Giving the Niche a Chance

Most real world vendors are restricted in what they can sell: they can only have so much space on their shelves and best business practices dictate that the most profitable action is invest in what is most likely to sell. Some products are too costly to produce or have too small a demand to justify ordering. As the internet evolved, most businesses adapted in order to take advantage of its features.

Being online allows vendors to sell products without physically having them on hand. The lack of such a restriction means the service can easily stock on a wider range of products, effectively allowing a vendor to supply to a wider array customers. Where there is demand, but not as much as the most popular products, is known as the Long Tail of an audience. Theoretically, all the less popular products combined are just as profitable as the "head" of sales.

The "Long Tail" is in yellow. Theoretically, all the less popular products
combined are just as profitable as the "Head" of sales.

One Web 2.0 pattern is to take this a step further: they aim to make the long tail more accessible and viable in order to exploit it. The easiest method to accomplish this is to allow users to sell their own products through the application. Akin to Innovation in Assembly,  those who utilise the service to sell their products share the same community as their customers. Ideally, the community should be able to meet its own demand.

Valve benefits especially from this pattern with its application Steam. Steam provides games, allowing customers to download, play, socialise and even keep their save data online. If a user makes a purchase, they have the ability to download the game as many times as they want (as long as their internet connection is capable, at least). While Valve has released several games for Steam, they also allow other corporations and even independent developers to sell through the platform as well.

One vital feature about Steam is that it avoid any form of production costs: all of its software can be downloaded online. Because of this, Valve have seemingly infinite "shelf space." In the same vein, developers only need to produce one copy, one that can be shared to any buyers. With packaging and delivery out of the equation, the games have less costs and therefore are easier to profit from.

So the platform Steam allows enables developers big and small to profit, but that alone doesn't guarantee sales. Valve has been fair to most (if not all) of its participants, featuring new games big and small as they are released. This free publicity assists the niche market, giving it the strength needed to compete against the popular mainstream market.


References:
Ajeet Khurana, About.com, Advantages of Ecommerce
Jason Van Dyk, (2nd May 2010), Leveraging the Long Tail using Web 2.0
Wikipedia, Long Tail article, retrieved 4th May 2012
Valve Steam Webpage