Return on Investment (ROI) of Social Technology Implementations

In one of my previous blog posts, I described how the technology giant IBM utilised Enterprise 2.0 technologies to foster innovation, discover novel ideas and find ways on how to commercialise existing technologies. Although the blog post contained several useful bits of information about the process IBM had invented to make this online collaboration happen, the article did not contain any figures on the actual Return on Investment (ROI) statistics on IBM’s social media endeavour.

To be able to accurately gauge the success of a project, the Return on Investment (ROI) numbers need to be established as accurately as possible. Without knowing these figures, one can only guess the effectiveness of a given project. Needless to say, gathering the right kind of data for such calculations is far from being an easy task. This is exactly the reason why IBM commissioned Forrester Consulting in 2009 to establish the ROI enterprises may realise when using IBM’s Social Collaboration tools. The results of the study have been publicised by IBM, as presenting these statistics on the potential benefits of adopting these social media tools can be very strong incentives for IBM’s prospective business partners.

Forrester gathered the data used used in their research from existing statistical data on IBM’s tools and by conducting interviews with IBM’s sales personel and one large organisation currently using these tools. The data was fed into a financial impact model built by Forrester, which resulted in the following three main benefits being identified:

• Revenues of incremental new products
• Improved Time-to-market
• Revenues of incremental sales
• Staff productivity savings

Let’s calculate the ROI figures based on the numbers published in the study. Based on a 20,000-seat enterprise implementation, the initial implementation and roll out of adopting IBM’s tools would cost roughly 1.5 million dollars in the first year. The ongoing maintenance after the first year would incur about $313,000 a year. Thus the cost of investment for a 3 year period would be $2,126,000 in total.

Providing that the company has a total revenue of $20 billion a year, the revenues of incremental new products is estimated to be in the $420,000 to $8,400,000 range, with a likely estimate of $2,100,000 revenue per year. The other three areas would result in significantly more modest incremental yearly revenues ($336,000, $150,000 and $455,813 likely yearly figures, respectively). By adding up the low, likely and high values in all four categories we get the following estimates for the profits:

Profits (1 year)

• Low – $1,045,500
• Likely – $3,041,813
• High – $10,556,813

Profits (3 years)

• Low – $3,136,500
• Likely – $9,125,439
• High – $31,670,439

By plugging the numbers into the ROI formula, we get the following 3-year ROI figures for implementing IBM’s tools:

ROI Low = 47,53%
ROI Likely = 329,23%
ROI High = 1389,67%

The ROI figures above are very strong indicators on the financial success of adopting IBM’s social media solutions. Such studies can act as an extremely effective marketing tool to prospective clients who are on the verge of buying into a long-term social media strategy.

References

Use of Enterprise 2.0 in the Professional Services Sector
IBM
Total Economic Impact Of IBM Social Collaboration Tools
Forrester Consulting
Wikipedia – Return on investment

Social Networks and Social Monitoring

The Queensland Police Service (QPS) is a government organisation responsible for law enforcement in Queensland, Australia. As most government organisations in the western world today, QPS maintains a strong web and social media presence to inform and educate the public. A quick Google search revealed the following Queensland Police Service related websites:

• YouTube – http://www.youtube.com/user/QueenslandPolice
• Pinterest – http://www.pinterest.com/qldpolice/
• FaceBook – https://www.facebook.com/QueenslandPolice
• Twitter – https://twitter.com/QPSmedia

Socialbakers is a social media analytics platform that allows companies to monitor their social media usage statistics, including Facebook, Twitter, Google+, LinkedIn and YouTube. This is an invaluable tool for measuring the success of a social media campaign and for optimising a company’s social media activities to achieve the best possible results. The page allows the viewing of a few basic statistics for free, but the whole range of data is only available to paying users subscribed to the Analytics PRO account.

