Direct-to-consumer (D2C) starts with building community, not owning the sale

Directory-881420_640More and more book publishers seem to be focused on building a better direct relationship with consumers. Some of these direct-to-consumer (D2C) efforts are well thought-out while others are nothing more than publishers following the crowd.

How else do you explain so many publisher sites that are simply catalog pages with the option to by print or ebooks direct? What’s the compelling reason for someone to come to the site? Even if they find the site why would a consumer consider buying direct rather than from their favorite retailer?

It reminds me of the old days when everything was driven by seasonal (print) catalogs. The accounts insisted on having enough lead-time to promote titles, so the summer titles were presented the previous fall or winter. The print catalogs were then left behind with the buyer as evidence of the sales call presentation.

Most of today’s publisher websites are nothing more than the digital version of those seasonal catalogs. And since there’s no compelling reason for consumers to discover and explore them, many of these websites are ghost towns.  Publishers create them and then wonder why nobody visits or buys.

Here’s something most D2C-focused publishers overlook: It’s virtually impossible to change a consumer’s buying habits. The larger my Kindle ebook library, the less likely I am to buy my next ebook from a retailer not named Amazon, and that includes an aversion to buying direct from the publisher. It’s that wonderful retailer walled garden phenomenon; and those walls are something publishers helped create by insisting on locking their books inside DRM.

So if that spiffy website is unlikely to generate direct sales why does it exist? If your answer is “to increase discovery”, do yourself a favor and study the results of a Google search for your top titles, series and authors. If your pages aren’t among the top search result links you’re kidding yourself with the “discovery” justification. The top results are the ones getting all the clicks.

Rather than trying to change consumer buying habits and owning the sale, publishers should instead focus their D2C efforts on building community. Publishers own the relationship with authors, so as a publisher, what are you doing to build community around your authors? What are the top three reasons are you giving consumers to come to your website?

Btw, authors are just one component. Many publishers have popular series or dominate a specific genre. What are you doing to build community around that brand or genre?

It’s OK to still offer direct buy buttons on each title’s catalog page but your D2C buy buttons should be offered alongside buy buttons for all the popular retailer sites.  That includes buy buttons for print as well. Let the consumer decide where they want to buy and don’t force them to hunt for your product on a retailer’s site.

If publishers don’t spend the time building this community with consumers, who will? The retailers aren’t going to do it. Their focus is way too broad.

So although most publishers missed out on the opportunity to go direct in the digital era, there’s still plenty of time to establish a strong consumer relationship by using your site to build and foster community. Just be sure to keep your priorities straight and focus on community first and owning the sale second.

How Amazon Underground will affect content pricing and business models

Screen Shot 2015-08-31 at 9.29.05 AMAs interesting as the all-you-can read models from Next Issue, Oyster Books and Scribd are, I believe Amazon just introduced a new model that’s likely to be much more disruptive in the long run. I’m talking about Amazon Underground, where paid apps go to be free.

If you haven’t heard about Underground it’s a collection of paid Android apps that are now available free if you download them directly from Amazon. The initial collection is mostly games but it will undoubtedly grow over time. It’s also important to note that the catalog includes paid apps as well as those with in-app purchases (e.g., additional levels for a game); those in-app options also become free in the Underground world.

App developers get paid for engagement in the Underground model. So if their app gets downloaded but never used they earn nothing. On the other hand, if their app is wildly successful and used extensively, Underground represents a whole new developer revenue stream.

Any app developer will tell you there’s an enormous difference between the number of downloads of a 99-cent app and that same app as a freebie. Amazon gets that and may have cracked the code in leveraging free while also driving revenue.

It all has to do with advertising revenue. You may not see much (any?) advertising in some of these apps today. For example, I haven’t seen a single ad in a casino game and Office app tool I downloaded. That will undoubtedly change in the future. After all, in order to keep investors happy, Amazon’s losses today always need to point to profits and other benefits in the future.

What are those benefits?

First of all, it’s an interesting way to co-opt the Google Play store. Remember, you can only get these Underground apps direct from Amazon, not Google. I’ve got to believe Amazon’s own app store isn’t exactly thriving, so this is a great way to give it a gentle boost.

Second, all those Underground apps you download ultimately pull you deeper and deeper into the Amazon walled garden. This too might not be apparent today but it will become crystal clear when those ads start popping up. And don’t forget that you’re opting into a model where all your app usage is closely tracked. After all, that’s how Amazon determines how much to pay developers. If you’re a privacy freak, Underground is not for you.

Why should publishers care about Amazon Underground? It sounds like an interesting model for game developers but not all that applicable for books, newspapers and magazines, right?


