The basic principle stands: Netflix pours billions into expensive content, while YouTube taps the world’s creativity.

Netflix is a business built on heavy-hitters (expensive productions like Stranger Things, The Witcher, and Squid Game), while YouTube is built on volume—500 hours of video are added every minute. YouTube is built on the long tail.

The concept of the long tail was popularized by Chris Anderson in an October 2004 article in WIRED.

“Forget squeezing millions from a few megahits at the top of the charts. The future of entertainment is in the millions of niche markets at the shallow end of the bitstream.”

The concept of the long tail remains one of the best investing frameworks for internet companies. Many of the most successful technology companies in history have been built on the long tail.

One of the powers of the long tail is its ability to expand selection. Amazon might be the best example.

for long tail companies to succeed, they need to ensure that niche products are in stock when you need them

When more selection is available, customer preferences and interests become much more readily apparent than when tastes are curated by a handful of executives.

Another facet of the long tail—paired with this greater selection—is that the long tail helps customers discover new products.

Recommendations (and paid placement) on Amazon dictate the flows of billions of dollars spent on commerce; Netflix and YouTube algorithms shape culture; and Spotify’s recommendation-based playlists move music.

The two major categories for the long tail framework are content and commerce.

TikTok relies heavily on remix culture, allowing people to build on each other’s sounds and trends; this removes the friction to create that exists even with robust creation tools (“What video should I make?”) and leads to a stunning amount of creativity.

As creation gets even easier, the long tail will continue to lengthen.

Innovations like Midjourney, DALL-E, and StableDiffusion—which provide text to image AI generation—may unlock new levels of creativity and expression. This will shift content even more away from the handful of big-budget hits, and more to the long tail of creators.

There’s one characteristic that many of the most successful internet businesses share: they create more jobs through their platform than the company could ever directly employ.

Chris Paik calls this “off-balance sheet operating leverage.” Can a company enable an entire ecosystem to form on top of it? Companies that have off-balance sheet operating leverage are often the companies that rely on the long tail.