The service is extremely easy to use; after entering the URL of the Queensland Police YouTube channel in a Google-like search box, a page appeared summarising the viewing statistics of the uploaded videos. It turned out that as of 20 September 2013, the Queensland Police Channel had 1905 subscribers and 508 uploaded videos in total. The total number of all video viewings was 1,608,696, which is an impressive number compared to the 4.5 million population of Queensland. The free version of the search displayed two very informative timelines about the number of subscribers and uploaded video views in the last six months. These graphs are very useful in spotting general trends and they are an excellent marketing and monitoring tool:

Queensland Police YouTube Channel Subscribers

Another very useful platform for monitoring social media presence is Socialmention. The service operates in a very similar to way Socialbakers, the user only needs to enter the name of an organisation and the service does the rest. Entering “Queensland Police Service” into the search field gained the following interesting results, however the experience is not nearly as polished as Socialbakers’. This is very likely due to the fact that while the former is a free service, the primary goal of the latter is to gain paying customers, so the bar is obviously set to a higher standard.

Both online monitoring services mentioned above provided some interesting insights into the online presence of QPS. It must be noted, however, that the availability of publicly accessible datasets was quite limited in both cases. In the case of Socialbakers, for instance, the owner of a particular Facebook, YouTube or Twitter channel can sign up a paid account to be able to retrieve extensive analytics that is simply not available for unregistered users.

References

Queensland Police Service (QPS)
Queensland Police Service YouTube Channel
Queensland Police Service Twitter Channel
Queensland Police Service Pinterest Page
Queensland Police Service FaceBook Page
Socialbakers
Socialbakers – queenslandpolice YouTube channel statistics
Wikipedia – Queensland
Socialmention
Socialmention – “Queensland Police Service” search results

Use of Enterprise 2.0 in the Professional Services Sector

IBM logo

It would be probably hard to find anyone in the developed world who is not familiar with the name IBM. It is less well-known that the multinational technology giant owns the world’s largest corporate research organisation, IBM Research, which has eight labs in six countries, employing over 3000 researchers in total.

IBM Innovation Jam

Since 2001, IBM has been using various online “jams” to involve their workforce all over the world (more than 300,000 employees) to collaborate on various topics and to solve problems. The largest jam event titled Innovation Jam took place in 2006, where IBM set up a jam to discover novel ideas of using existing technology and find ways for commercialising them. With more than 150,00 participants, the event could be considered the largest brainstorming event ever held in the world to date, which resulted in 46,000 ideas in total. These ideas that had been subsequently analysed by senior management for weeks to extract the ones suitable for commercialisation. This is an excellent example of the Collect Information and Insights value lever. As of now, IBM’s crowd sourcing efforts have resulted in more than US$700 profit.

In 2007, IBM made the online platform available to other organisations outside of IBM to foster innovations through online collaboration. Just to illustrate the enormous success of the platform, the following major jam events have taken place in 2010 alone:

SecurityJam
A five-day long security jam involving more than 4000 security experts from all over the world, including military officials and government leaders, that resulted in thousands of ideas, some of which were presented to the NATO and the European Union.

CovJam
Coventry City Council in Coventry, England, invited residents to participate in a brainstorming session to discuss a 20-year plan on the modernisation of the city.

ServiceJam
600 organisations, including government agencies, non-profit institutions and corporations jammed to come up with novel ideas in regards to volunteering and public service.

The example of IBM illustrates that Enterprise 2.0 ideas and concepts can be utilised with great commercial success if the company fully stands behind adapting these novel technologies. It is for almost certain that more and more companies will follow IBM’s example in the coming years and implement similar solutions to foster new innovations and maximise their profit in turn.

References

IBM
IBM Jam events
A Global Innovation Jam – Cultural Impacts
An Inside View of IBM’s ‘Innovation Jam’
A Global Innovation Jam – Transforming the World
The social economy: Unlocking value and productivity through social technologies

Use of Enterprise 2.0 in Non-Profit Institutions

American Red Cross

The American Red Cross is a non-profit organisation that provide humanitarian services for those in need, including community services, emergency assistance, disaster relief, educational services and health and development related programs in the United States. The organisation is governed by its volunteers and is mainly supported by community donations and the income from their blood products.

