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What makes books different…


Before the digital age, retailers that tried to sell across media were pretty rare. Barnes & Noble added music CDs to their product mix when the era of records and cassettes had long passed. Record stores rarely sold books and, if they did, tended to sell books related to an interest in music. For those stores, it wasn’t so much about combining media as it was about offering a defined audience content related to their interest, like Home Depot selling home repair books. For the most part in pre-Internet times, books, music, and video each had its own retail network.

But when media became largely digital in the first decade of the 21st century, the digital companies that decided to establish consumer retail tried to erase the distinction that had grown up dividing reading (books) from listening (music) from watching (movies and TV). The three principal digital giants in the media retailing space — Amazon, Apple, and Google — all sell all these media in their “pure” form and maintain a separate market for “apps” as well that might contain any or all of the legacy media.

The retailing efforts for all of them are divided along legacy media lines, acknowledging the reality that people are usually shopping specifically for a book or music or a cinematic experience. Most are probably not, as some seem to imagine, choosing which they’ll do based on what’s available at what price across the media. (This is a popular meme at the moment: books “competing” with other media because they are consumed on the same devices. Of course, only a minority of books are consumed on devices, unlike the other media. Even though this cross-media competition might be intuitive logic to some people, it has scarcely been “proven” and, while it might be true to a limited extent, it doesn’t look like a big part of the marketing problem to me.)

It seems from here that Amazon and Barnes & Noble have a distinct advantage over all their other competitors in the ebook space because, with books — unlike movies and TV and music — the audience toggles between print and digital. And this might not change anytime soon. The stats are scattered and not definitive, but a recent survey in Australia found that ninety-five percent of Australians under 30 preferred paperbacks to ebooks! Other data seem to indicate that most ebook readers also read print. To the extent that is true, a book shopper — or searcher — would want to be searching the universe of book titles, print and digital, to make a selection.

It should be more widely understood that the physical book will not go the way of the Dodo nearly as fast as the shrink-wrapped version has for music or TV/film. It hasn’t and it won’t. There are very good, understandable, and really undeniable reasons for this, even though it seems like many smart people expect all the media to go all-digital in much the same way.

Making the case that “books are different” requires me to unlearn what I was brought up to believe. My father, Leonard Shatzkin, used to ridicule the idea that “books are different”, which was too often (he thought) invoked to explain why “modern” (in the 1950s and 1960s) business practices like planning and forecasting and measuring couldn’t be applied to books like they were to so many other businesses after World War II. In fact, Dad shied away from hiring people with book business experience, “because they would have learned the wrong things”.

But in the digital age, and as compared to other media, books are definitely different and success in books, whether print or digital, is dependent on understanding that.

First of all, the book — unlike its hard good counterparts the CD (or record or cassette) and DVD (or videotape) — has functionality that the ebook version does not. Quite aside from the fact that you don’t need a powered device (or an Internet connection) to get or consume it, the book allows you to flip through pages, write margin notes, dog-ear pages you want to get back to quickly, and easily navigate around back and forth through the text much more readily than with an ebook. There are no comparable capabilities that come with a CD or DVD.

Second, the book has — or can have — aesthetic qualities that the ebook will not. Some people flip for the feel of the paper or the smell of the ink, but you don’t have to be weirdly obsessed with the craft of bookmaking to appreciate a good print presentation.

But third, and most important, is the distinction about the content itself. When you are watching a movie or TV show or listening to music through any device, the originating source makes only the most nuanced difference to your consumption experience. Yes, there are audiophiles who really prefer vinyl records to CDs and there probably are also those who will insist that the iTunes-file-version is not as good as the CDs. And everybody who has watched a streamed video has experienced times when the transmission was not optimal. There are almost certainly music and movie afficionados who will insist on a hard goods version to avoid those inferiorities.

But the differences between printed books and digital books are much more profound and they are not nuanced. In fact, there are categories of books that satisfy audiences very well in digital form and there are whole other categories of books that don’t sell at all well in digital. That is because while the difference between classical music and rock or the difference between a comedy and a thriller isn’t reflected in any difference between a streamed or hard-goods version, the difference between a novel and a travel guide or a book of knitting instruction is enormous when moving from a physical to digital format.

For one thing, the book — static words or images on a flat surface, whether printed or on a screen — is often a presentation compromise based on the limitations of “static”. The producer of a record doesn’t think “how would I present this content differently if it is going to be distributed as a file rather than a CD?” But the knitting stitch that is shown in eight captioned still pictures in a printed book could just as well be a video in an ebook. And it probably should be.

In fact, this might be the use case for which a consumer would make a media-specific decision. If you know what knitting stitch you need to learn, searching YouTube for a video might make more sense than trying to find instructions in a book!

Losing the 1-to-1 relationship between the printed version and the digital version adds expense and a whole set of creative decisions that are not faced by the music and movie/TV equivalents. And they are also not a concern for the publisher of a novel or a biography. But these are big concerns for everybody in the book business who doesn’t sell straight-text immersive reading. The point is that screen size and quality are not — and never were — the only barriers in the way of other books making the digital leap.

So even though fiction reading has largely moved to digital (maybe even more than half), most of the consumer book business, by far, is still print. Even eye-catching headlines like the one from July when the web site AuthorEarnings (organized and run by indie author Hugh Howey, who is a man with a strong point of view about all this) said “one in three ebooks” sold by Amazon is self-published, might not be as powerful at a second glance.

Although Howey weeds out the ebooks that were given away free, the share of the consumer revenue earned by those indie ebooks would be a much smaller fraction than their unit sales. The new ebooks from big houses, which is a big percentage of the ebook sales they make (and that AuthorEarnings report in July said the Big Five still had an even bigger share of units than the indies), are routinely priced anywhere from 3 to 10 times what indie ebooks normally sell for. So that “share” if expressed as a “share of revenue” might be more like five or ten percent. It really couldn’t be more than 15%.

(In fairness to Howey, he tries to make the point that indie authors earn more from lower revenue because their cut is so much bigger and he makes the argument that they are actually earning more royalties than the big guys. He also tells me that he calls some S-corp and LLC publishers “uncategorized”, even though they are almost certainly indies, in his own attempt to be even-handed. In fairness to the industry, I will point out that his accounting doesn’t take unearned advances into consideration, and since most sales of big house ebooks are of authors who don’t earn out, that lack of information really moots the whole analysis about what authors earn. Another big shortcoming of the comparison is that most published authors are getting a much more substantial print sale than most indie authors.)

But indie authors on Amazon are the industry high-water mark of indie share and ebook share. They are almost entirely books without press runs or sales forces, so they are almost entirely absent from store shelves. And they are also entirely narrative writing.

The facts, apparently, are that even heavy ebook readers still buy and consume print. There is not a lot of clear data about whether “hybrid readers” make their print-versus-digital choice categorically or some other way. There is some anecdata suggesting that some people read print when it is convenient (when they’re home) and digital when it is not. There are a number of bundling offers to sell both (offered by publishers and one called “Matchbook” from Amazon), which certainly seems to say that publishers believe there’s a market of people who would read the same book both ways at the same time!

What that all would seem to say is that the retailer selling ebooks only is seriously disadvantaged from getting searches for books from the majority of readers.

Do we have any independent evidence that selling to the digerati only — selling ebooks only — might limit one’s ability to sell ebooks? I think we do. It would appear that B&N has sold roughly the same number of Nooks as Apple has iPads. (This equivalence will probably not last since Nook sales seem to be in sharp decline.) That is somewhat startling in and of itself, since Apple is perhaps the leading seller of consumer electronics and B&N was entirely new to that game. Nook also seems to have — at least for a while — sold more ebooks than Apple. (This “fact” may also be in the rear view mirror with the apparent collapse of Nook device sales.) I will be so bold as to suggest that this is not because Nook has superior merchandising to the iBookstore. More likely it is because the B&N customer is a heavier reader than the Apple customer and prefers to do his or her book shopping — and even his or her book device shopping — with a bookseller.

[Correction to the above paragraph made on 11 Sept. I misheard and therefore misreported something that was caught by a reader in the comments below, but I should also correct here.  Apple has sold ~200M iPads but are only roughly 12% of the ebook market whereas B&N has sold only about 1/20th the number of Nooks and are about 18% of the ebook market. That fact makes little sense to anyone in Silicon Valley but speaks to how book audiences really behave. We all know a very high % of Nook owners are active store buyers.]

There is one more huge distinction between books and the other media and it is around the motivation of the consumer. While sometimes TV or movies might be consumed for some educational purpose, most of the time the motivation is simply “entertainment”, as it is with music. While analysis of prior video or music consumed and enjoyed might provide clues to what should be next, figuring out what book should be next is a much more complex challenge.

And the clues don’t just come from prior books consumed and enjoyed. Books are bought because people are learning how to cook or do woodworking, or because they are traveling to a distant place and want to learn a new language or about distant local customs, or because they are going to buy a new house or have suddenly been awakened to the need to save for retirement. You can’t really suggest the next book to buy to many consumers without knowing much more about them than knowing their recent reading habits would tell you.

But not only do (most of) the ebook-only retailers not know whether you’re moving or traveling, they don’t even know what you searched for when you were looking for print. And, even if they did know, operating in an ebook-only environment would make many of the best suggestions for appropriate books to address everyday needs off limits, because many of those books either don’t exist in digital form or aren’t as good as a YouTube video to satisfy the consumer’s requirements.

Indeed, it is the sheer “granularity” of the book business — so many books, so many types of books, so many (indeed, innumerable) audiences for books — that makes it so different from the other media.

Of course, there is one company — Google — that is not only in the content business and the search business but which also handles “granularity” better than any company on earth, down to the level of the attributes and interests of each individual. Google not only would know if you were moving or traveling, they would be in a great position to sell targeted ads to publishers with books that would help consumers with those or a million other information needs. (They also know about all your searches on YouTube!) But because Google’s retailing ambitions are bounded by digital, they are walking past the opportunity to be the state-of-the-art book recommendation engine. They’re applying pretty much the same marketing and distribution strategy across digital media at Google Play. They aren’t seeing that book customers are both print and digital. They aren’t seeing that books are, indeed, different.

