Why is the theory of Long Tail potentially important for small businesses? Well here’s Chris’s summary:

The theory of the Long Tail is that our culture and economy is increasingly shifting away from a focus on a relatively small number of “hits” (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail. As the costs of production and distribution fall, especially online, there is now less need to lump products and consumers into one-size-fits-all containers. In an era without the constraints of physical shelf space and other bottlenecks of distribution, narrowly-target goods and services can be as economically attractive as mainstream fare.

The New Yorker’s review raises an interesting but flawed criticism of Chris’s thinking. It suggests that it is only the big online names like Amazon, Ebay, and iTunes that can ‘house the long tail’ i.e. the massive array of goods and services that cater for very particular customers, tastes and passions. They are therefore wagging the long tail. In control. An online oligopoly.

Of course, these big online brands are making a bundle of money, but what about search and word of mouth. I know very few people, for example, who browse iTunes looking for podcasts on a particular subject. It’s the online word-of-mouth network combined with Google et al that is the primary guide in this space. Large aggregators of Long Tail content may be the one stop out of town megastores, but it’s the growing interaction and sharing of online communities and networks that means the internet high street is thriving in its diversity.

The rapid – albeit long-delayed – roll out of broadband is changing the face of commerce and entertainment, unleashing a wave of creative potential across the world. It is even possible to view the past seven days as the tipping point for a new era.

For small businesses, networks create opportunities. They always have done. If there is a new era, there’s an argument for saying that it’s the small guys who are going to benefit most.