The Long Tail Theory

Chris Anderson is the man is first came up with the long-tail theory. My best understanding of this term is that the potential aggregate size of the many small markets in goods that don't individually sell well enough for traditional retail and broadcast distribution may someday rival that of the existing large market in goods that do cross that economic bar.

The term refers specifically to the orange part of the sales chart above, which shows a standard demand curve that could apply to any industry, from entertainment to hard goods. The vertical axis is sales; the horizontal is products. The red part of the curve is the hits, which have dominated our markets and culture for most of the last century. The orange part is the non-hits, or niches, which is where the new growth is coming from now and in the future.

Traditional retail economics dictate that stores only stock the likely hits, because shelf space is expensive. But online retailers (from Amazon to iTunes) can stock virtually everything, and the number of available niche products outnumber the hits by several orders of magnitude. Those millions of niches are the Long Tail, which had been largely neglected until recently in favor of the Short Head of hits.