Essays

How Does Goodreads Make Money?

Much of the book industry relies on Goodreads for a lot of things. From readers and authors, to publishing professionals and journalists, the book-focused platform is all-around functional to anyone who loves books. But looking at its website’s design, it feels stuck in the decade’s past. From when Amazon acquired Goodreads for $150 million in 2013 up to the present, the UX hasn’t seen major style changes. Amazon is probably aware that Goodreads desperately needs a facelift, but it’s not doing anything about it. Does that mean that its subsidiary is not profitable enough to warrant precious resources and funding? How does Goodreads make money anyway?

I reached out to Goodreads to specifically ask them that, even going to their website to do a lot of digging and asking some tech experts to weigh in on the subject.

The bookish social media site doesn’t have an official media kit at the moment, according to a representative. But a media kit dated 2017 reveals that its business model revolves around offering “book discovery packages” that consist of “owned, earned, and paid media.”

Direct Advertising Opportunities with Publishers

On Goodreads’s advertising page, authors or publishers can fill out a form asking a little bit of their information, such as their budget. Then, Goodreads says it would give them access to advertising products and resources, and it appears it reaches out to its clients to give them customized solutions.

For a social media platform that garners millions of views per month and holds a ton of user data, Goodreads struck gold with advertising. According to Chris Muller, Director of Audience Growth for DoughRoller, Goodreads’s business model is based on the concept of social commerce. “People share book recommendations, reviews, and discuss any books they are reading or want to read in the future, which contributes to the website’s success. This website’s Holy Grail appears to be recommendations from like-minded readers,” he said.

In Goodreads’s 2017 Discovery Kit, the Amazon-owned platform listed some ways in which it provides services to publishers and authors, and how it cashes in on the user data Muller mentioned. And though the information appears outdated, it’s still useful to have a general sense on how Goodreads operates.

Among the top revenue streams mentioned are sponsored newsletters and new releases mailers, which Goodreads sends to millions of users every month; advertorial placements, which is also called the author spotlight; personal selection emails, which can target an author’s fans showing a new release; and sponsored homepage polls.

Giveaways Program

Goodreads’s Giveaways is definitely one of the popular features of the platform. Although international readers can almost always enter a giveaway, the service itself is only available for U.S. and Canadian authors who want to run print book giveaways. For the Kindle book giveaway, however, those who use Amazon’s self-publishing platform Kindle Direct Publishing can take advantage of the service.

In this business model, Goodreads offers Standard and Premium packages. The standard package costs $119, while the premium one costs $599. Each option has its own perks, but I find the Standard package decent enough.

According to Goodreads’s 2017 media kit, 50-60% of giveaway winners write a book review.

Affiliate Links

Whenever a user clicks on the Buy buttons on a Goodreads book page, they would notice that there are affiliate codes attached.

“Goodreads receives a cut of any book sold through partners like Amazon, Barnes & Noble, and Apple Books. But, this revenue is likely not important given the strategic value of Goodreads to Amazon. I think this is shown by the fact that Goodreads has killed off its advertising programs aimed at individual authors and smaller publishers,” said Ben Fox, a tech entrepreneur and currently the founder of Shepherd.com, a Goodreads competitor.

Fox was referring to Goodreads’s self-serve advertising — not its direct advertising service — which it shut down in February 2020. Now, Goodreads promotes Amazon’s self-serve ad product instead, which is obviously on a different site.

“They still sell advertising to large publishers, but it seems likely Amazon is subsidizing Goodreads or giving them a custom affiliate deal that gives them a much larger share of any book sold,” Fox said.

Online Advertisements

Goodreads says that it shows interest-based ads on its website. “Interest-based ads are sometimes referred to as personalized or targeted ads. We show interest-based ads to display features, products, and services that might be of interest to you,” it reads on a disclaimer page.

But what do these interest-based ads really look like for a casual user of the platform? According to Goodreads, personal recommendations and other similar features are considered ads. This brings into question the endgame of its recommendations tool — is it really out there to genuinely help a reader find books they might love, or is it just another way to profit off of the user’s activity?

On the other hand, in its media kit, these are the ad units it offered: homepage roadblock; book/quotes page roadblock; and home ROS (run of site) genre and author targeted ads, which is a fancier name for banner ads.

Though these kinds of ads seem too pervasive for some, the good news is that users can select the option not to receive targeted ads, though will still see ads not based on your interests.

How Much Does Goodreads Make?

Looking at the old media kit, you would be surprised by how much data the bookish social media site collects that it can use to target specific audiences.

Putting Amazon out of the picture, Goodreads is a powerhouse on its own. Its various platforms garner millions of views, whether that’s on social, its website, its apps on different devices, its newsletters, and so on. It was such a potential cash cow back then that Amazon eventually took notice of it.

“Goodreads and its community could have competed with Amazon’s book sales, so they were absorbed before they posed a serious threat. Amazon’s control of online bookselling approaches insurmountable by combining Goodreads’ recommendation database with Amazon’s own vast databases of readers’ purchase histories,” said Muller.

As for Fox, who has a firsthand experience running a Goodreads-like site, he gave a rough estimate of how much Goodreads make in a month. “LinkedIn says that Goodreads has around 300 employees. A rough rule of thumb is a cost of $150,000 per employee. That would estimate that their costs are $3.75 million per month for their team. How does that match up to ad revenue? Their media kit says they have 55 million unique visitors per month to the site, if we assume a $25 eCPM rate that would bring in $1.4 million a month,” he said.

If Goodreads is earning that low, per Fox’s ballpark figure, you might think it’s doomed. If the site isn’t profitable enough compared to other social networking sites, why is it still up and running after all these years? Remember that if something doesn’t work well for Amazon, it eventually kills it off. In fact, in 2017, it shut down Quidsi, its e-commerce platform for baby products, after failing to make money. This year, it plans to close 50 of its brick-and-mortar stores for failing to “gain traction.”

“Maybe their affiliate and email revenue gets them the rest of the way. Either way, I don’t think they are worried about money given Amazon’s backing,” Fox said of Goodreads.

For Shakib Nassiri, founder of WAMA Underwear and an expert in the digital space and ecommerce industry, income isn’t really the main goal of the bookish platform, unlike before. “The direct income of Goodreads isn’t as important as it used to be. Now, it is more of a pipeline to push avid readers towards purchasing books on Amazon … It is an incredibly valuable bank of data for Amazon to have access to, and to be able to send Amazon-specific ads on. Goodreads likely brings in a decent chunk of Amazon books sales,” he said.

Taking that into account, though Goodreads doesn’t appear to be bringing a lot of money to the juggernaut that is Amazon, it remains a data gold mine for the corporate giant as it retains its hold over the publishing industry. Goodreads and/or Amazon is probably getting more mileage with tons of user data they collected throughout the years, and that’s all that matters in the digital age. Just ask Meta.

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