When the day comes that they do, this idea will look better to them that it might have at first glance.

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This is a teamwork play that could really give Amazon a headache if they got together


I will admit that I have long been among those who believe that Amazon has what amounts to an enduring stranglehold on the book business. They have achieved a market share — which could be in the neighborhood of half the trade books sold if you combine print and digital versions — that is unprecedented in book business history. This is a smaller share than the two giant bookstore chains — Barnes & Noble and the now-defunct Borders — had combined at the peak of their marketplace power.

Lately, I have seen that point of view challenged. Jake Kerr wrote a very thoughtful piece making the point that Amazon’s desire to take margin out of the ebook business is a good defensive move that diminishes the appetite of their mega-company ebook competitors — Apple, Google, and, less so, Microsoft — to invest in beating them back. Suw Charman-Anderson picked up on the theme that Amazon is being defensive, “looking tired”, and found others who seemed to think the same way. Both of them express doubts about Amazon’s continuing hegemony without even using one powerful argument I think is important. Amazon is protected from ebook competition by the inability of competitors to put DRMed content onto dedicated Kindle ereader devices. (Another barrier is that so many early ebook adopters did so via a Kindle account, so their content and login credentials are in the Amazon platform along with a lot of other shopping data that raises the switching hurdle.) But the share controlled by dedicated devices is diminishing and anybody reading on a multi-function device can choose from a range of ebook retailers. (And that’s not to mention that somebody might invent a way to place protected content on Kindles without Amazon’s help; rumors have it that somebody already has!)

Contemplating Amazon’s weaknesses is new thinking for me. What I see is Amazon’s power over the book business, which is great. Amazon has achieved this position through smart and efficient operations and brilliant tactics like Amazon Prime that build customer loyalty, as well as being beneficiaries of the natural migration of sales from brick stores to online. But, most of all, Amazon benefits from its broad business base. They don’t have to support their business exclusively, or even substantially, from their book sales margin. And, on top of that, they don’t have to finance the building and maintenance of a global operation strictly from what they earn in the United States.

So they trump everybody. Barnes & Noble, their only competitor selling both print and digital books, seems to have stalled in its bid to build a rival global empire with the Nook device as the leading edge. Their lack of stores outside the US robs them of the main tool they used to build Nook from a standing start to what seemed for a while to be a serious threat to Kindle and the consequent lack of global scale is hobbling their Nook business. The US stores are still profitable as print-sellers, but very few are those who maintain that print-in-stores is anything but a declining market. (As for BN.com, the less said the better. Of the four principal components of B&N’s business: bookstores, college stores, Nook ebooks, and their online retailing operation, the most dramatic and persistent failure has been BN.com.)

Kobo, Apple, and Google are all ebook purveyors only with no print book complement. Kobo has nominally tried to deliver a combined offering, and claimed some store support to sell their devices, by making alliances with leading local booksellers in many markets. Apple, a company primarily interested in selling its hardware and the ecosystems it builds around them, has no apparent interest in print. Google appears to have hit on a broader variation of the Kobo strategy, making alliances with physical retailers by offering a combination of its power in search and a same-day delivery capability called Google Shopping Express — competing with Amazon Prime — that retailers in a single vertical couldn’t deliver for themselves.

Under that rubric, Google is now allied with Barnes & Noble. But I see this as an initiative with the accent on the wrong syllable. The combined companies’ offering is only of real value applied to the small number of book purchases for which same day delivery adds substantial utility (and for which the digital version — always delivered instantly — doesn’t constitute an adequate solution for the need for speed). They are further limited by the books available in the particular B&N store plugged into the program in each locality and each store carries far fewer titles than the chain does as a whole. So the number of books customers will need delivered with that alacrity will be further reduced by the imperfect match between the demand and what’s available. Even if this program steals a high percentage of the same-day demand sales from Amazon, I’m not sure how much it would shift market shares. And with Amazon also offering rapid delivery and probably around a greater number of titles, it is not a given that the new offering from Google and B&N will steal much market share at all.

That doesn’t make it a bad move. The sales and visibility are incremental pluses for Barnes & Noble. Google’s new Google Shopping Express has a business model into which B&N fits very nicely. Books are a nice-to-have additional product line to offer within that service, designed to compete with Amazon’s growing same-day goods delivery. This is a fight between two behemoths that is much larger than the book business (as it has to be to interest them). B&N has a role to play, but it is a supporting position, not a lead.

From where I sit, this offering from Google and B&N doesn’t look like a game-charger for the book business. Nothing about it would seem to threaten Amazon’s overall (and still growing) hegemony in book retail. The migration of sales from print to digital and from stores to online has clearly slowed down, perhaps even plateaued, in the past year or two but few are those who believe those trends are permanently over.

Google is on a right track with Google Shopping Express; people who buy physical goods use Google search to find them and see Google ads when they do. But going after the smallest corner of the print book business — those books on which 6-hour delivery presents a very big advantage over 24-hour delivery — is not going to bend the curve much on Amazon’s future, even if it provides some marginal benefit to B&N and Google.

But there is a different combination that could give Amazon a real headache. There are two companies that together could deliver print and digital, just about anywhere in the world with competitive delivery speed, with discovery capability that would rival Amazon’s as well. Between them, they really have almost all the capabilities and infrastructure required already in place.

One of those companies is, of course, Google.

The other is Ingram, the book business’s biggest US wholesaler and, through its present activities already providing global digital and print distribution as well as print-on-demand. Ingram is positioned to deliver any book in any form anywhere extremely efficiently. They also have a robust and accurate database of book metadata which, if combined with Google’s data and search mastery (and capabilities that match Amazon’s “Search Inside” offering as well), could challenge Amazon effectively as a “best first place to look” for any information about books.

What Google needs to take on board to make the strategic leap to explore a partnership like this is that most book consumers read both print and digital and probably will for some time to come. It will get harder and harder to compete with Amazon without a print-and-digital offering; you can’t be fully effective with either one unless you do both.

And it would help if Google saw the book business as distinctly different from the other media businesses that with books constitute Google Play. The differences play to and can enhance Google’s core strength. Book marketing is almost infinitely granular, because the number of possible motivations to buy a book are so great in number. Rarely do you buy music or video because of where your next vacation will be or because you want to put a new roof on your house or change careers. Associating specific book suggestions to discerned interests and motivations is the key to effective book marketing in the digital environment. And the insights about any individual by analyzing their book search also can tell you what else they may be looking for. Nobody does those things better than Google. They have limited impact on the ability to suggest music or movies, but enormous value in selecting what books to feature to any particular customer at any particular time and what else they can be sold after they’ve bought a book.

A Google-Ingram partnership would not only start with every capability necessary to compete with Amazon as a global bookseller, they would have some additional Secret Sauce as well. Google and Ingram wouldn’t actually have to make money on the combined retailing component because they make money other ways that are associated with it. Google would be adding incremental search and ad placement opportunities. Ingram would be benefiting as a wholesaler providing all the print books and many of the ebooks the new “store” sells. They could make nearly nothing from the new retailing operation, just like Amazon does with its book retailing operation, and still have the enterprise return a profit for their engagement.

A joint digital retailing enterprise to sell books and ebooks from Google and Ingram is the only possibility I can see on the horizon that would save the legacy publishing business from being entirely subject to Amazon’s inexorably growing marketplace power. It is almost certain that Ingram — part of the book business Amazon is so successfully disrupting — sees this very clearly. (Full disclosure seldom necessary in this space: Ingram has been a client of The Idea Logical Company for many years.) Being a hero to the book business may be a less immediate objective for Google, but making life a bit more difficult for Amazon almost certainly is. Nothing they could do would create more challenges for Amazon than a partnership with Ingram to create an all-media store that sells both physical and digital versions of everything, including and especially books.

Since I posted my last piece, triggered by Amazon’s invoking of Orwell and Streitfeld’s accusation that they got him wrong, two conflicting posts have arisen. I’m indebted to Hugh Howey for pointing out that apparently Orwell really did want to destroy cheap paperbacks but Orwell’s estate takes a different view. In fact, I don’t think which side got it right is particularly germane to the arguments I was making. The Orwell connection made a cute hook, but it is not really an essential part of either side’s story.

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It is hard for publishers to apply even Harvard B School advice in their struggle with Amazon


Harvard Business Review published an article recently by Benjamin Edelman called “Mastering the Intermediaries” which gives advice to businesses trying to avoid some of the consequences of audience aggregation and control by an intermediary. The article was aimed at restaurants who don’t want their fate controlled by Open Table or travel companies who don’t want to be beholden to Expedia. The advice offered is, of course, scholarly and thoughtful. It seemed worth examining whether it might have any value to publishers suffering the growing consequences of so much of their customer base coming to them through a single online retailer.

The author presents four strategies to help businesses reduce their dependence on powerful platforms.

The first suggestion: exploit the platform’s need to be comprehensive.

The author cites the fact that American Airlines’ strong coverage of key routes made its presence on the travel website Kayak indispensable to Kayak’s value proposition. As a result, AA negotiated a better deal than Kayak offered others or than others could get.

Despite some suggestions in the late 1990s that publishers set up their own Amazon (which they subsequently half-heartedly tried to do with no success) and a couple of moves to cut Amazon off by minor publishers that were minimally dependent on trade sales, this tactic has never really been possible for publishers on the print side. Amazon began life by acquiring all its product from wholesalers — primarily Ingram and Baker & Taylor — before they switched some and ultimately most of its sourcing to publishers to get better margin. But the publishers can’t cut off the wholesalers without seriously damaging their business and their relationships with other accounts, and the wholesalers won’t cut off Amazon. So for printed books, still extremely important and until just a couple of years ago the dominant format, this strategy is not worth much to publishers.

