse as elderly dog massage, career building for sound engineers, and overcoming children's sensory integration challenges.

These online course creators aren't selling to millions, and they don't have to. All they need are modest successes to either earn a nice side income or replace a full-time income altogether. Take an online course creator who offers a class of 30 people, twice a year. If they charge $997 per person, that's a total of $59,820. It's a far cry from the revenues of the big hits, but it's a substantial sum for most people.

And that's the beauty of the Fat Tail. These modest successes aren't limited to the few Goliaths who are the most popular or the highest authorities in their fields. In the case of online courses, it's accessible to anyone who can teach something that others find valuable.

How can entrepreneurs take advantage of the Fat Tail?

  1. Find a niche that cares about solving a problem or experiencing a delight enough that they'll be willing to pay a premium for, and
  2. Create something they can actually pay you for.

There's plenty of opportunity in the Fat Tail, and I'm excited to see what other industries enjoy a Fat Tail of successes.

Published on: Jan 3, 2017
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