Google and the Long Tail

(Editor’s note: Turns out Google may not be serving the ‘long tail’ as efficiently as we thought. Victor Hanna tells us why.)

While Google has been quick to hop on the ‘long tail’ bandwagon, many online product marketers can’t tap into Google’s offering.

It has to do with the way Google manages their Adwords advertising program. It ignores low demand search terms — more of which I will get to further below.

Google’s ‘long tail’ strategy, as generally understood, refers to Google’s serving the thousands, if not millions of small advertisers, who together place more ads than big advertisers combined.

But big advertisers can rely on the small tail too. Let’s use a company such as Netflix to set the backdrop. The long tail concept infers that aggregate demand for Netflix’s extensive ‘back catalog’ of titles – the so called long tail — can amount to the largest source of the company’s overall product sales. If the theory holds, demand for the long tail of its catalogue should account for revenues that exceed those generated by the current offering of their newer blockbuster releases. When the surface area on the tail of an animal is 10 times that of the body of the beast itself, the tail just can’t be ignored. It would stand to reason then, that Amazon.com would have more revenue coming from the long tail of its product catalog than from the books on the NYT best sellers list.

Now let’s relate this to Google and other search engine pay-per-click advertising programs, which play a key role in the promise of the long tail since may product searches start at a search engine before landing at the actual merchant product page. Today, virtually any person or company with a few shekels can open a Google Adwords account and have 1 or 500,000 product titles pushed up as ads on Google in relatively short order. Anytime a Google user searches on any one of those 500,000 search terms, your handsome text ad should appear nearby the organic search results. Hopefully, users with an interest in any of your product(s), say product number 452,237, will click the ad, be transported to your ecommerce website, and ring your company cash register.

Suppose, however, long tail product #452,237 only has an aggregate demand of 4 units per year in the U.S. There would be little chance of success for a merchant to start a business in hopes of selling just 4 units a year of anything, unless of course we are talking battleships or commercial real estate. Yet if you add up the demand for all of the tens of thousands of long tail items in the catalog that have a 4 unit annual demand cycle, and you may just have a business on your hands. Herein lies the rub.
Unfortunately, it seems that Google Adwords actually stops serving ads that have little user search demand, so product #452,237, of which the total aggregate search demand in a given 12 month period may well only be 4 searches, will be summarily shut off as soon as the algorithm determines that managing such a low demand search term is not a good use of Google’s resources. In other words, as soon as it becomes a waste of good food, it’s a goner.

The problem can be even more drastic for merchants who sell ‘only’ niche, long tail-like products. Allow for a moment an example of a small and highly specialized manufacturer who sells a specific component to a particularly dated but still-in-use Air Force Helicopter. The demand may only be 5 units per year, but at $50,000 a pop at 50% profit margin, that small manufacturer gets to keep his doors open so long as the military customer who needs that part can find it. Unfortunately, with only 5 searches a year on that item, it’s probably a goner.

So, what to make of the promise of the long tail when it comes to merchants with enormous product catalogs. Many of those merchants need to offset low-margin high-demand items that carry a costly CPC, with the long tail of their catalog- which may deliver consistently higher margins, but carry a lower CPC.

Similarly, what to make of the specialty merchant, such as the small company which manufacturers rare helicopter replacement parts that sell at a very high ticket price, but which generate too little search demand to warrant the search engines to serve up a text ad? How does that company get to play?

It’s not a question for me to answer, but it is a question that will need to be resolved if we expect to get the full benefit that the long tail promises.