However, the strategy was and is employable for ebooks, which are sold via contractual sufferance from agency publishers, even if the sourcing is (sometimes, not typically by Amazon) through an aggregator. That was the implied threat when Macmillan CEO John Sargent went to Seattle in the now-famous episode in 2010 to tell them that ebooks would only be available on agency terms. Amazon briefly expressed its displeasure by pulling the buy buttons off of Macmillan’s print books. (Publishers can’t cut them off from print availability, but they can cut publishers off from print sales!) In the meantime, Amazon’s share of the big publishers’ ebook sales has settled somewhat north of 60 percent, and those Kindle customers are very hard to access except through Amazon. This is considerably more share than Kayak had when American Airlines threatened their boycott.

In fact, it is likely that Amazon could live without any of the Big Five’s books for a period of time, except for Penguin Random House, which is about the size of the other four big publishers combined. The chances are that PRH’s size will prevent Amazon from treating them the way they are now treating Hachette. And the massive share that Amazon has of both print and ebook sales makes it extremely difficult for Hachette, or any other big house except PRH and possibly HarperCollins, to sustain an ebook boycott (with consequent print book sales reductions) for any significant length of time. In other words, for publishers dealing with Amazon, this horse has left the barn.

Where it has not yet left the barn is with the ebook subscription services, and for them many publishers actually appear to be following the strategy being suggested here. Only two of the big houses have put titles into Scribd and Oyster, and it appears that they got extremely favorable sales and payment terms in order to do so. Indeed, these fledgling subscription offerings must have the big houses’ branded books to have a compelling consumer proposition.

The second suggestion is to identify and discredit discrimination.

The HBS piece cites the complaints that eBay was giving search prominence to suppliers who advertised on the site forcing a reversal of the policy.

Although the search algorithms on powerful platforms are ostensibly geared only to give the customer what they’re most likely to want, it is probably generally understood that these results are jiggered to favor the platform’s interest. It is not surprising that Google has underwritten White Papers from UCLA professor Eugene Volokh and from Supreme Court nominee Robert Bork defending that conduct. Volokh argues that the first amendment prevents the government from interfering with search results and Bork says nobody is harmed if Google favors its own interests.

Could we apply that same logic to Amazon? How about this scenario?

Amazon is well on its way if not already past the point where they sell more than half of the books Americans buy (combining print and digital). Book consumers are highly influenced by the suggestions made and choices surfaced by their bookseller, whether physical or virtual. That is: the process of buying books is inextricably linked to the process of discovering books. So Amazon is getting a stranglehold on recommendations which for many consumers also means a stranglehold on marketing and promotion.

The “damage” to society that results from results being gamed in fiction is probably minimal, and restricted to Amazon promoting either its own published titles, its favorite self-published authors, and books from other publishers that have paid to play. But, with non-fiction, the consequences could be much more severe and of real public interest.

Imagine a persuasive book arguing that the government should sharply increase the minimum wage and let’s also imagine that Amazon corporately doesn’t like that idea. Is it really okay if they suppress the awareness of that book from half or more of the book-buying public?

This is the kind of an argument that can arouse the government which, so far, has shown scarcely more interest in Amazon’s dominance of book commerce than they would if they dominated the commerce in soft drinks or lawn fertilizer. Can they be awakened by publishers to this concern before dramatic cases affecting public awareness and policy are documented? We don’t know, but we do know that Hachette sent lawyers to Washington early in the Obama Administration to call attention to Amazon’s growing marketplace power and their willingness to use it. That apparently had no affect (unless, in some perverse way, it contributed to the government’s interest in pursuing the “collusion” case).

There could certainly be some consumer blowback to the gaming of search results by a platform, perhaps including Amazon. The Harvard article says Google changed algorithms that seemed to be burying Yelp because consumer sentiment, partly measurable in search queries, showed dissatisfaction among the public. But in the absence of an aroused government, it would seem unlikely that this suggestion will do publishers large or small much good.

It is definitely worth noting here that Hachette authors are involved in just such an effort right now over the current Hachette-Amazon dispute. (And Amazon authors, also often called “indie authors”, are pushing back in the other direction.) There is a difference of opinion about how much this is “hurting” Amazon or whether it will push them to a quicker resolution of the dispute; I’m not sure anybody will ever know the answer to that.

The third suggestion is to create an alternative platform.

As the piece explains, when MovieTickets was on the verge of dominating phone and online ticketing, Regal Entertainment and two other large theater chains formed Fandango.

Unfortunately, this is a strategy that simply won’t work as an antidote to Amazon. In fact, trying it, which publishers have, demonstrates a failure to understand the source of Amazon’s power in the marketplace.

Amazon’s strategy is in plain sight and is the title of the best and most recent book about them: Brad Stone’s “The Everything Store”. Books had a central role in getting Amazon started, but have now declined to very likely less than 10 percent of their revenue and far less of their operating margin. Books are strategic for Amazon, but not commercially fundamental. This is one of the reasons, perhaps even the principal one, why they operate their book retailing on margins so thin that the incumbent book retailers can’t match them. After all, B&N can’t make up the margin shortfalls created by offering books cheaply by selling that same customer a lawnmower. Nor do they benefit from additional scale provided by selling lawnmowers or cat food or server space.

The fact that Amazon did book retailing in a thorough and sophisticated way as they established their business to become an online Walmart made them different from omni-retailers in the past (going back to departments stores a hundred years ago) who sold some books.

The story has been told on this blog before about Amazon cutting prices more than fifteen years ago to discourage competition coming into the market. Although publishing is a profitable business for them, it is also a strategic component of larger objectives: getting an increasing share of its customers’ purchases across a range of physical products as well as to compete as a streaming content provider across the entire range of digital media.

No enterprise focused primarily on books can compete with that. Amazon takes too many customers off the table before whoever else is competing gets to begin and keeps them for a wide range of reasons. They’ve got the most admirable competitive position conceivable: a first-class operation supported by scale provided by myriad other enterprises, totally wide-ranging and broad knowledge of the details of book retailing, and the financial heft to accept diminished (or even negative) margins from time to time to support strategic objectives.

So, Bookish, the attempt to compete (although that objective was not explicitly stated) forged by three major publishers more than a decade after Ingram’s I2S2 attempt to create a broader base of online retailers, was never a serious threat. (It is now owned by another Regal, Joe Regal, whose Zola Books — an ambitious upstart ebook retailer — bought Bookish, apparently for its recommendation engine, from the publishers.)

This is probably the 20th year in a row, dating from their start in 1995, that Amazon has gained market share for sales of books to consumers. And that’s because consumers are making what for them is the obvious choice for convenience, total selection, and competitive pricing, as well as getting tied into Amazon through their PRIME program. Unless one of the other two tech giants in the bookselling world — Apple or Google — decides to make a dedicated effort to take some of that market share away from Amazon in both print and digital (and neither of them is much interested in print), it is hard to see where a serious competitor can come from.

As of this moment, there is no way for any ebook retailer except Amazon to put DRMed content on a Kindle, which eliminates a big part of the audience from play for any competitive platform.

The fourth suggestion: deal more directly. The article points out that people ordering takeout through online platforms like Foodler and GrubHub have often already chosen their restaurant so that restaurants that deal directly can afford to exit the platform.

As I was working on this post, HarperCollins announced that they have redesigned their website to be consumer-facing which enables them to sell books directly to consumers. They’ve collaborated with their printer-warehouse partner, Donnelley, to handle print book fulfillment and have a white-label version of indie ebook platform Bluefire to deliver ebooks. They promise that authors will be able to use the capability very easily to connect their own web presences and they’re thinking about additional compensation to authors that generate those sales.

This bold move has a hole in it, though, and it is one that publishers so far have no easy way to fill. All the non-Amazon platforms use Adobe DRM, which HarperCollins/Bluefire supports, so they can put your ebook on a Nook or Kobo device with copy-protection. Of course, they have their own “reader”, which can be loaded with ease on most web-capable devices and can apparently also be squeezed onto a Kindle Fire. But, because HarperCollins wants to continue to use DRM protection for the content, they won’t be able to sell directly to users of Kindle devices that are dedicated e-readers.

Although publishers have certainly encouraged that competition to Amazon which exists, their direct efforts have for the most part been limited to cultivating direct interaction with the end user audience to influence awareness and selection. Many smaller publishers are willing to sell direct without DRM and other large publishers sell direct in a more restrained way, but this seems to be the first concerted effort by a major player to drive direct sales.

It will be interesting to watch the pricing interaction between Harper and Amazon and whether Harper can come up with “specials” (bonus content, some connection to the author, bundling) that Amazon or another retailer can’t match. Competing on price is the retailer’s first instinct, but for publishers competing with Amazon on price is a fool’s errand, fraught with the potential for retaliation in many ways (including that “discounts” from publishers, the retailers’ margin, is presumably based on the publisher’s price. What does “publisher’s price” mean if they sell for less?)

But HarperCollins doesn’t need to get a big volume of direct sales for this to be a worthwhile initiative for them. I’d expect it to be copied. Any sales they can get directly increase their power in the marketplace.

There is one other initiative we’re aware of that can perhaps help publishers disintermediate Amazon for direct sales. That’s Aerbook, which widgetizes a book or promotional material for a book so that it can be “displayed” in any environment. Aerbook’s widgets can contain the capabilities for transacting or for referring the transaction to a retailer, Amazon or anybody else. Putting the awareness of the book directly into the social and commercial streams can be a big tool for authors and publishers. But even Aerbook can’t put a DRMed file on a Kindle. They offer a version of “social DRM” — essentially “marking” the ebook in a way that identifies its owner — which can be loaded onto the Kindle. But big publishers and big authors have apparently not yet come to a comfort level with that solution; perhaps the need to get to the Kindle customer directly and the experience Aerbook develops with their method will encourage a more open mind on that question over time.

So, it would seem, the best thinking presented by Harvard Business Review for how producers and service providers can dodge platforms trying to lock in their audiences has precious little that can be usefully applied by publishers to escape the grip of Amazon. Having taken about half the retail book market over the two decades of their existence, they have given themselves a reputation, tools, and momentum that will make it very hard to stop them from eating into the other half substantially in the years to come.

