Amazon introduced their Amazon Source program today, which enables indie booksellers to sell Kindles and receive a cut of future Kindle book sales made on those devices.
Retailers that are part of the program can use Amazon Source (http://source.amazon.com) to purchase Kindle devices and accessories for resale. Retailers can choose between two programs:
1) Bookseller Program: Earn 10% of the price of every Kindle book purchased by their customers from their Kindle devices for two years from device purchase. This is in addition to the discount the bookseller receives when purchasing the devices and accessories from Amazon.
2) General Retail Program: Receive a larger discount when purchasing the devices from Amazon, but do not receive revenue from their customers’ Kindle book purchases.
Amazon Source aside, I’ve often wondered if an independent bookstore could sell their usual selection of paper books but also sell Kindle books to those who wanted them. The bookstore would basically buy the books as gifts for the customer through Amazon and take the affiliate fee (which is 8.5% with sufficient monthly sales volume) as profit. (The fee on magazine subscriptions is 25%!) I love frequenting indie bookshops — the browsing experience of a good bookstore is still far superior to that on Amazon or a Kindle — but I don’t buy paper books anymore. So I usually leave bookstores with a list of 2-3 books I later buy on Amazon…it would be nice if the bookstore gets a cut of that action. If it worked well enough, the physical books in the store would be more like advertisements for the digital copies than salable items and you could change how you stock the store…less overall inventory or a more varied inventory with far less overhead.
Knowing next to nothing about the economics of bookstores, I don’t know how well that would actually work, but it would certainly be an interesting experiment. (via @tcarmody)
That’s because Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers. The shareholders put up the equity, and instead of owning a claim on a steady stream of fat profits, they get a claim on a mighty engine of consumer surplus. Amazon sells things to people at prices that seem impossible because it actually is impossible to make money that way. And the competitive pressure of needing to square off against Amazon cuts profit margins at other companies, thus benefiting people who don’t even buy anything from Amazon.
Attacking the market with a low margin strategy has other benefits, though, ones often overlooked or undervalued. For one thing, it strongly deters others from entering your market. Study disruption in most businesses and it almost always comes from the low end. Some competitor grabs a foothold on the bottom rung of the ladder and pulls itself upstream. But if you’re already sitting on that lowest rung as the incumbent, it’s tough for a disruptor to cling to anything to gain traction.
An incumbent with high margins, especially in technology, is like a deer that wears a bullseye on its flank. Assuming a company doesn’t have a monopoly, its high margin structure screams for a competitor to come in and compete on price, if nothing else, and it also hints at potential complacency. If the company is public, how willing will they be to lower their own margins and take a beating on their public valuation?
Because technology, both hardware and software, tends to operate on an annual update cycle, every year you have to worry about a competitor leapfrogging you in that cycle. One mistake and you can see a huge shift in customers to a competitor.
Not having to sweat a constant onslaught of new competitors is really underrated. You can allocate your best employees to explore new lines of business, you can count on a consistent flow of cash from your more mature product or service lines, and you can focus your management team on offense. In contrast, most technology companies live in constant fear that they’ll be disrupted with every product or service refresh. The slightest misstep can turn a stock market darling into a company struggling for its very existence.
I’ve had an idea for a long time now. It’s inspired by one of my favorite feelings: when you order something on Amazon, and it’s put on backorder, and then you forget you ordered it, and a year later it arrives—and it’s like a gift you bought yourself.
Well, I thought: what if I just wrote a program to buy stuff for me? The first iteration of this was going to be a program that bought me stuff that I probably would like.
But then I decided that was too boring. How about I build something that buys me things completely at random? Something that just… fills my life with crap? How would these purchases make me feel? Would they actually be any less meaningful than the crap I buy myself on a regular basis anyway?
All in all, this was a sort of creepy shipment. It sent me a book by someone who’s known for charting and modeling the human mind, and sent me some music that is extremely mechanical and almost random.
Edd Dumbill writes that Twitter, as it strives to become a profitable company, is turning into an old media company.
Twitter’s bait-and-switch, now they’ve built their reach on the back of eager early adopters, is disappointing. It marks them as part of old, unenlightened, business, and consigns them to a far less remarkable place in the future economy than they otherwise might have had.