Dell Logo

In March 2012, American Red Cross launched their new Digital Operations Center that was backed by a generous $500,000 donation from Dell, the world-famous American multinational computer technology corporation. The idea for the new center came from Dell itself, who opened a similar facility in 2010 called Social Media Listening Command Center, which the company used to monitor the impact and the social media reactions of their operations on a world-wide scale.

It is worthwhile to point out that this initiative is the first social media monitoring platform whose primary aim is humanitarian relief. Red Cross believes that the new center will aid them in reaching out to communities that need help in the event of a natural disaster situation. By utilising Facebook and Twitter monitoring, they are able to get first-hand real-time information from the people affected by the event sometimes even before it would be reported by traditional media channels. This enables the organisation to respond faster to the situation and also to establish real-time communication with individuals who need help.

In addition to engaging with the public when a natural disaster occurs, the center continuously sources and aggregates data obtained from Facebook and Twitter comments to spot trends and better anticipate public needs. This is an excellent example of the Collect Information and Insights value lever, where by aggregating information and reports and turning this data into easily digestible information (e.g. heat maps), the organisation is able to prioritise their resource use strategy in order to maximise the help they can provide. On the other hand, Red Cross can also broadcast fundraising and other type of messages asking for help through social media channels (for example asking for blood donations in case of a major crisis), which is a good example of the Mobilize resources lever.

To sum up, the case of Red Cross is an excellent example on taking a successful enterprise-level social media program (Dell’s Social Media Listening Command Center) and adapting it to the particular needs and requirements of a non-profit organisation.

References

American Red Cross
Wikipedia — American Red Cross
American Red Cross Opens a Social Media Operations Center
Dell
Red Cross Launches Social Media Disaster Response Center
The American Red Cross and Dell Launch First-Of-Its-Kind Social Media Digital Operations Center for Humanitarian Relief
Superstorm Sandy and the Red Cross Digital Operations Center
The social economy: Unlocking value and productivity through social technologies

Enterprise 2.0 and Social Media Policy

Commonwealth Bank Logo

The Commonwealth Bank of Australia is one of the biggest multinational banks of Australia with businesses in New Zealand, Asia, Fiji, United Kingdom and USA. Needless to say, an organisation of such an enormous size needs to pay special attention the new emerging Enterprise 2.0 and Web 2.0 trends in order to keep their competitive advantage and also protect their reputation at the same time.

Social media restrictions

In December 2010, Commonwealth Bank introduced a 2-page social page policy that threatens their employees with “serious disciplinary action which may include termination” for a range of various online activities. This alone would not have raised any eyebrows, as it is to be expected from employees nowadays not to engage in social media related activities during working hours. What caused a significant public outrage was that the policy explicitly forbid any online activity for all their employees outside normal working hours that might damage the bank’s brand (however that might be interpreted), and the worst of all, the policy held employees countable for their online friends’ actions. Also, if one’s friend posted any material that was considered to be “offensive”, the employee in question were to help the police with the investigation against their friend.

Clearly, the primary aim of CommonWealth’s social media policy, namely to protect the reputation of the company, had backfired terribly and had caused much more harm than good. While initially the bank tried to defend their draconian policy, later on they changed their attitude and appeared to be much more receptive in reviewing it and softening the restrictions in their policy.

The lesson of this case is that putting social media policies in place can be a double-edged sword that in some cases can have an the exact opposite effect. In order to avoid scandals, organisations must realise that social media has become a fact of everyday modern life, and they cannot (and are legally not even allowed to) to control every aspect of it as they cannot their employees actions in their private lives either. Having a social media policy does not mean that the company can make unreasonable demands on their employees on how their use the internet outside of work.