The fact that competing with Amazon is difficult doesn’t stop smart people from trying to figure out how it might be done. A group of publishing thinkers are holding a 2-day brainstorming session at the end of this month to come up with ideas. Two of them, Chris Kubica and Ashley Gordon, will be presenting at a session at Digital Book World in January called “Blue Sky in the ebook future”, which will include thoughts on how to improve the narrative ebook itself from Peter Meyers and somebody not yet chosen to speak about complex ebooks.

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Wondering whether printed books will outlast printed money, or football


When you’re trying to figure out what will happen in the book publishing business in the years to come, any prediction depends on how things work out that are beyond the control of the business, and sometimes well outside it. This will be increasingly the case if the book business, in what has remained a fairly lonely expectation of mine, is increasingly the domain of people who aren’t publishing or selling books as a primary commercial activity, but as an adjunct or complement to some other principal objective.

This past Sunday’s New York Times tackled the question of disruptive change in the world in general with a graphic report created by Claire Cain Miller and Chi Birmingham, based on the predictions of a panel of expert technologists and futurists. They asked four questions:

What far-off technology will be commonplace in a decade? Among the suggestions were that we’d see thousands of drones, chips implantable in humans that would deliver access to all one’s devices, and personalized medicines crafted to your specific DNA.

What industry will tech put out of business next? Among those predicted to meet their demise were higher education, the auto industry from drivers to mechanics, airline pilots, and consumer banking.

What technology will seem antiquated in a decade? The nominees here included email, computer keyboards, chargers, keys, and cash!

What is the next issue to undergo a sea change in social acceptance? Future targets from currently acceptable endeavors include football, factory animal farming, and ubiquitous recording and surveillance.

That’s quite an agenda for the next ten years.

There is logic behind all these predictions and the list of those contributing thoughts is stellar, but I daresay few of them are based on data as much as on insight. There’s no data to predict the end of wired charging or banks, or even to predict that football will become massively scorned. But there are straws in the wind for all of them.

So it is when we think about the future of publishing. There are things we simply can’t know for sure, subjects about which a range of outcomes over the next ten years is certainly possible, that will have a profound effect on what book publishing will look like — as an industry and more broadly as an activity — in ten years.

Here are some of the key questions, to which I’m quite convinced nobody can be sure of the answers, that will affect what publishing will look like ten years from now.

How persistent an activity is immersive long-form reading? There are all sorts of threats to it. Perhaps it is needed more than ever as an escape from the ever-more-intrusive demands of connected daily life, but it is also undermined by the accelerating pace of everything else. It is hard to discern this because each person’s personal reading patterns change over a lifetime. We’ve always sold more books to older people than younger ones, with exceptions for cultural phenomena that sweep through the young (Harry Potter, Hunger Games, Twilight). Long-form reading has always been required in schools, but as humanities increasingly take a back seat to more “practical” education, can we count on that continuing? It seems hard to build a case that long-form reading won’t be reduced per capita because of the ready availability of so much else and an increasing societal tendency toward short attention spans. (And that last is my impression, not one I can defend with data.)

As my generation is replaced with digital natives, a decline in the market for novels would seem to be a very likely consequence. Or, at least, novels as we know them now.

How persistent is the demand for printed books for long-form reading? The ebook revolution is in its seventh year, if dated from the launch of the Kindle, which was when explosive growth began. Over the past year or two, the explosive growth has stopped and there is the belief in some quarters that many consumers are still expressing a preference for printed books for long-form reading over digital ones. That’s probably true. A recent Harris Survey of Internet-connected adults said that 46% exclusively read print books and only 6% only read ebooks. The remaining 48% are pretty evenly divided among those who read more print, those who read more ebooks, and those who read about the same number of each.

My hunch, again offered without the support of meaningful data (because there would be none), is that ebooks will continue to take share from print for long-form reading, in fits and starts, but inexorably. The logic behind that conjecture is simple and two-fold. One side of it is that the print book experience won’t improve and the ebook experience will. With the first blush of fascination with “enhancing” ebooks by the insertion of distractions passing and real enhancements (the static dictionaries improved into author-built glossaries, improved bookmarking and page-flipping navigation, excerpt-sharing enabled) bound to become more common, there will become more and more reasons to prefer the digital version. (Even the killer app of print — the ability to write notes or underline — will ultimately be digitally-enabled in a ubiquitous way.) The other reason is that the proliferation of (mostly ebook) titles in the marketplace, hand in hand with diminishing shelf space for (mostly printed) books in stores, will increasingly drive online purchasing, which favors ebooks over print.

It wouldn’t take a big change year-to-year for the numbers of exclusive print readers and exclusive ebook readers to be reversed over the next decade with half continuing to do some of each. Since each reader shifting her preference from print to digital further undercuts the support for shelf space, you have (depending on your point of view) a virtuous circle driving ebook growth or a vicious cycle working against print. And against stores.

How well do informational illustrated books compete with alternatives? The informational illustrated book business, largely instructional, has not fared well in digital form. While the share of ebooks for immersive reading has generally ranged from 20% to more than 60% depending on the subject or genre, the numbers are a sliver of that for illustrated books. This has put pressure on illustrated book publishers to make the most of stores, to find direct paths to their customers, and to make the most of the global opportunities for print sales. My candidate for a Black Swan here is some industrial-strength attempt to curate the vast amount of video and other Internet-based content into “packaged” competition for books that teach skills. Just as MOOCs are disruptive to colleges and educational publishing (note the prediction in the Times story that higher education would be “put out of business” in the next ten years), the dagger that will prove mortal to much illustrated publishing may already exist.

Visuals and illustrated books and doing the things people use illustrated books to do (knit, garden, decorate a room) are not my personal milieux, as everybody who knows me personally will attest. But I’d suggest there’s a business out there with which I personally promise never to compete — assembling the library and creating the directory of the publicly-available material that would substitute for these books. Somebody’s going to do that in the next ten years. Here’s an example of something that points in the right direction, but I don’t think can solve the problem in the way I’m describing. Other nods to this idea exist in many verticals, albeit most likely in less-cohesive forms — wikiHow, Google searches, YouTube playlists, internet discussion boards and forums — but they really only hint at the solution I’m imagining.

How much of the creation and selling of books spreads beyond the book business? One of the leading Anglo-American CEOs pointed out to me many years ago that the day had passed when he could just call the CEO of his biggest accounts to discuss a problem. Retailing of print books requires Amazon, for whom it might be 10% of their total business and Walmart (is it 1% of theirs?) in the US, supermarkets in the UK. Global retailing of ebooks, with everybody in the publishing business rooting for Barnes & Noble to crack this, is in the hands of four companies — Amazon, Apple, Kobo, and Google — all of which employ book retailing as a strategic component of a larger endeavor.

So far, the publisher side of the value chain has not been affected by the same phenomenon, but I think it will be, in a very different and more disparate way. The concept of “content marketing” hasn’t really discovered the book business yet, but it will. Athough there are a handful of exceptions, today they are just the straws in the wind that indicate the possibilities.

I’m sure that in less than five years every multi-million dollar marketing plan will have an ebook component: sometimes free, sometimes freemium, sometimes paid. Over time the businesses that do this work will learn, probably faster than many book publishers, how to use the online discovery mechanisms to drive the attention of relevant consumers. And part of what could be a tsunami of new competition is driven by another reality: anybody who creates content for any other (usually advertising-supported) audience can carve up or recombine or represent their content as a competitive book product. It takes an organization and much more sophisticated expertise around subscription management and advertising for a book publisher to do online magazines (although it is a reasonable thing to try).

Because of self-publishing authors and public domain title miners, the new titles currently flowing into the marketplace are already coming more from non-traditional publishers than from the establishment, creating an ever-growing challenge around discovery and branded authority. If an ebook publishing program becomes a standard component of branding and corporate and consumer marketing over the next ten years, the new competitors to publishing as we’ve known it will be coming from a flood of well-marketed content whose purveyors may not have to make a profit from it. Imagine what happens to fiction publishing if Hollywood figures out that ebooks and marketing them is a far better development tool for a motion picture or TV show than the fourth rewrite of a script!

Ten years is a long time and a long time allows for some pretty radical predictions. Last week I was on a subway platform with hundreds of people, noticing that virtually all of them were looking down at a device in their hands. I was thinking, “my Dad died in 2002, he never saw this. My Mom died in 2007, she never saw this.” Ten years ago, I think few would have predicted that the number of people on a subway platform looking at devices would outnumber those reading newspapers by 50-to-1 or more. Maybe ten years from now we won’t have keys or cash. And maybe there will be very few people reading paper books.

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Peter McCarthy and I have a new business and publishing has a new digital marketing service


Today Peter McCarthy and I are formally announcing a new business which is a partnership between us: The Logical Marketing Agency. What we’re doing is applying the most modern and sophisticated digital marketing techniques and capabilities to the challenges faced by book publishers and authors — and therefore agents — and, because the same techniques apply — also by brands.

This business has been in gestation for about 18 months, since Pete and I first started working together on other projects. We are building on what he learned during nearly two decades in publishing, first working for The Reader’s Catalog and then The New York Review of Books, followed by six years at Penguin very early in the digital transition, and then six years at Random House. At Random House Pete’s job was, explicitly, to figure out how books would be sold in the future. So for several years he was tasked with experimentation, using the books from publishing’s most extensive and diverse commercial list and the resources of the world’s biggest trade publisher.

As my Idea Logical colleague Jess Johns and I came to realize how much Pete knew about the digital marketing challenge all publishers are aware is important but woefully under-equipped to tackle, we saw the great opportunity in “scaling” him. The Logical Marketing Agency is our vehicle to make Pete’s knowledge available and useful to every publisher or author who wants to make use of it.

Over the past six months or so, we have done initial, relatively small small digital marketing jobs for more than a dozen clients. They have included both major and smaller publishers in the US and the UK, authors, literary agents, and brands that aren’t publishers. By working with this initial group of beta clients, we have learned how to shape our offerings to directly apply what we know to publishers’ and authors’ and agents’ perceived needs and pain points.