Michael Heilemann has a somewhat harsher take in his post on Amazon, Twitter, and Star Wars:
Some part of me can’t help but admire the purity of the clusterfuck that is Twitter’s continued downward trajectory from startup wunderkind to some sort of bland, wannabe ad-driven media company.
It’s incomplete, but I can’t help but draw comparisons between Twitter’s alienation of their original users and ecosystem to, because I am me, Star Wars.
Despite what George Lucas says, the continuing alterations to Star Wars have been driven by business reasoning, not some artistic auteur need to see the vision completed. And in both cases, the original fan base is the one getting run over, while the unwashed masses get to enjoy Jar Jar and Justin Bieber, respectively.
Against all odds, I have become a (belated) fan of the Kindle. I still hate doing anything with it but reading words on its screen, but it’s light, runs on a single charge for seemingly ever, and I’ve really been enjoying reading on it lately.
If this trend continues, I might have to get the Kindle Paperwhite, which offers a built-in light, a touchscreen (I currently own a touchless Kindle 3), more resolution, more font choices, and a higher contrast screen.
Amazon announced recently that they bought a company named Kiva for $775 million. In cash. Kiva makes robots for fulfillment warehouses, of which Amazon has many. When I heard this news, I was all, robots are cool, but $775 million? But this short video on how the Kiva robots work made me a believer:
A week later, a friend posts a screen capture and tells me that my post has been showing up next to his news feed as a sponsored story, meaning Amazon is paying Facebook to highlight my link to a giant tub of personal lubricant.
Other people start reporting that they’re seeing it, too. A fellow roller derby referee. A former employee of a magazine I still write for. My co-worker’s wife. They’re not seeing just once, but regularly. Said one friend: “It has shown up as one on mine every single time I log in.”
Get used to this…promoted word of mouth is how a lot of advertising will work in the future.
BTW, as with many unusual products on Amazon, the “Customers Who Viewed This Item Also Viewed” listing (horse head mask?) and the reviews are worth checking out.
As a Fertility Specialist for Pachyderms, this was exactly what we needed to help rebuild elephant populations all over sub-saharan africa. It’s not all just Medications and IVF treatments. Some times you need a loudspeaker, a Barry White CD and a 55 Gallon drum of Lube.
One of the frustrations people have with Ikea is that you can’t order online from them (at least in the US). You have to go to the store or hire someone to go to the store for you. Not sure when they started doing this, but you can now buy a bunch of Ikea products from Amazon…some items even have free shipping if you’re a Prime user.
Update: Hmm, it seems you can shop online at Ikea…but the shipping and handling costs are insane ($129 to ship a $299 chair). Also of note if you hadn’t already guessed…the products on Amazon are often more expensive than they are at Ikea. Mark up!
Update: Further clarification in case it’s unclear…Ikea is not selling this stuff on Amazon, it’s all third-party resellers. So caveat emptor and all that (and that goes triple for eBay). Ikea wants you in the store, not shopping online.
Amazon is somewhat of an unusual company for American investors because it focuses on the long-term (10- 20-year timelines) instead of the short-term (quarterly earnings).
“If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people,” Mr. Bezos told reporter Steve Levy last month in an interview in Wired. “But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that. Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue. At Amazon we like things to work in five to seven years. We’re willing to plant seeds, let them grow-and we’re very stubborn.”
Like Apple, Amazon is one of those large market cap growth stocks that investors don’t really know what to do with. Both stocks are still undervalued compared to much of the rest of the market, IMO.
I was at Amazon for about six and a half years, and now I’ve been at Google for that long. One thing that struck me immediately about the two companies — an impression that has been reinforced almost daily — is that Amazon does everything wrong, and Google does everything right. Sure, it’s a sweeping generalization, but a surprisingly accurate one. It’s pretty crazy. There are probably a hundred or even two hundred different ways you can compare the two companies, and Google is superior in all but three of them, if I recall correctly. I actually did a spreadsheet at one point but Legal wouldn’t let me show it to anyone, even though recruiting loved it.
