Very interesting article: “The long tail of software. Millions of Markets of Dozens”.
Let’s look at the Amazon example. This graph shows that Amazon sells roughly 2.3M books and that the average Barnes and Noble retail store stocks 139,000 books. So, Amazon stocks roughly 2.2M more books that Barnes and Noble.
No surprise here. That’s the benefit of an online storefront. Massive inventories housed in ultra-low-rent areas that are fronted electronically.
The astonishing figure is the percent of sales that comes from the “long tail” of books (books that Amazon carries but that Barnes and Noble doesn’t).
57% of Amazon’s sales come from books you can’t even buy at a Barnes and Noble (to be fair, there is some skepticism around this number voiced here). This runs totally counter to the traditional 80/20 rule in retailing – that 80% of your sales come from 20% of your inventory. In Amazon’s case, 57% of their book revenue comes from 0% of Barnes and Nobles inventory.
In the past, software’s long tail has been generally inaccessible because software has been
* Too difficult to write
* Too expensive to write and distribute
* Too brittle or expensive to customize once deployed.
It just hasn’t been economical for someone to create a custom software company to help architecture firms.
That’s why, in the software business, the traditional focus has been on dozens of markets of millions instead of millions of markets of dozens. The traditional software model is to make software have enough features and address enough of a homogeneous market that you can sell millions of copies of the same software. In the past, that’s been the only way to make money.