On Amazon + Goodreads

So, Amazon is buying Goodreads. There’s so much to say, that it’s hard to get my head around it. Let’s try to break it into four broad questions:

Why did Amazon buy Goodreads?

This is probably the easiest one to answer (or maybe the next question is). Goodreads built the best online book discovery platform yet. Amazon is the largest online book retailer. Those two sentences right there are enough.

But there’s more than that. For one, Goodreads gives Amazon something its big tablet/e-reader competitors don’t have: a social network around books. Apple doesn’t have that. Google doesn’t have that. Barnes and Noble doesn’t have that. Amazon also gets to add to its considerable data about reader habits and millions of reader-reviews.

Goodreads had also been making noise of late that they were considering getting into the book selling business themselves, and I wonder if this acquisition had a defensive angle as well. Goodreads, in my opinion, could over time have challenged Amazon in online bookselling.

Goodreads is also much better internationally than Amazon and the Kindle, so Goodreads could give them another avenue of expanding their presence overseas and up north (deep breath, Canada).

Amazon also gets a way to promote its own publishing ventures outside of Amazon.com, which it has had a tough time doing. Bookstores aren’t especially eager to carry them, online or otherwise, so having available ad spaces and recommended reading slots to put their titles in front of readers is surely one of the biggest reasons Amazon pulled the trigger.

Lastly, Goodreads is a social network around books, but why couldn’t it be replicated around movies? Or music? Or video games? There’s a hell of a lot more money for Amazon in those categories as well.

Why did Goodreads sell?

The most obvious answer is for money. Goodreads was backed by almost $3 million in outside investor money, and those investors expect a return. If Forbes’ estimate of a “low eight-figure” selling price is correct, that’s a 7-8 times return for that. Not bad. (I think that’s a pretty good price for Goodreads, actually. They are one of the 100 biggest website in the US after all).

But there are other reasons Goodreads might want to do this. Amazon has some things that Goodreads could use. One, an established ereading platform. Two, unparalleled server-side and database knowledge (heck, the CIA uses Amazon services. The freaking CIA). Three, and perhaps most importantly, a way to make much more money than Goodreads makes now through direct sales. Goodreads makes money now selling advertising (mostly to publishers), but there’s a whole boatload more money to be made from direct sales.

Lastly, starting a business is hard and growing it is hard. The team behind Goodreads has been building this thing for five years. There’s something to be said to attaching yourself to a bigger boat. I can imagine the GR folks are pretty relaxed today and in a way they haven’t been in awhile.

What can Goodreads users expect?

Probably most Goodreads users are hoping that Amazon does almost nothing to Goodreads. That is unlikely.

I would expect the following:

  • Kindle integration
  • Amazon buy buttons
  • Increased advertising space
  • Goodreads integration on Amazon.com
  • Book previews on Goodreads
  • Increased presences of self-published titles on Goodreads

What would the doomsday scenario look like for Goodreads users? I’m not sure, really. Amazon should realize that Goodreads kicks their ass at social, so I would leave them alone save for the above items if it were up to me. I suppose one unfortunate outcome would be an extreme retail-ification of Goodreads (think more recommendations, categories, widgets, ads, special deal spam, etc).

What does this mean for books, publishing, and the universe?

I think this is very bad news for Barnes and Noble and Kobo. Apple, though it doesn’t make a ton of money from the iBookstore, is terrible at social as well. If social is the future of retail, Amazon extended its already considerable lead in books.

I’ll also be interested to see if publishers, long Goodread’s best ad buyers, show any reticence to keep spending money promoting books on Goodreads. On the one hand, Goodreads will still have a bunch of really active readers and book buyers. On the other, the ad dollars they spend on Goodreads only makes Amazon stronger, which isn’t necessarily great for traditional publishing. Tough spot.

My strongest reaction to the deal, though, might be unexpected. While perhaps many Goodreads users are going to be upset about it, I think the acquisition speaks to the vitality of reading and books. This is a growth and innovation story. Goodreads built something readers love, and they beat Amazon (make no mistake, this is about them doing something Amazon couldn’t, even after buying a Goodreads competitor a few years ago) by doing something different. There is room to build businesses and companies around books because readers still love reading.

So, who’s going to be the next to step up and build something cool for us? I’m excited to see.

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