Our mentality here is to first do no harm, and make sure that if we’re going to do integrations, users genuinely find it to be a big benefit. — Russ Grandinetti, Amazon VP of Kindle Content (via PaidContent)
I’ve been asked by several people what I think about Amazon’s acquisition of GoodReads. It’s funny because I (and many, many others) have long suspected that one of the major digital players (one of the usual suspects or someone else in the space), would buy or at least take an equity stake in the site. So my first reaction was, it’s about time! Also, I strongly suspected it would be Amazon who would try to buy GoodReads. I just wasn’t sure if a tie-up with Amazon would suit the sensibilities of GoodReads’s CEO Otis Chandler. In the end it did. I think that is most meaningful as it only would if certain conditions were true. I am certain of that, especially in light of Grandinetti’s hippocratic quote above.
I’ve given this a lot of thought in the past and now so I’ll go straight for bullets. Here are my thoughts:
The Amazon Side
- Amazon has the cash and the commitment to the (e)book category to do it
- At the very least, and I think firstly, this is a defensive move by Amazon. GoodReads simply has too many (~16MM) digitally-inclined, heavy readers for Amazon to just leave them be or, worse, allow them to “fall into the hands” of a potential competitor
- Amazon has not been able to pull off true social on their own. Books are the core of Amazon’s DNA. If they are going to add a social layer to their commerce experience, what a perfect place to start.
- Amazon has watched their competitors combine social and consumer media to great effect (eg. FaceBook via Spotify). Many believe that the act of reading does not “want” to be social, but GoodReads’s success has just made it clearer that people’s choices in books and experiences with them clearly does want to be social. It’s good old word of mouth realized via technology. GoodReads has nailed that for book consumers. Lots of ’em.
- Amazon is relentless in their efforts to add value for their consumers. GoodReads provides another avenue for them to do so.
- For Amazon, GoodReads is cheap (estimated by CrunchBase as costing them $150 million). In terms of customer acquisition and lifetime costumer value, some quick Excel work tells me this is a bargain for Amazon if they only get a sliver of GoodReads users to become Amazon consumers (which many undoubtedly already are). Or, even if a sliver simply become more active Amazon customers (which many very well may).
- Amazon needs more unique selling propositions around its digital offerings as it competes with the likes of NetFlix, iTunes, iBooks, Google, and others as well as non-Kindle tablets and all of the functionality they offer in addition to reading. On the micro (eBook) level, a true iBooks tie-in to FaceBook is pretty easy to imagine happening soon. That could be useful and attractive to consumers. And big.
From the GoodReads Perspective
- Built on top of relatively modest VC money and, I believe, some Angel Funding, GoodReads was built inexpensively. Still, ad-supported sites are a tough go, especially when the lion’s share of advertisers are penny-pinching publishers! GoodReads needed an exit strategy or the fortitude to continue as a major site with minor , hard-won revenues — a labor of love, which I believe it remains. Now, however, that love is accompanied by a great cash-out. (Kudos, GoodReads. You earned it.)
- A Kindle-GoodReads integration will be terrific for consumers. As Chandler told Laura Hazard Owen at PaidContent, “…the thing we’re most excited about is actually bringing the book into Goodreads and enabling people to just start reading right there from the Kindle Cloud Reader. We’ve never had a good book preview feature.” Hear, hear!
- GoodReads eCommerce — specifically the selling of eBooks — has been long-awaited by the publishing world. But, selling eBooks in consumer-meaningful formats that are also amenable to publishers (eg. have DRM) is incredibly hard without being a partner of one of the biggies. Simply bolting on a lesser-used format wouldn’t have cut it; GoodReads needed to go big.
- Like Amazon, GoodReads is extremely user-centric (thus the 16MM users!). It sounds from Grandinetti’s quote that Chandler made sure that Amazon understood fully that GoodReads needed to remain credible in the consumer’s eye.
- To that point, I look at the Amazon/IMDB integration where films that are available via Amazon instant video are merely shown as such along with a link as being a nice analog to how this integration might go. Subtle, useful and with very little that is explicitly “Amazon.”
- Despite some GoodReads’s users feeling immediately unfavorable regarding the merger, I suspect that Chandler knows that if he stays the course and simply leverages the Amazon relationship to improve the GoodReads user experience, all will be fine as both the GoodReads user and Amazon consumer continue to be treated like gold.
What I Think it Ultimately Means
- Readers, or as we like to call them “book consumers”, win. Especially Kindle consumers.
- GoodReads users win.
- Otis and company win.
- Amazon wins.
- Every other book and eBook retailer loses. No matter how neutral GoodReads stays with their buy buttons, no matter if the leave the Kobo review feed on, etc. the Kindle integration is likely to be catnip to eBook readers. Amazon’s market share goes up. Period.
- Other book social networking sites mostly lose. A couple achieve modest victories. Most are owned by Amazon and their positions and value will remain unchanged. A few indies will gain some users who absolutely must flee “the man.”
- Authors win — As Grandinetti told the NY Times, it is now “super-easy” for authors to reach readers. (Suggestion to authors: update that GoodReads profile pronto! Ditto your LibraryThing profile, which Amazon also owns and uses. And, oh yeah, Shelfari, which they also own and use. All contribute to the AMAZ data — which drives the algorithm. Take the time. Be thorough. Just a suggestion, of course…).
- Publishers win. In the short-term. Yup, they do. More eBooks will likely be sold as a result of GoodReads’s aggregation of readers incorporates a (much) more direct eCommerce mechanism. GoodReads will be more valuable to publishers than ever.
- Publishers win again. A place to advertise that is very, very close to both consumer and the eBook transaction is a nice thing to have. The new co-op?
- Publishers win again. In the short-term. Amazon is a very profitable account. It’s a good place for those 16MM to wind up buying books and eBooks.
- Publishers will feel as if they’ve lost in the short-term. (eg. Bookish looks more unrealistic now than ever). But that’s only because they still seem to believe that owning the consumer transaction is the key to a robust relationship with consumers. That thinking is changing and I expect this to change it further. Knowing how to influence consumers, facilitate discovery (use the “new co-op”), and be the ones who know how to work the various platforms to sell more units to consumers is what matters. Get that right and the rest falls into place.
- Publisher’s will need to accept that the level and manner in which they’re playing in the direct-to-consumer world is not meaningful. If it were, one of them would have plunked down the $150MM or invested something more than a few million dollars in their own direct efforts. Easy for me to say from my current seat, but it’s simply true and has been for a while.
- Publishers lose big. In the long term. Amazon becomes more powerful with more — and more meaningful — direct relationships with consumers and greater market share.
- Start-Ups with alternate business models may win. It’s clear that Amazon is going to keep pulling rabbits out of the hat (subscriptions, anyone?) and that publishers will increasingly have to accept the rabbits they are given. Unless they can find alternate paths to market. Oyster leaps to mind for me but there are many potentially viable start-ups (along with a slew of less-than-viable-ones) who are dying to do business with publishers. Publishers are going to need to learn to deal with some of their own underlying roadblocks (rights, royalties, The Fear, etc.) and answer those pesky phone calls from start-ups.
The Big Risk
- GoodReads users leave in droves as the sites morphs into an Amazon storefront. Unlikely given the circumstances and public statements. Nevertheless a risk.
Everyone hates it when their party gets crashed. That’s the case here, I think. Everyone hates it, that is, until it turns out that the new guests are pretty cool. I think Amazon is actually going to be pretty cool at this party. If not, Otis Chandler wouldn’t have invited them.
Clearly this is not exhaustive. Though it is long! As ever, I very much welcome additional thoughts and comments.