I’ve been talking about advertising in books for quite awhile now and I think Underground represents a viable, incremental business model for this vision. It’s obviously not the best option for some content but I’m convinced enough publishers and authors will embrace it, so much so, in fact, that naysayers will even have to consider it.

Let’s be clear about this though: I’m not suggesting an ad-based model will generate the same amount of per-unit revenue as the paid edition. That’s simply not going to happen. If a publisher is earning $5 per copy sold of an ebook today they might only earn ten or twenty cents (at best) from each download of the Underground version.

So why would any publisher ever agree to this?

It’s all about extending reach. Sure, nobody wants to trade a $5 sale for one netting ten cents. But what about all those readers who aren’t going to buy the book, newspaper or magazine to begin with? You’re netting zero from them today and possibly ten cents from each of them in the future. All that, with no cost of goods, btw.

Here’s another interesting use-case: Underground becomes a better sampling solution. Once the service is loaded with a bunch of ebooks, readers will be able to download the entire catalog without paying a penny. Amazon won’t be on the hook for any payment till pages are read. Consumers who like what they see but get frustrated with all the ads will always have the option to go back and actually pay for the original, ad-free edition. The rest of us will simply deal with the ads and enjoy the free ride.

That sounds like a win-win model for quite a few books, newspapers and magazines.

3 content pricing models from the future

Euro-447214_1280The year is 2020 and I’m about to make a digital content purchase. It’s amazing how much the industry has evolved in the past five years. For example, pricing is no longer a one-size-fits-all, take-it-or-leave-it component. I now have multiple pricing models to choose from: 

Social bulk discounts – That digital newspaper subscription I’m considering offers a 50% discount if I can get at least 30 of my social network friends to subscribe as well. Yes, the Groupon model is still alive but with a twist. In order to take advantage of the deal I first need to rally commitments from my friends. If successful, all the participants are also committing to broadcast their purchase via Facebook, Twitter or whatever other social network they opted in with.

Advertising-subsidies – It finally happened and publishing purists are still complaining about it. Meanwhile, the rest of us are thrilled to choose from two different options and price-points when we buy ebooks. Those who prefer the traditional ad-free approach pay full price while others pay less and are presented with ads as they read the book. Even deeper discounts are offered to consumers who agree to share their name and email address with sponsors and advertisers. I’ve completely embraced the ad-subsidized approach and find the same as reading a magazine or newspaper.

Clubs – Ever wonder what happened to the old record and book clubs of yesteryear? They’re back in the digital world. I get to choose from 3 deeply discounted ebooks to open my account and then I commit to paying full price for at least 10 additional ebooks over the next 12 months. If I fall short of that commitment my credit card gets hit with a penalty charge at the end of the term, so better to just buy all the books I want rather than pay a fine with nothing to show for it.

I hope you agree that tomorrow’s pricing models are terrific for consumers. The data and buying commitments ought to be good for publishers and retailers too, right?

You probably quickly surmised that Amazon isn’t a fan of any of these, mostly because they want to own all the data and sell it to publishers. That’s OK though because all the other retailers recognized the benefits and now offer all three models. Publishers are also using them in their direct-to-consumer efforts on their websites. As a result, the retailer playing field has been leveled a bit, benefiting both consumers and publishers.

Rest assured, the future is bright (but the Cubs still haven’t managed to win a World Series).

Why Oyster now sells ebooks too

Oyster started as an all-you-can-read ebook subscription service but they recently decided to expand their reach by selling individual ebooks as well. There’s been plenty of speculation on why they made this move, including catching up to competitors like Scribd and Amazon. While the competitive point is valid, I think there are two more important reasons for this move: sustainability and customer loyalty.

What's next, now that ebook sales are flattening? Join me at a free webinar on April 28 to see how to drive revenue growth. Click here to register.

Regarding sustainability, Oyster’s business model is a tricky one. Even though Oyster only earns $9.95/month from a subscriber they’re undoubtedly paying publishers more than $9.95 each month for certain subscribers. It all depends on how many books that subscriber reads in the month.

A subscriber doesn’t have to read the entire book for a publisher payout to occur, by the way. Each publisher has negotiated a percentage threshold, so once a subscriber reads past that agreed-to point in the book Oyster pays the publisher as if the entire book was read. In short, some (and perhaps many) subscribers are triggering full publisher payouts for partially read books.

That sounds like a great way to build a large subscriber base but if you’re losing money on many of them it’s hard to make it up in volume. This is precisely why Oyster needed to diversify their business model. They already have the platform, the reading application and they’re building a nice brand. All they had to do was add the option to buy rather than subscribe. It’s also a smart way to add more recent and popular publications to their offering, which tends to be pretty shallow in many subject areas.

