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Publishers adding value on the marketing side

November 17, 2011 by Mike Shatzkin 39 Comments

Obviously my day job, consulting, informs a lot of what goes into The Shatzkin Files. I guess it is just as obvious that I can’t quote everybody who tells me something or attribute everything I want to write about to a specific company or individual. I don’t make a living writing this blog and I wouldn’t make a living at all if people in the industry couldn’t trust me to keep their confidences.

But once in a while people inside competitive companies tell me things that they want the world of publishing to know about what they’re doing. That’s happened twice this week and, in both cases, publishers were making it very clear that they are doing things that will add real value to authors’ marketing efforts, things that no self-publishing author could do for themselves. Self-publishing authors could be wrong, but a read through the comment string of a recent post here makes it clear that they don’t much believe publishers add value in marketing.

On Monday, I was talking to Fritz Foy, the senior VP for Digital Publishing and Strategic Technology at Macmillan. My mission was to recruit speakers from Macmillan for Digital Book World. The conversation turned to the question of “collecting names” for marketing purposes. I had learned previously that Macmillan really has a company-wide effort to do that. That’s something I have advocated. I thought it was so important that I went to the unusual (for me) effort of learning some fundamentals of direct contact management and writing about them on the blog 14 months ago. But Macmillan is the only company I’m aware of that makes email address capture an objective across the company, although we see pockets of name-gathering activity in other majors.

Fritz emphasized that collecting names wasn’t the only priority. Using them, using them well, and tracking what happened when they used them were the keys. (I was reminded, as I was again by the next conversation I’ll describe, of the adage “you can’t improve what you don’t measure”.) To demonstrate, he pulled some October numbers from tor.com, which one would assume, based on the relatively longstanding tor.com effort, probably constitutes the company’s biggest single pool of email addresses.

And they had a lot of them, enough to have sent over 650,000 emails to their lists in the month of October. That’s impressive. But what’s positively stunning is that more than 30% of those emails got opened (that’s more than 200,000) and more than 20% of those clicked through: took the action that Macmillan asked them to take in the email. That’s in the neighborhood of 40,000 actions.

Now the actions were, for the most part, to get free access to more content. (Only 15% of the mailings were purely “marketing”.) They weren’t selling anything. But what Fritz was demonstrating was the growth of what I call “investment marketing”: marketing that produces a result that makes subsequent marketing efforts cheaper or more productive. These tor.com numbers are going to grow, inexorably. Another indication of how solid Macmillan’s lists are is that only 0.1% unsubscribed!

If I were an author (or agent) looking for a sci-fi publisher, it would impress me that Macmillan has lists that get a 30% open rate. It would make me feel they could do things to promote my book that another publisher without those lists couldn’t do. I don’t know what the growth rate is on those lists, but most things (sales, device penetration, self-publishing) in the digital publishing world have been more than doubling each year and these could well be too.

The key point to take on board here is that tor.com is a flagship; Macmillan is doing this across their company. They are building other verticals as well. If other publishers aren’t systematically taking names, getting email permissions, and testing what can be done with them, Macmillan will build up marketing capabilities that it will get increasingly expensive to compete against.

There is little doubt that Amazon’s author-recruitment efforts for their imprints include the promise to mail to known buyers in the author’s genre. They almost certainly can send more than 600,000 emails in a month for many books and genres. But can they get a 30% open rate and a 20% clickthrough?

And Amazon, a retailer, can’t get trapped into just pushing the books it signs up when their consumer brand, and their sales, depend on offering full range of selection of available titles across publishers’ lists. That conflict is compounded as they sign up more and more titles as proprietary. (But it will also be ameliorated if the titles they sign are higher profile than they’ve been so far.)

The day may not be far off when agents are going to be asking publishers “how many emails can you send in support of this book on publication day?” If I were in Amazon’s shoes, I’d be pushing that question. It looks like Macmillan is methodically building the ability to provide an answer.

But not everybody with a modern view of marketing agrees with me (and Macmillan) about the importance of name-gathering, which brings us to the second conversation this week.