References

Wikipedia – Commonwealth Bank
Bank threatens staff with sack over social media comments
Lessons from the Commonwealth Bank’s social media policy
Learning from the social media policy mistakes of the Commonwealth Bank
Bank’s Social Media Policy Says Snitch & Spy on Your Friends or You’re Fired

Enterprise 2.0 Social Technology Value Levers – @ComcastCares Case Study

Comcast Logo

Comcast is the largest provider of entertainment, information and communications services and products in the United States, providing cable television, broadband Internet and telephone services to their customer base in 40 states. As of March 2012, Comcast had more than 18 million subscribers to their Internet services alone. Despite their obvious commercial success, the company had been the target of criticism for their poor level of customer service for a long time, which had been evidenced in their low customer satisfaction scores.

@ComcastCares

It is a well know fact of life in the digital age that disgruntled customers can do tremendous harm to the reputation of a company by tweeting and posting negative comments about their experiences with customer service. Due to the viral nature of Facebook and Twitter, the company’s reputation will surely suffer in almost all such cases.

Comcast Cares Logo

Comcast has managed to revolutionise their customer care approach and improve customer satisfaction by utilising Twitter as a means of reaching out and communicating with their customers. In 2008, Frank Eliason, a Comcast customer service representative, initiated a new project where he and his team of 10 started addressing the growing criticism of their customers that had been caused by their frustration and dissatisfaction with Comcast’s customer service. The project made good use of Twitter’s microblog functionality in order to help customers in the most efficient way possible.

According to a 2011 report, Frank’s new customer care division processes about 6000 blog posts and 2000 Twitter messages per day which results in faster customer response times that directly translate into improved customer satisfaction indexes. One unique aspect of their Twitter based communication is that they don’t use “ghost” personas – all communication that comes from @ComcastCares originates from Frank himself. This brings the much needed human touch back to the online customer interaction which is pretty rare among companies the size of Comcast. Arguably, this has been the key ingredient that made Frank’s project a success and a very strong differentiator compared to customer service practices of similarly large corporations.

Conclusion

To sum up, taking care of your customers and handling customer complaints appropriately must be a first priority for every company that wants to improve (or even just maintain) their good reputation on the market. With the proliferation of social media on the Internet, news travel extremely quickly and no company can afford to lose their paying customers due to the perception that their concerns are not being addressed appropiately by customer service. Conversely, by providing stellar customer service through social media can be an important differentation that can result in serious market advantages over the competitors.

References

Comcast
Wikipedia – Comcast
Wikipedia – Criticism of Comcast
Cable Continues Low Customer Satisfactions Tradition
Comcast Reports 1st Quarter 2012 Results
12 digital and social media case studies that prove Customer Service ROI
Social Media Case Study: How Comcast Is Winning The Battle For Perception
Twitter – Frank Eliason
Twitter – @ComcastCares

Examples of Enterprise 2.0 in Action

In this blog post, I am going to present two examples of companies utilising Enterprise 2.0 techniques in a significant way to meet corporate goals. Both examples will be analysed according to the Wikinomics business model (Peering, Being Open, Sharing and Acting Global).

BASF

BASF Company Logo

Starting from 2008, BASF have made significant steps towards becoming a social business by creating the connect.BASF online business network. By 2013, the platform has become a huge success and more than 35,000 employees around the globe are collaborating and sharing information on it on a regular basis.

Peering

When starting the connect.BASF project, the primary aim of the company was to foster the creation of self-organising online communities that solve business problems by sharing knowledge, collaborating and participating in discussions. “We form the best team” – was the motto of the project, which acknowledges the fact isolated players cannot provide as much value as communities who act together as a global team.

Being Open & Sharing

The platform is completely open and all employees of the company have access to it. This facilitates the open sharing of ideas and has lead to numerous unexpected discoveries where teams that formerly were not even aware of the existence of each other have collaborated on the spot in an ad hoc fashion and created innovative solutions to difficult problems.

Acting Global

The company has 390 production sites across all continents. The enterprise social network has helped in bringing the companies workers closer together by creating a better connected organisation. As of April 2013, 35,000 users were registered to connect.BASF forming more than 3,700 online communities.