The other enormous challenge I see for these all-you-can-read subscriptions is customer loyalty. Since I never own the content I’m reading, and one service’s library starts to look same as all the others, there’s no reason for me to stick with any one provider. The service with the lowest price and other gimmicks eventually becomes the winner. That’s not exactly an attractive long-term strategy.

But if I’ve built a library of books I actually own on that platform it starts to look more like the walled garden Amazon built. Once you’ve bought a lot of Kindle editions it’s hard to think about moving to another ebook platform. That’s undoubtedly what Oyster hopes to do by adding the purchase option to their service.

Will it make a difference? Perhaps, but the biggest threat to Oyster and Scribd is, of course, Amazon. Fortunately for Oyster and Scribd, Amazon is now much more focused on drones all the other non-book consumer product areas. That’s enabled Oyster and Scribd to build some buzz and momentum. The problem is that if someone at Amazon decides to make subscriptions more of a priority both of these little guys are extremely vulnerable. It’s just too easy for consumers to switch to Amazon and gain all the other benefits an ebook-only service simply can’t offer.

Lessons learned at Book Business Live

The team at Book Business recently hosted a one-day, invite-only event in NY. I had the pleasure of attending as well as moderating the first panel of the day, Transforming Your Company for the New Era of Book Publishing.

The day was filled with highly engaging discussions featuring panelists from McGraw-Hill, Pearson, Hachette, Cengage, Perseus, Rodale, HarperCollins and Scribd. Here are a few of the most interesting points I took away from the event:

Direct-to-consumer (D2C) and competitive pricing – Towards the end of my session an audience member asked our panel the following question: How is it possible to build a direct channel when Amazon is always going to at least match, if not undercut, your prices? Clancy Marshall of Pearson provided a terrific response. She noted that her team is focused on creating a broader, more compelling learning environment, not simply trying to sell a book at the lowest price. This is perhaps the most important thing for publishers to keep in mind as they build out their direct channels: It’s all about creating a reason for consumers to come to you, not simply trying to offer the lowest price. You’ll lose 100% of the time if you’re trying to build a D2C channel based solely on low prices.

What's next, now that ebook sales are flattening? Join me at a free webinar on April 28 to see how to drive revenue growth. Click here to register.

What are you going to do with that data? Tom Breur of Cengage told an interesting story of a correlation they noticed between text highlighting and student performance. They looked at the performance of students using a particular title and tracked how often the student tended to use the ebook’s highlighting feature. It turned out that students who highlighted more often generally got lower grades in the class. Their conclusion: Students who highlight are just skimming, not closely reading the text. The real question here is this: As you and your organization gather more data from ebooks, what will you do with that data? It reminds me of those registration cards that used to appear in the back of print books. I once worked for a publisher who had an office with stacks and stacks of those cards, carefully filled out and mailed in from their readers. The cards were just sitting there, taking up space and collecting dust. Gathering the data is just the first step. In the Cengage scenario, I’d like to think they’re developing ways for their platform to help highlight-happy skimmers become more engaged readers.

The lean model is alive and well – I almost stood up and cheered when Mary Ann Naples of Rodale mentioned their use of the lean startup model. We first started talking about the lean approach at Tools of Change several years ago and it’s great hearing that at least one publisher has fully embraced the concept. If you’re not familiar with the lean approach you’ll find all the resources you need here.

Indirect and direct can coexist and thrive – Mary Ann Naples also helped explain how a publisher’s D2C efforts don’t have to conflict with indirect/retailer channels. She talked about the importance of building community, something I believe is critical for publishers to create consumer brands, not industry brands. Further, she pointed out that a publisher’s community-building efforts help establish a compelling D2C solution while also helping their product stand out in the crowded indirect channels. In short, community can be leveraged to build a stronger consumer brand across all channels.

Focus on your biggest fans – I loved this point made by Rick Joyce of Perseus. He talked about how the music business is so good at selling more products to a band’s mega-fans. A broad consumer approach is fine but what about that portion of your list that tends to have the strongest following? It might be a particular series or author, for example. Are you creating the deluxe editions, the boxed sets, the must-have versions that those fans crave? And are you working with that part of your customer base to build the community foundation of your D2C efforts?

Kudos to Denis Wilson of Book Business and all the speakers who were remarkably transparent in their discussions and audience Q&A. If you ever have a chance to attend one of these Book Business events I highly recommend you make the time for it.

Is the Ebook Revolution Over?: Driving Ebook Growth as Sales Plateau

You knew it wouldn’t last forever. You expected the double-digit growth rates would taper off but you never anticipated your ebook sales would flatten out so quickly.

Is the ebook revolution over?  Is this as good as it gets for ebooks? Or is there something you can do today to generate ebook revenue growth like you’ve seen in the past?

To help answer these questions I'm pleased to announce a free Olive Software webinar I'm hosting which will show how publishers can grow their top line and, at the same time, wrestle back control of their business.  