We got a call from Open Road Integrated Media asking us to come down to their shop and learn a bit about what they’re doing. Open Road is an ebook publishing company founded by former Harper CEO Jane Friedman which has been an annoyance to the big publishers. Jane has been in the business for more than four decades in high positions at major houses (at Random House before Harper). She knows the agents and she knows how the game of signing up content works.

So she moved against the establishment by offering a standard deal of a 50% share of ebook revenues, when the major publishers are holding the line at 25%. (Open Road’s deal includes the ability to recoup one-half the digitization cost before paying what we usually call royalties but which they call “profit share”. ORIM says that comes to less than $500 per title. Open Road pays no advances.) She used her understanding of the ambiguities in legacy publishing contracts to sign up backlists from both living authors and estates, including Willam Styron, Lawrence Block, Carl Hiaasen, Alice Walker, and others.

Those have been the headlines about Open Road and that was pretty much the extent of my knowledge of their proposition. Without any other knowledge of their economics — their ability to raise money, their burn rate, their sales — I was skeptical about the sustainability of their model, if it rested primarily on paying 50% for what others were paying 25% for and gathering high-quality backlist of titles not nailed down already for ebooks, which is a limited resource.

It turns out they have a lot more going for them than that. But they don’t gather names.

Open Road’s head marketer is Rachel Chou, who worked with Jane Friedman at Harper. Jane and Rachel, and former Scholastic CEO Barbara Marcus, who is an advisor to Open Road on children’s and YA acquisitions, made the point that Open Road is a marketing company. That’s what they do. And their bullpen with about a dozen people in cubicles working away is just about exclusively devoted to marketing. Except that, in their eyes, marketing and sales and author relations are all the same thing to them, and they see a workflow built around that perception as a key differentiator.

In fact, they see the consolidation of functions in their shop as a significant competitive advantage. In the ebook world, marketing and sales are so closely related that it is hard to see how to parse them. That’s partly because the promotions by ebook retailers could be the single most important marketing component (a point made emphatically by Diversion Books’ Scott Waxman at our eBooks for Everyone Else shows in New York and San Francisco), but it is also because all marketing efforts at Open Road are aimed at driving sales to the ebook retailers. (Their widgets all have buy buttons for the full range of retailer choices.)

But that’s not where the competitive advantage of their structure comes into play.

Rachel spelled that out. One of the major retailers came to them in the past few weeks with a big sales opportunity. They could place 15 Open Road titles in a major promotion that would sell a lot of books. One catch: they needed the titles cleared for the promotion within 24 hours.

Another catch that is characteristic of the ebook world: this was a price promotion that required clearing the participation of each book with its agent. That’s 15 agents. Rachel and her team of marketers, who have the agents of the Open Road ebooks on their own speed-dials, got the job done and got all 15 books into the promotion.

Moving that fast would be a non-starter in any significant publishing house. Whether the opportunity came in through sales or marketing, neither team would own the agent relationships. I believe in most houses it would be necessary to have the agent calls made by the editor who had signed the book. Certainly, the editor would have to be consulted before anybody from marketing or sales could make such a call. And that round of communication, which would include explaining the promotion opportunity to each of the affected editors, would never be attempted within a 24-hour window. Realistically, 24 days would be a challenge.

Open Road is organized differently than legacy publishers because there is so much they don’t have to do! There is very little in the way of a production department (there is a person who creates their covers and Pablo Defendini, who was a key player building Macmillan’s tor.com, is their “interactive producer”.) There is no sales department. There is no inventory management. Everybody works in a room that is dominated by a wall with a 2-month marketing calendar, listing all the events and anniversaries they might promote around. They have 75% or 80% of their company dedicated to marketing, which everybody — including all the big publishers who have expressed an opinion to me — agrees is the prime responsibility of the book publisher in the digital era.

