Steam is an online digital entertainment company that currently offers 1100 games for purchase, download and play from any computer (Steam, 2010). Compared to department stores that rarely offer more than 100 titles (usually the more popular ones), Steam’s range is simply larger and caters better to specific interests rather than current trends. Such business models are what Anderson referred to when he coined the term leveraging the long tail (Anderson, n.d.).
Traditionally retailers only targeted the ‘head of a market’. However, collectively, products in the tail have the potential for similar or greater sales (Anderson, n.d.).
Companies such as Steam are able to cater to these niche markets by using new technologies to reduce costs (Wikipedia, 2010). Users enter, edit and update their personal information negating the need for some customer service employees. Steam users enter their own details from payment information through to their billing address (Steam, 2010). Self service extends to support, using the Steam forums and knowledge base gamers can ask their peers technical questions. This reduces the amount of money spent on support staff.
Products purchased from Steam are delivered virtually over the Internet in a digital form (Steam, 2010). In contrast to traditional business models, Steam does not pay for products until they have been sold to a customer. Furthermore, like other companies that trade in digital content there are few costs associated with a physical retail front or delivery.
Where the cost of inventory storage and distribution is low it becomes profitable to sell relatively unpopular products (Wikipedia, 2010). As a result vendors no longer need to put consumers in a one size fits all container (Anderson, n.d.). However, as the tail lengthens, consumers may find it hard to navigate to products of interest. Sites such as Steam use algorithmic data management to match supply and demand (O’Reilly, 2005). Based off pages a user visits, Steam recommends other games they might be interested in.
In summary, as Anderson (n.d.) suggests, People gravitate towards niches that are narrow interests (and everyone has them). Trends show that through using new technologies to reduce costs collectively, niche markets are as economically viable as their traditional high appeal counterparts. Businesses can now be built on hitting the growing niche market (Holter, 2006).
As for the future of Steam, I would like to see them follow the trend of the Apple App store and allow more independent developers to submit games for sale (this would lengthen their tail too).
References
- Anderson, C. (n.d.). About Chris Anderson.
- Davis, H. (2005). The Long Tail.
- Holter, E. (2006). Examples of the Long Tail Effect.
- O’Reilly, T. (2005). What is Web 2.0?.
- Steam. (2010). Steam Store.
- Wikipedia. (2010). E-Commerce.
- Wikipedia. (2010). The Long Tail.
nice video
ReplyDeleteGreat post Jack. And your video is impressive too!
ReplyDeleteMakes me think whilst reading your post that the future of business in general will be hundreds of mega-mart style businesses that provide one particular product or subset of products.
I wonder how this thought would affect the Walmart's of the world?
Interesting that you were accessing steam on a mac. Your article helped me get my head around the idea of the long tail. I liked the video too :-)
ReplyDeleteThanks for the support guys. I had an interesting discussion the other night with someone who works for EB. She was suggesting that even EB is now attempting to shift its products online. Presumably for the reasons mentioned above. She also said that because people can return games at EB when they are purchased in store people will continue to buy them in this way. I'm not sure if demos offer a similar service.
ReplyDeletelol Anthony good point. Steam on a mac? haha I wasn't actually using it just referring to it as an example.
Hi Jack
ReplyDeleteGood topics and good sample as well
You have explained the concept of Leveraging Long Tail Business very well. You use Steam as a sample to consolidate your points.
Steam is online or digital business, so it is open to the public. Being online market is main reason for selling with low cost and unpopular things for long time, and that is the concept for Long tail.
You sample has successfully matched and explained this concept.
Kind regards
Hashem
Great post, Jack.
ReplyDeleteI found a special characteristic of Steam. It has a community for users to share interest. So it provides a chance that users may connect with similar interest of "Long Tail" products. That would be a nice way to increase satisfaction and convenience.
By the way, interesting video.
Great post and video Jack! Really informative and easy to understand. Steam is a great example. Do you think sites like Steam help with problems like piracy? Since I guess it cheaper(?), and the users dont have to go to a store to purchase the product.
ReplyDelete