BeingGirl

BeingGirl Logo

BeingGirl is a community site created by the consumer goods company Procter & Gamble site that targets adolescent girls in the 12-14 year age group. The main purpose of the website is to provide information to young girls facing the typical issues of puberty (dating, self-care, menstruation, eating disorders etc.). It serves as a community where girls can discuss their everyday problems with each other and can ask for expert advice. Needless to say, the site is also a marketing tool for Procter & Gamble’s hygiene products, but the company has taken a more subtle advertising approach this time: the primary focus is on building a community while the products are kept in the background. This subtle marketing strategy has proven to be extremely effective as the BeingGirl campaign is four times as effective as a similarly priced traditional marketing program.

Peering

The site’s visitors can engage in various discussions, enter contests and participate in polls, which all provide a very strong foundation for building a community around addressing the various problem adolescent girls are facing today. Another important aspect of peering is that the company continuously improves the site based on the results of the polls and forum discussions.

Being Open

A key point of the success of the site is that the company does not hide the fact that it wants to advertise its products. However, it puts an emphasis on adding value first by building a community where young girls feel at ease and are happy the spend their time online. By putting their users first and their marketing agenda in the background, Proctor & Gamble has achieved what other companies using traditional advertising are only dreaming of.

Sharing

At the initial launch of the site in 2000, the site only provided traditional educational materials which haven’t gained much interest. When the company decided to make the site more fun and social while being educational at the same time, things have really taken off. The site provides music downloads, video series, blog posts and various forums for the girls to participate in and share their feeling about going through adolescence.

Acting Global

The website is now available in 50 different languages and it has become a huge success worldwide. Clearly, the company has succeeded in addressing a global audience with their more than 2 million visitors per month worldwide.

Conclusion

To sum up, in both case studies Procter & Gamble and BASF have been able to put Enterprise 2.0 to excellent use with great success. The fact that such established corporations are taking Enterprise 2.0 seriously is a sure sign that this trend is only going to get stronger in the future.

References

Wikinomics: How Mass Collaboration Changes Everything
BASF
How connect.BASF Helped BASF Become a Social Business
The growth of an enterprise social network at BASF
Enterprise 2.0 success: BASF
BeingGirl
Procter & Gamble
Wikipedia – BeingGirl
“Best In Class” Marketing Using Social Media
P&G Does it Again with Beinggirl.com – 4x More Effective Than Traditional Media
Social media success story: Proctor & Gamble

Personal Digital Strategy

Blogosphere as a network of interconnections

In the fast paced digital age we are living in today, an increasing number of people are starting their own blogs every year. By participating in meaningful discussions with like-minded bloggers (traditionally, by means of blog comments), one can quickly build an extended personal network, the advantages of which should never be underestimated. Having an own personal blog can have several benefits: first of all, establishing a well-known online identity can be a powerful marketing tool that can open doors when looking for a job. Also, the process of writing blog posts and interacting with readers builds one’s skills as a digital content contributor, which can have serious positive long-term career benefits.

Although the technicalities of starting a blog have become really simple by now, it should never be forgotten that the actual information content is a blog’s primary and most valuable asset. This is the reason why working out the strategy of any blog is of utmost importance — ideally, this should be done before posting the very first blog entry to keep the message and the purpose of the communication clear and focused.

First of all, my intention with this blog is to contribute to the discussions on Enterprise 2.0 related topics in a meaningful way. In order to attract prospective readers and to maintain existing ones, I am striving to create digital contents that represent value to my readers and I will make every effort to make the posts enjoyable to read that would keep the readers’ interest level up. This will require significant amounts of research work, but it is worth investing time in that because the readers value blog posts that are factually accurate and contain up-to-date information. It is extremely important to point out that every blog that is publicly available on the Internet can (and most likely, will be) regarded as a de facto resume of the author. For that reason, it is of crucial importance that the contents of the blog should never contain any offensive or controversial material that could be disadvantageous to the author in the future. Moreover, certain topics and opinions could also have legal consequences, especially if they have something to do with one’s current employer. I am going to pay special attention to these points, for obvious reasons.

