The idea of the book is that because of the Internet, the World is divided into smaller economies of scale. Economies of scale is defined according to the Investopedia as...
"Economies of scale gives big companies access to a larger market by allowing them to operate with greater geographical reach. For the more traditional (small to medium) companies, however, size does have its limits. After a point, an increase in size (output) actually causes an increase in production costs. This is called "diseconomies of scale".
Mr. Anderson's book points to the new dynamic, where I can make money from a small niche demand for my product. But in thinking about the perspective he introduces, it occurs to me that there may be an "enemy" of the Long Tail: the very idea that -- even for a moment -- people beyond the small target market may want that product, causing a potential increase in production costs.
Specifically, let's say you've got a new kind of online simulation game for a specific market as my company, Sports Business Simulations does, and it's existence is captured by a national TV news program (YIPPEE!). Now, you've got more traffic than your server can handle, leading toward 1) a crash, and 2) a higher cost to pay for a better server. (OUCH!)
That's the increase in production cost at play. It's not something he adresses in the book, and so this System Dynamicist may have uncovered a "limit to growth" in any Long Tail industry dynamic. What could break that cost logjam is that the very dynamic of increased demand via national exposure may -- may -- lead to investment in the product, thus removing the production cost barrier and allowing more dramatic growth in product sales.
But the limit to growth remains...
There's more to that dynamic relationship with respect to The Long Tail and I will explore it soon.
The book, released in June of this year, is very timely. A launch party was held in NYC, and you can see the highlights of it here:
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