First we thought about the two key elements that need optimizing: titles and authors. Titles need easy discoverability; they need to be found in the right places, at the right time, by the people who are likely to be interested in them. This often involves a nuanced understanding of search as it exists in environments like Google, Amazon, Apple, and others but can also encompass other means of enhancing a book’s reach into its likely audience(s). Authors need optimized web presences, so that their credibility and personal networks are grown and enhanced regularly and so that their reputation as authorities on the subjects that matter is confirmed on the Internet.

Of course, the key for titles is the metadata: the long and short descriptions of the book that are accessed by all the retailers and search engines and the BISAC (or, in the UK, BIC) codes that identify the book’s subject matter (and, therefore, its audiences).

Pete’s key insight about title metadata — one that is very hard for most publishers to accept, frankly — is that it can’t be done properly without research. You start by positing what the audiences for a book are or, in the absence of hypotheses, how to figure out what they are. Then you look for them online and find out more about the makeup of those audiences: who those people are, where they hang out online, what they’re interested in and what they believe, and what words and phrases they use when talking about the author or the subject(s) in the book. Then you have to research the search terms that matter, to find out which ones are used most frequently and by whom. It is probably not surprising to learn that the “right” search terms might not be identical in Google and Amazon. And from there, one can keep going, analyzing what Pete calls the “meaningful back end data” that results from good outbound social media marketing. You can learn who it is that is engaging with and what their beliefs are, where they live, and other attributes that can be used to properly position each piece of marketing collateral. And, that’s a process that can keep going for a long time if the vein is rich.

How long does this research take? If you know what you’re doing, it can be done in an hour or two. How many publishers have the know-how and the staff to spend a couple of hours researching before writing descriptions of all their new titles? According to what we’ve found over the past few months, the answer is “not many”. Or “almost none”.

Getting the descriptions and metadata right is what Pete (and the Logical Marketing Agency) calls “foundational”. You must do it or everything else you do afterwards sits on a shaky base.

But there’s another level of knowledge that can be helpful beyond the foundation. What can you do to further promote a title beyond getting its core discoverability right? Well, there are potential paid media opportunities (keywords you might buy or audiences you might target through well-placed banners or other ads). There are other books or other things that have audiences to whom the book would appeal that give keys to other potential promotions. Each of these can lead to further SEO efforts around an author or title web site, new social media tactics to employ and more. You can take what is gleaned in the original research to find new ways to target the audience and that chain, in some cases, can be extended productively many times. The research that turns up those opportunities is something Logical Marketing will also offer, through “comprehensive” title analysis, a deeper drive than “foundational”.

We are doing the same for authors, offering a “foundational” author audit and a “comprehensive” one. But for authors we have found demand for even more research and analysis. Major publishers have bought customized author audits from us for authors they wanted to poach from other houses and for authors of their own they wanted to do a better job for and, often, compare with other authors’ efforts. These are really in-depth reports, 50 to 100 pages in length and filled with data, interpretation, and actionable insights. They often require an execution team to handle implementing the suggestions, though, increasingly we will be offering those services as well. The more complex an author’s online footprint — whether from many books or from many other things in their career — the more work this takes, but the more value there is. A long career and a long list of prior books can bury the messaging to surface and focus on the current book. It is ironic that authors with the biggest online presence can be the most complex to maximize for a particular project.

Recently, we have had two of New York’s biggest literary agencies try us out. One of them was looking for a picture of how one of their biggest authors was doing. The other had specific objectives in mind for their authors and asked us to look at the online footprints of three of them — two very big, one a little less so — to recommend how to achieve those objectives.

There are two additional elements we have only dabbled with so far, but which could become a big part of our business and service suite in the future: backlist and running campaigns.

Getting the most sales out of the backlist requires two things working in tandem. First of all, the backlist metadata has to be optimized. That requires research too, although a bit different research than for a forthcoming title because people have read it and people have talked about it. That gives clues to audience and nomenclature that are much more reliable than what one can discern for a yet-to-appear book. If publishers don’t have the staff time to do by-title research for their new books, imagine how hard it would be for most of them to do it for their whole backlist. It is safe to say that no house is staffed to do this.

The other necessary piece to optimize backlist sales is a tool that will chart the news and social graph — trend analysis — that then can bounce each day’s developments off the backlist metadata to find titles that can benefit from current attention. Of course, that opens up the question of “what attention?” Sometimes a change in metadata will produce a big result, tying the title to current interest. But sometimes more effort will make sense, like a digital media campaign. This has, of course, been tried by certain houses and has sometimes been successful. But it is our belief that this kind of work has not been executed optimally. Paradoxically, often the problem is that it is done too broadly. But it is important work we have some new ideas about how to do it well and at a cost-effective scale and pricing.

And that brings us to the final component of our suite of services, for now. We will run digital marketing campaigns for publishers. We did one of these last Fall for a live event, rather than a book. Since our conversations with publishers and self-publishing authors repeatedly confirm that running campaigns is a real pain point — they know they don’t have the staff for it and they sometimes know they don’t have the skills or experience either — we see that as a big part of our business going forward.

Brands are like authors. They have online presences; they have reputations; they have audiences that have characteristics that, once understood, enable you to reach them better and to find them in other venues. In fact, authors are brands. Publishers know that and we believe that what we do for authors would work for many other brands.

So it is with high expectations and great confidence that we can be helpful that we launch this new business.

One thing we’re going to add shortly is a self-service offering for independent authors. The service organizations we know who do the tech and distribution work for self-publishing authors all say they need marketing. That looks like an opportunity to us. If you want to get ahold of us, you can email us at [email protected] A web site with more about our services has gone up at that address as well.

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Some things I will be looking to learn more about at London Book Fair


The London Book Fair is an every-second-or-third-year thing for me, going back many decades. From an English-centric perspective, it is like a mini-Frankfurt. All the UK players are there and a lot of US senior executives. But because it is so accessible to the Continent, you can get a taste of how things look to the rest of the world.

In the US, we look to me to be in a period when two dominant giants — Amazon for online bookselling and Penguin Random House for general trade publishing — are consolidating their positions. Amazon’s enormous market share is growing, both for print and ebooks. It is too early to draw the same conclusion about PRH, but my guess is that a year or two from now we’ll have seen them taking share from their biggest competitors just like Amazon is from theirs.

(Dominant giants will be part of a conversation I’ll be taking part in on a stage in London. I’ve been asked to participate in The Great Debate, where this year the proposition is “It’s all about size. Bigger is always better.” I’m arguing the affirmative with Ken Brooks of McGraw-Hill Education as my teammate. We’re opposed by Stephen Page, the CEO of Faber, and Scott Waxman, who is both an experienced literary agent and the entrepreneur behind Diversion Books, a digital-first publisher. It should be fun. And friendly. We’re all nice guys.)

The dominant US brick-and-mortar retailer, Barnes & Noble, appears to be fairly healthy in its traditional business. It is shrinking, but the store operations are still profitable and well run. They appear to have benefited from the demise of its erstwhile competitor, Borders (as have the independents). From across the Pond, one does not get the same impression about UK’s Waterstones chain. However, in the UK, there are forces we don’t have in the US: not just the ubiquitous newsstand-type WHSmith stores, but also two supermarket chains, Sainsbury’s and Tesco, which are each ambitiously trying to build a book business and their own ebook channel. One thing I’ll be asking everybody about is the impact these retailers have in the book marketplace, particularly when we get beyond the top sellers. Perhaps if they’re doing well, it would encourage Walmart to get serious about bookselling. Certainly Walmart would like to do anything they can to poke Amazon in the eye.

Without serious competition from new players who are well-funded, like the UK supermarkets, it is hard to see what stands in the way of the global ebook giants: Amazon and Apple and, to a lesser degree, Google and Kobo. Perhaps I can get a sense in London of how Barnes & Noble’s multi-territory expansion for Nook is faring. But, however they do, there is a so-far little-noted effect beginning to become evident that could tilt the global book business to the English-language marketplace, and to the US in particular.

In a recent conversation, an executive at a Big Five company told me of a recent development. His company had licensed a few titles for Russian language rights to a publisher in Moscow. But by which retailers would most of those ebooks be sold? The answer is Amazon, Apple, Google, Kobo and Barnes & Noble! And the Russian publisher, really just breaking into the ebook business, has far more limited access to these retailing giants than the US publisher which had licensed them the rights.

So the US publisher, in a suggestion that seemed in everybody’s interests, offered to be the “distributor” of those Russian ebooks to the major accounts. The deal was made and it worked. I said to the executive who explained this to me, “You could be helpful in distributing all their books, not just the ones you licensed them.” “Exactly,” he said.

But then we took the conversation a little further. This house is wondering whether, in an ebook-dominant world, it wouldn’t make more sense for them to publish books themselves in Spanish, Mandarin, and French (the first three languages they are thinking about). After all, the translations are done by freelancers. Anybody can hire them no matter where they are. And if most of the books sold are ebooks, and if the publishers of English, especially those in the US, have multiple daily contacts with the big ebook retailers and others don’t, then what is the point to licensing away those rights?

That approach would mean that publishers in at least some non-English territories would, at best, be able to license the print rights for the local geography they really cover. And it would mean that the biggest publishers with the biggest checkbooks to sign the biggest authors and titles will be able to benefit from an even larger share of the book’s global market while paying the author more than they could earn with a local publisher sharing in the other-language rights.

If this is more than one company’s inspiration right now, I should be able to find evidence of that at the London Book Fair.

The other thing for me to learn, of course, is how digital marketing of books looks from the UK. In our fledgling new business with Peter McCarthy (take a look at his new post) we have already done some title optimization work for two UK-based publishers, one large and one medium-sized. So we’ve learned how to do the work using UK-based Google and Amazon and putting BIC codes rather than BISAC codes into the metadata. We’ll be formally announcing the new business and opening our web site the day before the London Book Fair opens. I expect to find a lot of interest in what we can offer, just as we have in the US. There is no doubt that the London Book Fair presents the best possible opportunity to find out very quickly what our own opportunity is outside the US as the need for sophisticated marketing naturally follows the growth and increasing complexity of the overall digital environment.