I mean, just to give you a very brief taste: Amazon’s recruiting process is fundamentally flawed by having teams hire for themselves, so their hiring bar is incredibly inconsistent across teams, despite various efforts they’ve made to level it out. And their operations are a mess; they don’t really have SREs and they make engineers pretty much do everything, which leaves almost no time for coding - though again this varies by group, so it’s luck of the draw. They don’t give a single shit about charity or helping the needy or community contributions or anything like that. Never comes up there, except maybe to laugh about it. Their facilities are dirt-smeared cube farms without a dime spent on decor or common meeting areas. Their pay and benefits suck, although much less so lately due to local competition from Google and Facebook. But they don’t have any of our perks or extras — they just try to match the offer-letter numbers, and that’s the end of it. Their code base is a disaster, with no engineering standards whatsoever except what individual teams choose to put in place.
The advantage traditional paper-based media has always had over electronic media is that the consumer doesn’t have to bear the cost of the technology up front. If you buy a book or a magazine, the technology that enables its production and transmission is already built in.
The cost of the device can turn an electronic media gadget into a prestige device, like Apple’s iPod or iPad. But it’s nevertheless a hurdle for customers. $500 for an iPad or $400 for the first-generation Kindle is a lot of cash to drop for folks who want to read. It’s also a levee bottling up a torrent of content that can be sold and delivered over those devices.
With Amazon’s new $79 Kindle, $99 Kindle Touch, $149 Kindle Touch 3G, and $199 Kindle Fire, Amazon dynamites that levee. The devices aren’t free, but they’re so much cheaper than comparable products on the market that they will likely sell millions of copies and many more millions of books, television shows, movies, music and apps.
TO SEE how profoundly the book business is changing, watch the shelves. Next month IKEA will introduce a new, deeper version of its ubiquitous “BILLY” bookcase. The flat-pack furniture giant is already promoting glass doors for its bookshelves. The firm reckons customers will increasingly use them for ornaments, tchotchkes and the odd coffee-table tome-anything, that is, except books that are actually read.
In the first five months of this year sales of consumer e-books in America overtook those from adult hardback books. Just a year earlier hardbacks had been worth more than three times as much as e-books, according to the Association of American Publishers. Amazon now sells more copies of e-books than paper books. The drift to digits will speed up as bookshops close. Borders, once a retail behemoth, is liquidating all of its American stores.
Groupon has filed its S-1 and hopes to raise $750M in its initial public offering. Given they’re currently losing a staggering $117M per quarter, despite revenues of $644M, they’ll be burning through that cash almost as soon as it hits their account.
At the moment, it’s costing them $1.43 to make $1, and it doesn’t look like it’s getting any cheaper. They’re already projected to make close to three billion dollars in revenues this year. If you can’t figure out how to make money on three billion in revenue, when exactly will the profit magic be found? Ten billion? Fifty billion?
I feel like the Groupon IPO is an elaborate practical joke.
It was a different time and (as DHH notes) a different company, but when Amazon IPOed in 1997, they lost $27.6 million that year on net sales of $147.8 million. That’s an 18% loss for Amazon compared to Groupon’s, hey, 18% loss. Amazon didn’t report their first profit until Q4 2001. No guarantee whether Groupon will ever turn a profit but something to consider anyway. Oh, and probably not relevant but interesting nonetheless: Amazon CEO Jeff Bezos is an investor in DHH’s company, 37signals…and until recently, 37signals co-founder Jason Fried was on Groupon’s board of directors.
Kevin Kelly forecasts that Amazon will soon be handing out free Kindles…perhaps to Amazon Prime members.
In October 2009 John Walkenbach noticed that the price of the Kindle was falling at a consistent rate, lowering almost on a schedule. By June 2010, the rate was so unwavering that he could easily forecast the date at which the Kindle would be free: November 2011.
Since then I’ve mentioned this forecast to all kinds of folks. In August, 2010 I had the chance to point it out to Jeff Bezos, CEO of Amazon. He merely smiled and said, “Oh, you noticed that!” And then smiled again.
The Kindle has never been knock-it-out-of-the-park great…it looks like Amazon’s strategy is not to build a great e-reader but to build a pretty good free e-reader.
Since the introduction of the iPhone, Apple has ruled the December holidays. Under the tree, by the menorah, and around the Festivus pole has appeared a steady stream of iPods, iPhones, iTunes gift cards, iPod touches, and even MacBooks. Apple has sold tons of devices in the final quarter of the last three years and, with the iPad added to the lineup, will likely do so again this year.
But I think two companies who will do even better than Apple in December this year.