But, even within that, Open Road is organized for efficiency and speed based on the realities of the value chain for ebooks. Their marketers are assigned books which “fit together”, so they are consistently going back to the same blogs and websites for promotion. They can develop relationships. They’re not really a “vertical” publisher (by genre or by topic) but they do have multiple titles from the same author, which helps.

To be fair, the other major publishers are reorganizing themselves constantly into more marketing-focused and less bureaucratic organizations. Just this past week, Simon & Schuster announced organizational changes which effectively shift resources from physical store sales to online marketing (which is admittedly an oversimplification.) The big companies all have great leadership and they’re well aware that they have to change. And I know for sure there are plenty of initiatives I haven’t heard about because the houses feel there’s competitive advantage to keeping them quiet. In fact, Rachel Chou told me about newsletters that are published readers at HarperCollins were getting open rates when she was there a couple of years ago that were even higher than Fritz’s tor.com numbers in October!

Open Road’s team would point to other distinctions between them and other publishers. (They not only claim to be different from the legacy print publishers, they don’t recognize any of the other ebook publishers as true competitors either.) They do extensive video interviews with every author (or a descendant in the case of a deceased author) which creates a rich library of video content. It’s a point of pride with ORIM that these are not fodder for video trailers, but give them real editorial material that can be made into solid programming, often combining video from several authors thematically into “mashups”. They distribute that video aggressively and claim they’ve now reached the point where they’re a recognized B2B brand by some digital media and bloggers who come to the Open Road website, unbidden, to pick up video. Of course, all the video is tagged so the Open Road marketers can track its placement, downloads, and any clickthroughs that result to the retailers.

And that leads us to metrics. Open Road is relentless about data and analytics. They make the point that they can test different covers or tag lines on Facebook or in other media and have answers within hours about what works best. The Open Road team believes that the big houses don’t give their marketers the kind of tools ORIM has to measure the impact of campaigns and that their competitors’ corporate structures don’t enable fast changes in the pitch or the artwork based on data.

These may not be sustainable advantages. Tools can be provided. Workflows can be changed to permit faster responses when that’s necessary. The established houses can raise their royalty rates. How fast things will change in the big houses is an open question (and the answer is different for every house), but it is undeniable that the decision-making structures that worked for print books readily accepted time lags that are a real handicap in the evolving ebook world.

Jane Friedman and her team claim that there is a marketing plan for every book for every quarter! (They admit there’s some ganging there; a bunch of different books might be part of the same Mother’s Day effort.) Whether that is scaleable and replicable when they are ten times their current size (approximately 1400 titles) is another question. But it is certainly a point of differentiation today.

Open Road doesn’t sell direct, only through intermediaries. And they eschew name and email address capture of end users, preferring to rely on the combination of the viral distribution of content and their always-developing relationships with bloggers and websites.

Both Macmillan and Open Road are doing things that no big trade house could have imagined five years ago. Macmillan is applying scale; Open Road is applying the speed and flexibility enabled by a smaller organization. But both of them are employing what I’d call “investment marketing”: doing things on behalf of their books that build their capabilities to do more on behalf of subsequent books. I think that’s the key for publishers who want to give authors and agents convincing reasons to publish with them in the future.

We’ll do a panel on “investment marketing” at Digital Book World in January. Of course, Open Road and Macmillan will be on it. So will F+W Media, a vertical publisher (investment marketing is much more natural for vertial publishers) and we expect to add one more Big Six house which is doing interesting things in this regard.

Filed Under: Authors, Conferences, Digital Book World, Direct response, eBooks, General Trade Publishing, New Models, Publishers Launch Conferences, Supply-Chain Tagged With: Alice Walker, Amazon, Barbara Marcus, Carl Hiaasen, Diversion Books, Fritz Foy, HarperCollins, Jane Friedman, Lawrence Block, Macmillan, Open Road, Pablo Defendini, Rachel Chou, Random House, Scott Waxman, Tor.com, William Styron

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Mike Shatzkin

Mike Shatzkin is the Founder & CEO of The Idea Logical Company and a widely-acknowledged thought leader about digital change in the book publishing industry. Read more.

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