One person I will be sad not to see at London Book Fair is my longtime friend Bruce Robertson, a founder of the pioneering packagers The Diagram Group, who died a little over a week ago at the age of 79. Bruce was sui generis: a brilliant man with a unique gift for visualization that was the guiding spirit behind dozens of global bestselling illustrated books. Forty years ago, I had the opportunity to sell three of Diagram’s greatest books, “Rules of the Game”, “The Way to Play”, and “Man’s Body” when Bruce’s publisher at that time, Paddington Press, was distributed in the US by my family’s distribution company, Two Continents. I always enjoyed seeing him and hearing his witty, insightful, and often cutting take on the people and practices in our business. Fortunately, there were many opportunities to see Bruce and his endlessly good-natured wife, Pat, over the years, at industry events or when he was in NY or I was in London. We are all one of a kind, but some of us are more obviously so than the rest of us. Bruce was like nobody else. He’ll be missed by many friends from all over the world.

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Sony exits and the ebook business loses an original player


Sony has thrown in the towel on the ebook business and turned its customers over to Kobo. This has unleashed speculation that Nook will soon do the same. If B&N were really forced to choose between the investments they need to make in their stores and the investments required to compete in digital delivery, it would be hard to see them making any other choice but to save the stores. The notion of another retailer, perhaps Walmart, buying the whole thing seems eminently logical, but one can’t account for the role that a sentimental attachment to the stores by B&N’s principal owner, Len Riggio, might play in these decisions.

Despite the hopes and expectations of upstarts like Zola Books (which itself made an acquisition lately, taking Bookish off the hands of the three publishers that started it) and Baker & Taylor’s Blio or longtime competitor Copia or the originally phone-based txtr, it feels to me like we’re seeing the beginning of consolidation of the ebook business. Verticalization may work, as it has seemed to for Allromanceebooks but just being “indie-curated” wasn’t enough for Books on Board, a pretty longtime player that expired last year. (So far, Diesel, a comparable indie, is hanging in there.)

Sony is a big company with a very tiny ebook business. They were also really the “first mover” in the modern era ebook device space. The e-ink Sony Reader is more like the Kindle and Nook than any other thing that came before. But if the ebook play ever fit into a larger objective for Sony, it is not clear what that was.

Apple opened their ebook store because they thought they had a suitable device for book consumption (the iPad), but they also had experience with selling content before (iTunes). They also see potential for iPads in the school and university markets, so they have developed technology to enable more complex books — the kind that haven’t been successful commercially yet — to be developed for their platform. Establishing their devices and the iOS ecosystem in the education market would be a big win for them.

Google recognized over a decade ago that books, being repositories of information that contained the best response to many searches, were a world they wanted to be in. With their growing position in devices — the Nexus 7 phone and Chromebook computers — and as the developers of the Android ecosystem that competes with iOS in the app market, there are many ways that being in the ebook business complements other endeavors, including, perhaps, competing with Apple and iOS in the schools.

In the last post here, I posited (among other things) that ebook retailing just wouldn’t work as a stand-alone business; it has to be a complement to other objectives and activities to make commercial sense. Sony has found that it doesn’t fit for them, almost certainly because it doesn’t add value to any of their other businesses.

Of course, ebooks definitely complement Barnes & Noble’s core business. You have a pretty obvious deficiency if you run a bookstore and don’t sell ebooks, so everybody manages to do it somehow or other. Among the mistakes Borders is accused of having made before they disappeared was turning their ebook business over to Kobo. Doubts about the future of Waterstones in the UK include whether it was wise to turn their ebook business over to Amazon. If Barnes & Noble didn’t have Nook, they’d have to make a deal with whoever did have Nook, or with somebody else.

I’m sure Apple or Kobo or Google would be just delighted to have their ebooks integrated into Barnes & Noble’s suite of offerings, and probably Amazon would too, although they would almost certainly never be asked. All of them have shown interest in affiliating with indie stores, with Google having gone in and out, Kobo now trying hard with them, and, even Amazon, which can’t penetrate indies effectively with their own published books now offering them an affiliate program to sell Kindle ebooks called Amazon Source. But surely all of them would jump at the chance to expand their distribution to Barnes & Noble customers.

It is likely that B&N believes that the Nook business can only be truly successful if they keep investing in improved devices and create a global presence. That may be true, but it also might be that Nook can be a useful adjunct to their store business without continually adding devices or creating a presence outside the US where there are no B&N stores. More and more people are comfortable reading on multi-function devices through apps. Maybe B&N could profitably hold on to a core Nook audience by emphasizing synergies with the stores more (bundling print and ebooks, like Amazon does with its Matchbook initiative and as has been tried on a smaller scale by some publishers, would be one such way) and not worrying so much about making Nook competitive with the other ebook retailers as a stand-alone business.

The wild card here is if some big outside player — Walmart being the most frequently mentioned — saw benefits to having the ebook business (or even the whole book business) in its portfolio. That’s happened in the UK, where supermarket chain Sainsbury’s bought a majority stake in Anobii (a UK-publishers-backed startup, analogous to Bookish in the US) and Tesco bought Mobcast because the ebook business was one that they thought fit in well with their offerings and customer base. (Both Sainsbury’s and Tesco made statements about strengthening their “digital entertainment” and online retailing propositions. Tesco is investing in devices as well.) Kobo has made it a pillar of their strategy to find brick-and-mortar partners all over the world.

On a global basis outside the English-language world, the ebook business is still in its infancy. But it is hard to see how any player without a strong English-language presence could develop the scale to compete with those who have it. Every nation and language will have local bookstore players who have “first claim” on the book-readers in their locality. Some might harbor ambitions to also own their local ebook business, particularly as it becomes increasingly clear that ebooks cannibalize bookstore shelf space. But the cost in cash and time of doing it, combined with the competitive advantage of having English-language books in the offering no matter what language your target market reads, will make a build-it-yourself strategy increasingly unattractive. So it would seem that Amazon, Apple, Google, and Kobo are positioned to grow organically and partner ubiquitously. And it will require some seriously disruptive event, like Walmart buying Barnes & Noble, to break the hold that quartet will have on the global ebook market over the next decade.

A potential disruptive development which this piece ignores is the possibility that ebooks become largely a subscription business over the next decade. I have two overarching thoughts on that.

One is that the book-by-book purchasing habit is sufficiently ingrained that it will not be changed drastically around ebooks in the next ten years. I have no idea what percentage of the ebook market is now subscription, but I think it is safe to say “far less than 1%”. So my instinct is that it would take wild success for it to get to as much as 10% in the next ten years.

The other thing to remember is that any ebook retailer can always develop a subscription offering. Amazon effectively started already that with Kindle Owners Lending Library. You can be sure that if Oyster or 24Symbols starts gathering a substantial share of the market, all of the Big Four as we see them here will find a way to compete for that segment. (It is considerably harder to go the other way around; it is much less likely that Oyster or 24Symbols will open regular stores.)

So whether subscription grows faster or not, the giants of ebook retailing will remain the same.

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Book publishing may not remain a stand-alone industry and book retailing will demonstrate that first


You are missing some good fun if you don’t know those AT&T commercials where the grown-up sits around a table with a bunch of really little kids and asks them questions like “what’s better: faster or slower?” There always seems to be an obvious “correct” answer. Those kids could answer some important questions about ebook retailing in the future like these:

“What’s better? Selling just ebooks or selling ebooks and print books?”

“What’s better? Selling in just one country or in all countries?”

“What’s better? Selling just books or selling books and lots of other things too?”

“What’s better? Having one way to get revenue, like selling books with or without other stuff, or having lots of ways to get revenue so that books are only a part of the opportunity?”

And the answers to those simple questions, so obvious that a 5-year old would get them right, explain a lot about the evolving ebook marketplace and, ultimately, about the entire world of book publishing.

Book retailing on the Internet, let alone an offer that is ebooks only, hardly cuts it as a stand-alone business anymore. The three companies most likely to be in the game and selling ebooks ten years from now are Amazon, Apple, and Google. The ebook business will not be material to any of them — it is only really close to material for Amazon now — which is why we can be sure they will see no need to abandon it. It is a strategic component of a larger ecosystem, not dependent on the margin or profit it itself produces. And the rest of their substantial businesses assure they’ll still be around as a company to run that ebook business.

Kobo is owned by Rakuten, a large Japanese online retailer. They started a global  expansion in 2005, buying up ecommerce companies in different key markets, including Buy.com in the US. They also have invested in Pinterest. I don’t know what it is, but I have to believe that deep in Rakuten’s strategic consciousness there is a larger reason for them to have Kobo, probably based in the opportunities inherent in having a consumer’s email address and credit card information and knowledge of what s/he reads. So they also have a base bigger than the ebook business.

Barnes & Noble demonstrates the principle that books alone and one market alone just aren’t enough. They were able to use their US store presence to jump-start the Nook, but after they grabbed the low-hanging fruit among their store customers for digital reading, they quickly ran out of steam. Without a global presence and without a strong online store (BN.com has been deficient, and an albatross, for years), they just don’t have the ballast to be competitive. And that’s a shame, because B&N is the player that could make the most powerful consumer offer in the book space. They have online and offline, print and digital, but it really hurts them that the execution of offline print isn’t up to competing with Amazon and the overall coordination that would maximize the power of all these capabilities is not in evidence.

This is a totally conceptual theory being posited here, not one with any data to support it. And it is not based on the value of the consumer proposition, although it does seem to me that the “right answers” to the questions in the lead can be formulated strictly from the consumer perspective. The thinking is that book retailing, and particularly ebook retailing, is doomed to being a low-margin business. As such, it is much easier to sustain and support if there is benefit to be gained that goes beyond the margin that can be captured from those sales.