Two excellent examples for blogs that adhere to the principles outlined above are The Danny Rodd Weblog and Andrew Kim Blog, the central topic of which are how to create hormonal balance by speeding up metabolism with nutrition. Both blogs bring unique value to their readers in many regards. Most of all, it is extremely hard to find information on this subject matter on the Internet, and the posts on these blogs are not only well researched and full of scientifically accurate information, but are also interesting and a pleasure to read. Clearly, the two blogs add significant value to the collective human knowledge and most of the time the comments are almost as interesting and educational as the posts themselves.

To sum it up, I strongly feel that a thorough understanding of the above matters is very important for everybody who wishes to establish an online digital presence on the Internet today. Personally, I am going to pay special attention to these points whenever I am even just contemplating writing a new post for my blog.

References

State of the Blogosphere 2011: Introduction and Methodology
Blog as a Marketing Tool
To Blog or Not to Blog? – How Blogging and Social Networking Can Impact Your Job Search
Fired for Blogging
The Danny Rodd Weblog
Andrew Kim Blog

Lightweight Models and Cost Effective Scalability

Overview

The stock.xchng Logo

One of the most important principles behind successful Web 2.0 startups are without doubt the adoption of Lightweight Models and Cost Effective Scalability patterns. In todays market environment, starting small and then being able to scale with demand is absolutely crucial for a successful Internet-based business. With the advent of numerous open-source operating systems, databases, web servers, content management systems and programming frameworks, businesses are now able to create application servers for virtually free—not counting the money spent on hardware and the services of a technical expert, of course. But with the recent proliferation of cloud-based hosting services, such as Amazon EC2, even the hardware part can be outsourced. Of course, the scalability does not only apply to the technical level but to the business model too. Adopting a scalable and cost-effective market strategy and business model, along with scalable technology, ensures that the final product will hit the market in the shortest possible timeframe while at the same time allowing for future growth.

Comparisons

stock.xchng (also abbreviated as SXC) was launched in 2001 by a Hungarian web designer and entrepreneur Peter Hamza. The unique aspect of the service was that it allowed users to share and download high-resolutions, royalty-free digital photographs and illustrations for free, in contrast to other popular commercial stock exchange sites of the time which often required paid membership. The service has social networking aspects as well: users may set up personal profiles, write personal blog entries, participate in discussions in the forums and comment on each other’s work.

Clearly, the service adopted a very effective scaleable business model right from the start: the technology stack itself was based on open-source technologies (Linux, Apache, MySQL, PHP, also known as the famous LAMP stack) and the website was operated in the beginning solely by its creators (three people in total), thus minimising the startup costs and the initial investment. The choice of flexible, robust open-source technologies allowed for the site to grow rapidly as the number of users steadily increased. In a relatively short timeframe, stock.xchng gained a massive popularity and evolved into one the most visited stock images providers on the whole Internet. In 2009, the site had over 2,500,000 million registered users and hosted around 400,000 photos, which eventually resulted in the acquisition of the company by Getty Images in 2009.

Future directions

stock.xchng is a prime example of applying the principles of Lightweight Models and Cost Effective Scalability into practice. It is indeed possible to build a highly successful online business by putting in minimum effort at the start in order to achieve maximum gain in a very short amount of time—just an excellent, unique idea is needed. As more and more free tools, hosting services and cloud-based platforms are becoming available, the barrier of entry gets even lower: one just needs to wire together existing components, services and frameworks, which can often be achieved even without writing a single line of new code. The result of this will be that we will see more and more interesting services emerging and gaining popularity, which is a benefit for the all of us.

