The Long Tail of Software?

We’ve heard so much (and too much) regarding the long-tail of content. . . books, blogs, podcasts, videos. .. but is there such as thing as a software long-tail? I would say so, but the harder question to answer is that “is there money to be made in the tail?” The deeper and more important question on the economics of the software long-tail is that

1) can money be made in creating a marketplace/aggregator for software (big head + long tail)?

2) can publishers of niche software (tail) make enough money through such a marketplace?

Apparently many people think so.

In the last few weeks, Vector Capital’s purchase of WinZip, Yahoo!’s acquisition of Konfabulator, and finally’s announcement of Multiforce all points to one emergent thought that the software tail is where the money will be.

Almost 10 years ago, the consensus was that there really isn’t big money to be made in creating applications for the Windows platform especially in consumer applications. (and also because NT hasn’t really made inroads beyond the work stations market). The general wisdom was that whatever you create/code Microsoft will eventually “embrace & extend” it to death if the market is big enough. . . (actually, mainly just give it away for free). Whatever is left, Symantec will scrap up as if Microsoft has an implicit understanding with Symantec to let it protect its flank in return for some market share. This was even more so after Office blew away wordstar, Ami Pro, wordperfect, Lotus 1-2-3 etc.

Of course the world changed when. . .

1. The internet arrived and brochure websites became web apps

2. Intuit Rebel Alliance was able to beat back Microsoft Evil Empire

Given more opportunity, and increased confidence . . . entrepreneurs and VC’s began to fund consumer plays (which eventuall let to e-commerce companies) more often resulting in the last consumer bubble and todays’ web 2.0.

This has been happening for quite some time now, but no VC really jumped into a market where they considered themselves part of the tail. They were still out trying to hit homeruns trying to find a market large enough (the head) for that multi-billion $ play.

But now, it seems like VC’s, entrepreneurs, and companies are getting more and more intrepid, willing to bet into any part of that long-tail meme.

Konfabultor was a collection of tail/niche applications waiting for a player with critical mass of users and more a broad portfolio of mass-appeal applications (& content) to acquire it and really unlock its value.

Vector is perhaps hoping the change in economics of the business (be it micro-payment, software subscription, increase distribution through aggregators) might enable to it finally monetize the WinZip user base.

Salesforce is making an even headier bet. That it wants to be the aggregator/marketplace of choice for hosted applications. By building a platform (which I hoped an open source version will one day appear) with basic services (authentication, hosting, application server, payment, provisioning etc), hopes to be able to become what

eBay is to “stuff”

Netflix is to video

Napster/iTune is to music

xxx is to Podcast

blah blah is to blah (cause everything is a long tail?)

So lets celebrate sofware’s arrival at the long-tail party and wish them good luck.