This has really been Amazon’s secret sauce from the beginning. The book publishing industry scratched its collective head for years as Jeff Bezos and his crew grew a giant online bookseller without keeping much margin and had Wall Street shovel money at them to grow and invest. The widespread wisdom in publishing in the late 1990s was that Amazon was performing some kind of parlor trick that would shortly come to an end. Instead, they built on their customer base, their tech, and their reputation for service to expand way beyond book retailing. And today they can afford to run a profit-less book retailing and publishing operation (if they want to; I have no evidence that they don’t make profits and don’t claim to know), taking the margin out of the game in a way that would squeeze any competitor trying to make a profit from book retailing.

Google and Apple are similarly situated in that way and profits (or losses) from ebook retailing don’t even rise to the level of a rounding error for them. Their ebook retailing operations exist in service to larger initiatives: search and Nexus 7 and the whole Google Play content offering in Google’s case; making devices more useful and complementing the iTunes and apps offerings in Apple’s. Their ecosystems are much larger than their ebook businesses and they benefit just from the ebook business being there.

And they’re global. As is Kobo, and Rakuten presumably has an ecosystem play in mind, although it isn’t evident yet.

This is a paradigm that leaves Barnes & Noble out in the cold. Their business, on which they must make money, is selling books. They are trying to diversify their merchandise selection a bit in their stores, but that’s a strategy that is both difficult to execute and has nowhere near the upside that Amazon, Google, and Apple have with their other businesses. This is an unfair fight where B&N is dependent on margins from their ebook (and book) sales while their competitors, if perhaps not totally content to break even on that business, aren’t materially affected if they do, or even if they lose a bit of money on that aspect of their business.

All of this is good for publishers, who benefit from having lots of retailers.

But publishers are bound to face the same problem due to atomization. As the share of the book market — print or digital — reached by online retailers grows (and it is perhaps past 50 percent for fiction already), it makes it easier and easier to put book content into the marketplace and have it reach a substantial percentage of its potential audience. Ambitious self-publishing authors have been reaping the benefits of this reality in growing numbers for the past several years; now entities ranging from newspapers and magazines to ad agencies and colleges and manufacturers are discovering the same opportunity.

In other words, publishing — like book retailing — is likely to become a subsidiary function pursued in strategic support of larger goals. Unlike in retailing, this will not be consolidated among a few players, but as widely scattered as the subjects about which books are produced. But the core challenge for the legacy publishing establishment, that they will increasingly face competition that doesn’t need the profits from that activity as much as they do, will be the same. Book publishing as a stand-alone industry with most of its significant players earning all their profits within it is in the process of morphing into something quite different, starting with the retailers.

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Amazon might lose interest in total hegemony over the book business before they achieve it


The industry got the news that Amazon was probably reassessing its own publishing program a couple of weeks ago when it was announced that Laurence Kirshbaum was stepping down as the head of Amazon Publishing and being replaced by a 14-year veteran of the Seattle company, Daphne Durham. Whatever are Durham’s strengths and connections, they don’t include the familiarity with the New York publishing scene and agents that Kirshbaum brought.

While this certainly does not suggest an overall reduction in Amazon’s publishing activity, it does signal a change in tactics. It would appear that the unorganized but united stand by Barnes & Noble and independent bookstores to boycott Amazon-published titles and refuse to give them shelf space made it virtually impossible for Amazon’s publishing enterprise to compete with the big houses for brand name authors. The few that they tried — Penny Marshall and Timothy Ferriss wrote the high-profile titles that were watched — had disappointing results. Whether that was largely because the stores wouldn’t play along or for other reasons (not all books by famous authors or celebrities are equally edited or equally appealing), the overall environment did not leave agents or the authors everybody wants panting for an Amazon publishing deal.

Retreats — apparent or real — by Amazon are rare. (The last one we can recall is when they pulled the buy buttons from Macmillan titles in 2010 to protest agency pricing and very quickly rescinded the action.) But it would be a mistake to think either that Amazon is less interested in publishing than they were before or that the threat they pose to publishers’ relationships with authors is no longer something publishers need to concern themselves with.

In fact, all the recent evidence suggests that Amazon’s market share is still rising. The Bowker numbers reported at the end of July of 2012, trying to measure who got the Borders sales (which were 10% of the total when the retailer went out of business) put Amazon’s total share of the book market at 29%, up from 23% a year earlier. In that same report, it was reported that B&N had gained a point of share, up from 19% to 20%. So Amazon out-benefited B&N from Borders’ collapse by six to one.

Earlier this year, it was reported in Britain that Amazon had a whopping 79% of the burgeoning ebook market. That’s more than they have in the US. It is also apparently the case that Amazon has the lion’s share of the online book sales market in the UK (and, along with their subsidiary company The Book Depository, most of Europe and the English-speaking world).

The share of total sales that goes through their registers is only one measure of Amazon’s disruptive growth. They’re also signing up more and more books directly to their imprints (the genre publishing growth continues unabated and was never heavily dependent on Kirshbaum) and getting more and more books through authors self-publishing. And as they disintermediate publishers by bringing in books directly by either means, they also threaten their competitive retailers in all venues. Although you can be self-published through Amazon and continue to distribute to other channels, they offer financial incentives to discourage that.

In fact, Hugh Howey, the enormously successful self-publisher of “Wool”, told us a year ago that the decision to broaden his distribution base to include Nook and other platforms cost him money. He did it because he thought it was the fan-friendly thing to do but he’d have made more money on his ebook sales if he’d sold fewer units and given up the other formats.

(KDP Select is the program that demands exclusivity. By enrolling, authors get their works in the Kindle Owners’ Lending Library, increased royalties on sales outside the US, and access to additional promotional tools. You can still have your book on sale in physical, “or in any format other than digital”.)

We see Amazon growing into a large and slightly separate book industry of its own. They don’t use the book business’s standard ebook format, epub; they use their own format, mobi. (The Amazon “flavor” is AZW, and they also have the newer KF8.) They don’t care much whether a book has an industry standard ID, the ISBN number. Amazon assigns its own number, unless the publisher has a 10-digit ISBN they can use, which they call an ASIN. They own a must-optimize author page (Amazon’s author page affects an author’s discoverability on Google; the converse is not true) and a must-use book readers’ social network (GoodReads). They have their own print-on-demand operation making it simple for an author to set up both ebooks and print at the same time.

The “advantage” a publisher has pursuing authors is that they can offer a much broader distribution base as well as their honed skill at marketing and publicity. But there’s a price for that; self-publishing with Amazon brings an author four times the revenue for ebooks and somewhat more for every print copy sold as well. Whether Amazon is a quarter, a third, a half, or more of a book’s sale depends on the book, but authors will be increasingly facing the choice Hugh Howey faced: publish exclusively with Amazon and sell a bit less but make a bit more, or publish to a broader audience through a publisher (or on your own) and make less money. Apparently, many authors are doing 90-day runs of KDP Select to get a boost at Amazon, then switching back to broader distribution

Fortunately for the rest of the publishing business, the shift to ebooks and to online purchasing may have stalled. In the US, Amazon appears to have about 60-70% of the ebook business, and ebooks constitute about 30% of the total business. But the ebook share is much higher for immersive reading, higher still for fiction. For fiction, more than half the sales of many titles can be digital. And the print sales are anywhere from 25% to 35% online. So for fiction, Amazon may already be nearing half the total sales for many titles.

We wouldn’t expect the slowdown of the shift in sales to last. New offerings of ever-cheaper and more-flexible devices, more and more cheap ebooks in the market (discounting the backlist ebooks seems to be publishing’s latest most common marketing trick), and the natural growth in digital interaction as older people exit and younger people with new credit cards replace them, pretty much assure that the online sale will continue to grow in relation to the store sale. As that happens, as the 2012 measurements after the demise of Borders showed, Amazon experiences organic growth.

So, when does Amazon’s share growth stop? And who is left standing when it does? Here we have to enter a realm of pure speculation; there are no data points that can help us figure this out.

To answer these questions, we need to look at the book business in segments.

For narrative text, books that one reads from the first page to the last, we’d expect continuing growth of digital. For genre fiction (including YA), which has the additional characteristic of having audiences that consume many titles a year, we’d expect a lion’s share digital market — 80 percent or more — to be common within a couple of years. For those books, Amazon will continue to just eat away at the publishers’ position. More and more of the genre readers will migrate to them because they’ll have an increasing number of titles on an exclusive basis, more — and more aggressive — price promotion, and probably a variety of subscription opportunities. That should lead inexorably to more and more of the genre authors being willing to publish with them exclusively because they’ll be able to reach an increasingly large percentage of the reader base through digital and Amazon alone.

If I were looking for the first candidates not to be “left standing”, we’d expect to find them in genre publishing. In time, the big publishers will increasingly focus on “big” genre titles, rather than lengthy genre lists.

I also expect more DRM-free trials, particularly in genre fiction, so that publishers and third-parties can sell mobi files to existing Kindle customers. For while genres are where Amazon has their greatest potential strength, it is also true that genres are where publishers have the best chance at building brands and direct customer relationships that matter.

More general fiction and non-fiction will be read mostly in digital form in a short time too, although the hardcovers for those books will continue to exist. But for the big players in general trade, there’s another problem besides Amazon to deal with. That’s the new publishing behemoth: Penguin Random House. I would guess (all we can do) that by three or four years from now, the first choice for most authors will be either PRH or Amazon. PRH will provide the biggest reach; Amazon will often provide the biggest potential revenue. The other general trade houses will fight each other for the authors that don’t want to be part of either behemoth.

For illustrated books and children’s books, the environment will be different. Stores will remain important, but there will be fewer of them (and therefore fewer books of this kind published). The bookstore I’d imagine in several years will have far more illustrated and gift books in it as a percentage of the total title mix than it does now.

What I think will save publishers from disappearing, oddly enough, will be a loss of interest at Amazon in taking more market share. This conclusion comes from a combination of something I learned from people at Google about Google and what is clear from Stone’s book.

Last spring, I visited a Google installation that was not about the book business, but about an online game. The game is a big online experiment in engagement. Googlers showing us around were thinking about the revenue potential of the game, which was not supposed to be their primary concern. They had come to the conclusion that $100 million in annual revenue would be achievable, but they didn’t think they’d be able to go after it. Why? Because nobody in a responsible position at Google would take ownership of something as small as $100 million in revenue.