References

stock.xchng – the leading free stock photography site
stock.xchng – site info
Wikipedia – stock.xchng
LAMP (Software Bundle)
Stock Photography, Royalty-Free Photos, Video Footage & Music | Getty Images
Stockxpert / SXC Press Release – HAAP Media Ltd Announces Full Acquisition by Getty Images

Leveraging the Long Tail

Overview

The Last.fm Logo

The term “Long Tail” was popularised by Chris Anderson in his famous Wired magazine article in October 2004, where he demonstrated the concept by citing Amazon, Apple and Netflix as examples. The theory of the Long Tail in a nutshell is that we are experiencing a shift in our content consumption patterns from focusing on a relatively small number of mainstream products (also know as “hits”) towards the much larger market of niche items. In the physical world, shelf place has been historically physically constrained and expensive, therefore stocking only the best-selling products was the only economically viable alternative for a given store. However, it turns out that the Internet is an ideal marketplace for catering for the niche interest groups. Since there are no physical shelf-space limitations to speak of, it is just as easy to provide access to a huge number of niche products as to only the most popular, selected “hit” items. Online retailers, such as Amazon, can stock virtually everything, and these millions of narrow niches seem to better suit the individual interests than of the customers than the generalised best-sellers.

But not only online retailers can capitalise on the long tail paradigm. There are a growing number of services who are leveraging the power of the long trail in a number of unique ways, to cater not only for the mainstream audience in the head, but also to address the many millions in the tail. Last.fm is such a service that helps its users discover new music based on their listening habits, which is especially useful for individuals interested in obscure, hard-to-find niche genres.

Comparisons

Last.fm is a music service that helps its user discover new music based on their music listening habits. To quote a large recent study done by Yahoo on consumer preference data, “the vast majority of users are a little bit eccentric, consuming niche products at least some of the time”. Last.fm capitalises on this exact aspect; it offers individuals with niche musical interests the possibility to discover similar bands they might like and connect with people having the same musical tastes, while also catering for people interested in more popular forms of music.

The heart of the service is the so-called “Audioscrobbler” recommendation system, which collects data on the songs the user listens to, builds a detailed profile on each user’s musical profile based on the collected information, then uses sophisticated algorithmic methods to recommend similar music to the user. Audioscrobbler can collect data from a computer via plugins installed to the user’s music player, from Internet radio stations the user listens to, or directly from a portable music playing device. Apart from the extremely popular recommendation system, which uses collaborative filtering algorithms to discover new content suited to a particular user’s tastes, the service also provides social networking features, such as formation of groups based on a common interests, friends lists, manual music recommendation by users or groups and journals written about artists. What’s even more interesting, the recommendations system also sports a widget reminiscent of the long tail diagram itself, in which the user can drag a slider towards the head or the tail part of the chart to explore more popular or more obscure recommendations.

Potential issues

The Long Fail

Not everybody, however, agrees on Chris Anderson’s theory of demand distribution in the Internet age. Some recent statistical data seem to support the views of the opponents of the Long Tail theory: out of the total 13 million of tracks available on the internet, 10 millions have never been purchased even once. Scientific analysis has shown that the sales distribution of online music retailer do not follow the power curve of the long tail curve, but rather exhibit normal logarithmic characteristics. Furthermore, social aspects and basic human behaviour have to be taken into consideration as well. According to Jonathan Karp—the founder of the highly successful book publishing company Twelve, whose objective is to focus on quality rather than quantity and publish no more than twelve books each year—”It’s been a truism among my colleagues that generally people want to be reading what other people are reading”.

Future directions

While the universal applicability of the Long Tail theory is being challenged currently, it goes without saying that online retailers such as Amazon and Apple have made quite sizeable profits due to their huge size of online catalogue which were inherently niche-buyer friendly. What me might see in the near future is a refinement of the theory and a more detailed understanding of the exact scenarios where it could be applied with great success.

References

About Last.fm
Wikipedia – Last.fm
Anatomy of the Long Tail: Ordinary People with Extraordinary Tastes
Last.fm user distribution, long tail of mainstream-ness
Last.fm: The Long Tail music picker
Music Recommendation and the Long Tail
Last.fm the Robotic DJ
Twelve Publishers – About Us – Mission Statement
Long Tails and Big Heads
The Long Tail Theory Gets Challenged, Just Not in Search Query Demand