The first is Amazon**. The cheapest Kindle is now only $139 (and the one with free 3G is $50 more). They are going to sell a metric crapload of these things this Christmas. And even if they don’t, they’re going to sell 50 million metric shitloads of Kindle books because you don’t even need a Kindle to read Kindle books…Amazon has readers for the iPad (which is way better than Apple’s iBooks app IMO), iPhone, Android devices, Blackberry, WinPhone 7, Windows, and OS X. I never would have predicted it, but I am a firm convert to Kindle books…and I don’t even have a Kindle. The killer feature here is Amazon’s multi-platform support. I *love* reading books on the iPad at home but when I’m out and about, if I’ve got my iPhone in my pocket, I can read a book. The best book is the one that’s always with you.
This one is more of a guess, but the other company that will do well this holiday season is Microsoft. I know, right? But have you seen this Kinect thing? It’s an add-on for Xbox 360 that takes everything people loved about the Wii and Wii Fit and makes it easier, more natural, and more powerful. Basically you hook this bar up to your Xbox 360 and it tracks your motion around the room. You’re the controller. Here’s a snippet from David Pogue’s positive review:
The Wii, by tracking the position of its remote control, was amazing for its time (2006). It’s a natural for games in which you swing one hand — bowling, tennis, golf. But the Kinect blows open a whole universe of new, whole-body simulations — volleyball, obstacle courses, dancing, flying.
It doesn’t merely recognize that someone is there; it recognizes your face and body. In some games, you can jump in to take a buddy’s place; the game instantly notices the change and signs you in under your own name. If you leave the room, it pauses the game automatically.
There’s a crazy, magical, omigosh rush the first time you try the Kinect. It’s an experience you’ve never had before.
One of the fun things about having an Amazon Associates account for kottke.org is that I can see what my readers are ordering on the site. (Amazon only shows the items ordered, not the associated names or anything like that. I have no idea who ordered what.) As one might expect, you folks buy lots of cameras and books and hard drives and movies but also paper towels, sweatpants, soap, and guitar strings.
So anyway, I was browsing around the other day when I noticed that someone had bought a bunch of Whip-It! whipped cream chargers. Four 50-packs for around $115. “Whoa!” I exclaimed to my wife, “Someone out there really likes whipped cream!”
Readers, I could almost hear the eyeroll as my wife explained to this naive bumpkin that people use these canisters of compressed nitrous oxide to get high. So whoever you are, thank you for the novel experience of learning a new Urban Dictionary term from my wife.
All three books in Stieg Larsson’s Millennium Trilogy—”The Girl With the Dragon Tattoo,” “The Girl Who Played with Fire” and “The Girl Who Kicked the Hornet’s Nest”—are now in the top 10 bestselling Kindle books of all time.
What I want to talk to you about today is the difference between gifts and choices. Cleverness is a gift, kindness is a choice. Gifts are easy — they’re given after all. Choices can be hard. You can seduce yourself with your gifts if you’re not careful, and if you do, it’ll probably be to the detriment of your choices.
Amazon announced yesterday that sales of Kindle books outnumbered sales of hardcover books over the last three months.
In that time, Amazon said, it sold 143 Kindle books for every 100 hardcover books, including hardcovers for which there is no Kindle edition. The pace of change is quickening, too, Amazon said. In the last four weeks sales rose to 180 digital books for every 100 hardcover copies. Amazon has 630,000 Kindle books, a small fraction of the millions of books sold on the site.
I left Seattle pretty sure that Amazon would be a better partner for Zappos than our current board of directors or any other outside investor. Our board wanted an immediate exit; we wanted to build an enduring company that would spread happiness. With Amazon, it seemed that Zappos could continue to build its culture, brand, and business. We would be free to be ourselves.
Amazon has opened slightly their data kimono with a look at the most highlighted passages by Kindle users. The results aren’t that interesting (to me) because the bestsellers dominate: some Gladwell, Dan Brown, etc. To make it more useful, they should weigh the results by sales and cram some social in there: the most highlighted passages by my friends = gold.
Amazon has finally added the ability to earn affiliates fees with Kindle books. From the press release
Amazon is excited to announce that effective May 1, 2010, you can earn advertising fees on Kindle books. With over 500,000 books, including 105 of 112 New York Times Best Sellers, Kindle books represent another great way to earn money advertising Amazon products. Advertising fees range from 4 to 8.5%.