Brad Stone paints a picture in “The Everything Store” of Amazon as, above all, a highly rational company. Jeff Bezos can be impetuous, but he’s not nuts. He is zealous about the things he cares about because he believes they matter: customer happiness being number one on the list. As the book business becomes a smaller and smaller part of the total Amazon picture and the challenges that matter to the business revolve around delivering your fresh produce in 30 minutes, not 90, it is likely that Amazon will have less and less interest in squeezing just a little bit more margin out of the book business. There will be easier places and easier ways to make money.

Amazon achieved the position it has in the book ecosystem through a combination of brilliance, execution, natural forces, and some good luck but, above all, focus. It had to take some big chances with pricing and margin to get where it has gotten, but that’s not really necessary anymore. Doing some very logical and natural things, like the new Matchbook program and rolling out more subscription and pricing offerings (like their new “Countdown Clock” discounts for new Kindle titles) will keep their share growing and their competitors scrambling. They will also almost certainly be coming after publishers for more margin (as will their equally dominant counterparts on the store side, Barnes & Noble), but it would seem unlikely that they’ll see the need to extend themselves to sign up authors or build out their ability to distribute print to other people’s stores.

Amazon will certainly continue to make it difficult for publishers to use price offers as a way of teasing away some of the direct ebook business. Publishers are finding that increasingly tempting as more and more vendors emerge who can solve the tech challenges for them. But even with publishers taking some ebook share directly, and more of them will, chances are that the ebook business will grow faster than the publishers’ shares and that Amazon’s growth, partly at the expense of other ecosystems, will not stop.

So the good news for publishers is that the business they now have will look less and less appealing compared to other worlds Amazon might conquer. That should save them from having a bulls-eye on their backs, but it will remain a very challenging environment where their biggest customer is the most powerful force in the marketplace and growth outside that customer is harder and harder to achieve. The publishing activities of Amazon will continue to get bigger; the industry of other publishers will continue to get smaller. But we are probably in for a period of slow and steady shifts rather than cataclysms.

As long as Barnes & Noble can stay healthy and the other ebook platforms aren’t crushed by losing titles to Kindle exclusives, that will remain the case. And that means “for quite a while” but not “forever”.

Remember that Brad Stone will be joined onstage by analyst Benedict Evans and publishing sage Joseph J. Esposito for a wide-ranging discussion about Amazon at Digital Book World in January.

Note that I also posted on Amazon yesterday. That piece describes three important pieces of their story that didn’t make it into Stone’s book.

And, if you’re from a start-up or your job at a publisher includes meeting with and evaluating start-ups, we really want your response to our survey, which will inform our dialogue about start-ups at Digital Book World.

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Finding your next book, or, the discovery problem


A big flap has arisen this week — which I believe I would have been equally aware of had I been home in New York rather than in London — because the giant UK books-and-stationery retailer WH Smith has apparently found inappropriate ebooks being recommended through the kids books portions of the Kobo-managed ebook offering they host. This has sparked a lot of conversation about how recommendations — indeed how curation — is managed in the online environment. In this case, the discussion is about the specifics of this problem and how metadata might have been wrong, gamed, misunderstood. This has resulted in Smith’s turning off their whole web site, which contains the Kobo-offered ebooks, while the problem is “fixed”. It’s a mess that points to how far we are from solving core challenges of selling books in a virtual environment.

Online bookselling has a long way to go before it can deliver even what it intends to deliver in response to a search or to prompt a next sale. Of course, there are two additional and larger problems that come first: knowing what the right suggestion(s) would be and being able to make enough of them to match the book shopping experiences online sales must replace.

Analysis offered by Russ Grandinetti of Amazon at our Publishers Launch Frankfurt conference last week suggested that the US and UK are on the verge of transacting more than 50% of the book business online, with other markets in Europe and Asia not more than two or three years behind. (This may understate the real state of affairs; in a meeting I just had in London I was told that one of the biggest UK publishers says that 60 percent of their sales of print, ebooks, and audio are through Amazon!) Online sales of books were probably in the neighborhood of 10%, or less, for most publishers a decade ago. That shift is why retail shelf space has diminished so much, with major chains having sunk in both of the big English-speaking markets (and in smaller ones as well).

When most books were bought in physical locations, it was axiomatic that a book displayed in a store had an exponentially greater chance of selling than one that wasn’t, despite wholesale supply in the US from Ingram and Baker & Taylor that could get almost any book to almost any store in 24-48 hours. It had to be seen in the store to be bought. Competent commercial trade publishers knew there was very little point to pushing a book through marketing efforts if inventory wasn’t in place at retail, because seeing the book at the time you might buy it was a more powerful trigger for purchase than any other. Indeed, all the other stimuli (reviews, suggestions from friends, conversation at the office) tended to be acted upon only when the presence in the store was in proximity to the suggestion or recommendation. (And that’s why recommendations from clerks in the store were the most powerful recommendations of all: hence the concept of “hand-selling”.)

One problem with the change to online buying from the discovery perspective is that the funnel for each shopper keeps getting narrower. It isn’t hard for somebody in a bookstore to look at hundreds of books in a few minutes. It’s nearly impossible online. This either requires the consumer to spend more time shopping to see the same number of titles they used to see in a store, or to make a decision having seen fewer. And the concern is that the decision that gets made having seen fewer can be not to buy anything at all. (Or, particularly in the case of tablet users, to buy something other than books.)

Of course, in theory, being able to present a personally-curated batch of suggestions for each customer could be far more precisely targeted than what a store can do, and, in that case, fewer titles shown might do the same job. But we are a long way from that. And, for reasons I hope this piece will make clear, personally-curated choices would actually be far more likely to be delivered by Google than by Amazon (although they would raise a host of what would be considered big privacy concerns to a lot of customers by doing it). And that’s not a reflection on the quality of anybody’s programmers, and certainly not of their commitment to their customers.

The technology that hopes to help you “pick your next book” is referred to as a “recommendation engine”. I’ve never been on the inside of such an effort but the thinking behind them seems to center around analyzing what books you’ve bought and what you’ve searched for and, from that, figuring out what you might read next. This might be based on analysis of the content itself (e.g. Pandora recommending music of similar style and quality) and/or collaborative filtering models — leveraging user inputs (purchase history, ratings, and reviews) to make recommendations for other similar users (“people who bought x also bought y”). It all recalls for me the experience of being told when I met a great bookseller, the late Joel Turner, at the 1978 American Booksellers convention in Atlanta, that “if a customer walks up to my cash register with five books, I can always sell him a sixth”.

Of course, over time, a bookseller can fill out that knowledge with even more data as they see more and more purchases and get to know their customers, and perhaps their families. But, in fact, using books bought as a guide to recommendations is an incomplete data set. It can also be a misleading one since people buy books for people other than themselves.

Another way to look at it came from my friend, Andrew Rhomberg.  Based on his experience with start-up Jellybooks, he formulated five major book discovery paths: serendipitous, social, distributed, data-driven and incentivized.

The point is that most people get their ideas about what to read next from many sources: people they talk to, reviews, news reports, business interactions. Some people say they get book recommendations from their friends; others (like me) say they don’t often read the same things their friends or relatives read. I suspect that online communities of readers tend to work best for people who do a lot of reading in genres and not nearly as well for people who mix fiction and non-fiction, entertainment and learning. And some people gravitate to what’s popular, so bestseller lists work best for them. It is clear that getting on a bestseller list fuels a book’s sales.

And books are bought for motivations other than “to read”, so it might also be important to know that a customer’s son is having a birthday, that a customer’s cousin is getting married, that a customer is shopping for a new home or looking for a new job or starting on a new hobby or spending money on an old one.

Few, if any, of these things would be apparent to even the most diligent hand-selling bookstore personnel. Bits and pieces of it might be detectable by the super-merchant Amazon (but not likely to any other).

This is one devilishly complex problem. There are countless potential inputs to the “next book purchase” decision and they are processed by each different individual in a highly personalized way. If you think it through, it seems obvious that most recommendations to most people wouldn’t work. Which takes us back to the need to make a lot of them, which a bookstore display does much better than online pages that show 10 or 20 books at one time.

In the long run, it would seem to me that Google is the entity best-positioned to address this challenge if they can somehow combine the knowledge of what you searched for (which they know), with what you read online (which they could know if you use Chrome for your browser), and the topics and book titles that have appeared in your emails (which they could know if you use Gmail) and the things you ‘like’ and talk about online (if you use Google+). Knowing your travel plans and patterns would be helpful too.

Of course, unless you use Google Play for ebook purchase and consumption, they’d be missing the two most important bits of data — what you bought and how voraciously you read it and they still wouldn’t know your print book purchases (unless they crawl your email receipts for that as well) — which Amazon is building on without all the other information. What you’d really want to do is to correlate the book buying and consumption information from the past with the behavioral data contemporary to it. With it all combined, perhaps you could filter recommendations so that the 20 or 50 you could show on line would have the commercial power of the hundreds or thousands you could see in the same amount of time in a store.

At the moment, both Amazon and Google are trying to see a pattern through one nearsighted eye.

But is this all really part of a larger problem for publishers? Is online discovery really affecting the sales patterns for books? It would appear so. One of the global ebook sellers told me during Frankfurt that their online sales are far more concentrated than publishers’ sales tended to be, with a tiny fraction of titles (under 5%) making up a huge percentage of total sales (nearly 70%). (I am assuming here that this retailer’s data is typical; of course, it may not be.) If memory serves, at the turn of the century Barnes & Noble stores saw only about 5% of their sales coming from “bestsellers” and, I believe (relying on memory of detail, which I admit is not my most powerful mental muscle) backlist outsold new titles. Publishers really live on the midlist. We know the long tail is taking an increasing share of sales and it would appear the head is too. Those sales come out of the midlist. It is pretty hard to run a profitable publisher without a profitable midlist.

And that would suggest that the increasing concentration of sales, which is likely the result of our hobbled ability to present choices in the digital sales environment, is a problem that publishers will want to address.

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