The phrase The Long Tail was first coined by Chris Anderson in an October 2004 Wired magazine article to describe the niche strategy of certain business such as Amazon.com or Netflix. The distribution and inventory costs of those business allow them to realize significant profit out of selling small volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items. The group of persons that buy the hard-to-find or "non-hit" items is the customer demographic called the Long Tail.

Given a large enough availability of choice and a large population of customers, and negligible stocking and distribution costs, the selection and buying pattern of the population results in a power law distribution curve, or Pareto distribution, instead of the expected normal distribution curve. This suggests that a market with a high freedom of choice will create a certain degree of inequality by favoring the upper 20% of the items ("hits" or "head") against the other 80% ("non-hits" or "long tail").

Ken McCarthy addressed this phenomenon from the media producers' point of view in 1994. Explaining that the pre-Internet media industry made its distribution and promotion decisions based on what he called lifeboat economics and not on quality or even potential lifetime demand, he laid out a vision of the impact he expected the Internet and consumer choice would have on the structure of the media industry, foreshadowing many of the ideas that appeared in Chris Anderson's book "The Long Tail: Why the Future of Business is Selling Less of More"

The Long Tail concept has found a broad ground for application, research and experimentation. It is a common term in the on-line business and mass media, but also of importance in micro-finance (see Grameen Bank), user-driven innovation (Eric von Hippel), market mechanisms (for example: crowdsourcing, crowdcasting, Peer-to-peer), economic models and marketing (viral marketing).

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