Writing for the New Yorker, Ken Auletta surveys the ebook landscape: it’s Apple, Amazon, Google, and the book publishers engaged in a poker game for the hearts, minds, and wallets of book buyers. Kindle editions of books are selling well:
There are now an estimated three million Kindles in use, and Amazon lists more than four hundred and fifty thousand e-books. If the same book is available in paper and paperless form, Amazon says, forty per cent of its customers order the electronic version. Russ Grandinetti, the Amazon vice-president, says the Kindle has boosted book sales over all. “On average,” he says, Kindle users “buy 3.1 times as many books as they did twelve months ago.”
Many compare ebook-selling to what iTunes was able to do with music albums. But Auletta notes:
The analogy of the music business goes only so far. What iTunes did was to replace the CD as the basic unit of commerce; rather than being forced to buy an entire album to get the song you really wanted, you could buy just the single track. But no one, with the possible exception of students, will want to buy a single chapter of most books.
I’ve touched on this before, but while people may not want to buy single chapters of books, they do want to read things that aren’t book length. I think we’ll see more literature in the novella/short-story/long magazine article range as publishers and authors attempt to fill that gap.
Now available for download. For an app from a company that’s trying to establish and dominate a new and potentially lucrative industry, the lack of polish on this app is kind of amazing.
I’ve noticed an increasing tendency by reviewers on Amazon (and Apple’s iTunes and App Stores) to review things based on the packaging or format of the media with little regard shown to the actual content/plot. Here are two recent examples.
Reviews for the theatrically released versions of The Lord of the Rings on Blu-ray are mostly negative — the aggregate rating is 1.5 out 5. These are award-winning movies but the reviews are dominated by people complaining about New Line’s decision to release the theatrical versions before the extended versions that the True Fans love. A representative review:
If I were reviewing the movie itself it would get a five. This review is for the product, as listed — in other words, I DO NOT RECOMMEND BUYING THIS PRODUCT/DVD. This product is being created FOR NO OTHER REASON than to dupe people into buying this movie twice…again.
Similarly, the early reviews for Michael Lewis’ The Big Short are dominated by one-star reviews from Kindle owners who are angry because the book is not available for the device. (thx, jason)
I have always enjoyed Michael Lewis’ books and was looking forward to reading The Big Short. With no availability in the US on Kindle, however, I will pass until the publisher/Amazon issue is cleared up. I actually believe that the availability of an item is relavent when giving it a review.
Compare this with traditional reviewers who focus almost exclusively on the content/plot, an approach that ignores much about how people make buying decisions about media today. Packaging is important. We judge books by their covers and even by how much they weigh (heavy books make poor subway/bus reading). Format matters. There’s an old adage in photography: the best camera is the one you have with you. Now that our media is available in so many formats, we can say that the best book is the one on your Kindle or the best movie is the one on your iPhone.
Newspaper and magazine reviewers pretty much ignore this stuff. There’s little mention of whether a book would be good to read on a Kindle, if you should buy the audiobook version instead of the hardcover because John Hodgman has a delightful voice, if a magazine is good for reading on the toilet, if a movie is watchable on an iPhone or if you need to see it in 1080p on a big TV, if a hardcover is too heavy to read in the bath, whether the trailer is an accurate depiction of what the movie is about, or if the hardcover price is too expensive and you should get the Kindle version or wait for the paperback. Or, as the above reviewers hammer home, if the book is available to read on the Kindle/iPad/Nook or if it’s better to wait until the director’s cut comes out. In the end, people don’t buy content or plots, they buy physical or digital pieces of media for use on specific devices and within certain contexts. That citizen reviewers have keyed into this more quickly than traditional media reviewers is not a surprise.
Book publishers have been in talks with Apple and are optimistic about being included in the computer, which could provide an alternative to Amazon’s Kindle, Sony’s Reader and a forthcoming device from Plastic Logic, recently allied with Barnes & Noble.
And if it runs apps from the App Store (“yes” seems to be the general consensus), you’ll be able to read books in the Apple tablet format *and* in Amazon’s Kindle format (with the Kindle app), which can’t be happy news for Amazon, hardware-wise.
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