Here are just a few of the topics we plan to cover:

  • Why the market is flattening out
  • What will drive future growth
  • It’s not print or digital; it’s print and digital
  • How indirect can help drive direct sales
  • The tools and techniques you need to succeed
  • How Olive can be your growth partner

Please join us at 1:00PM ET on April 28 for this 30-minute session – click here to register now, as virtual seating is limited. 

What’s the biggest obstacle facing Oyster, Next Issue, Spotify, et al?

I used to buy ebooks from Amazon but now I read almost exclusively on Oyster Books. Years ago I subscribed to a bunch of magazines and now I read all but one of them through Next Issue (The Week is the only exception). It wasn’t that long ago that I bought CDs and music tracks but now I’m mostly streaming through Spotify.

Since I’ve wholeheartedly embraced the content rental model, what’s preventing me from dumping Oyster for Scribd, Next Issue for Zinio or Spotify for Rdio?

The answer is “almost nothing.” All of these rental services face the enormous challenge of building customer loyalty. Since I don’t own the content and I’m on a month-to-month agreement with them, I can easily leave at any time. And when I switch, I leave almost nothing behind.

Contrast that with the likes of Amazon, where they focus on walled gardens and making it hard to leave. If you’ve built a large Kindle ebook library you probably don’t want to abandon it for another retailer and another reading app, particularly since you can’t bring your old books with you.

You might figure this is no big deal as customers who leave for a similar service will be offset by ones who go the other direction and switch from the competition. As with pretty much any business today though, it’s generally far more profitable to maintain an existing customer than it is to acquire a new one.

So how will these rental services deal with this? The most obvious answer is to expand their catalogs. But they’re all doing that and we’ll eventually reach a point of equilibrium where catalogs are almost identical between the services. Publisher exclusives could impact this, of course, but I’d like to think publishers learned their lessons from walled gardens and won’t make a similar mistake with exclusive distribution deals.

Another way rental services can distinguish themselves is to create more unique features in their apps. The competition will likely copy those features though, so any gains here will be short-lived.

Lower pricing isn’t an option either as that can be quickly copied and is nothing more than a dangerous race to the bottom.

How will this all play out? As much as I hate to admit it, I think all of this only further strengthens Amazon’s position. Amazon specializes in customer loyalty. That’s why so many of us first look to Amazon when buying almost everything these days. They’re also terrific at linking services together. Look at how Amazon Prime has evolved from free two-day shipping to now include Prime Photos, Prime Music and the Kindle Owners’ Lending Library. Critics will argue that none of these add-ons are as good as what consumers can find through other competitors; the difference is Amazon offers them for free, as part of Prime, and you can bet these add-ons will continue to improve over time. Lastly, when it comes to low prices and losing money, well, Amazon is the king.

The lesson here is that while consumers will continue flocking to the rental model, the lack of customer loyalty means the leaders today may not even be relevant tomorrow.

Anticipating change in the myopic publishing industry

Have you ever heard the quote, “everything that can be invented has been invented”? It was once believed that a U.S. Patent Office commissioner uttered those words but that claim has since been refuted. Regardless of whoever said (or didn’t say) it, I’m convinced it’s a view many in the publishing industry strongly believe in. 

Let me provide a few examples…

In 2006 the ebook marketplace mostly consisted of PDF files. There were a few other formats but none showed any signs of broad consumer adoption. The industry seemed to be growing weary of anticipating the ebook explosion that was always “just around the corner”.

I remember working at a large book publisher in those days. One of my former colleagues was very outspoken, noting that books aren’t like music (which had already made the shift from physical to digital), there’s no device that makes a digital version more interesting than a print version, consumers like holding and reading a print book, etc.

Then, in late 2007, Amazon launched the Kindle and everything changed.

Let’s fast-forward a few years for the second example… In 2011 I was co-chair of the Tools of Change publishing industry conference. One of the messages we communicated to attendees was the need for them to diversify their channel strategy and focus on the one channel they totally control: direct-to-consumer. Our pleas were met with rolling eyes, yawns, and responses like this one from a very high-level executive at one of the Big Six: “We don’t need to create a direct channel…that’s why we have retail partners like Amazon, for example.”

My how times have changed. Today we even see the big guys focusing more on direct-to-consumer strategies, particularly as Amazon becomes more dominant and pushes for an ever-bigger piece of the pie.

For my third and final example, let’s look back to 2013, when some were suggesting a “Netflix for books” model would emerge. Most scoffed at the idea, suggesting books aren’t like movies and an all-you-can-read option would never take hold.

Earlier this year we saw the launch of Oyster Books, featuring that all-you-can-read model. Some publishers opted to experiment while consumers (like me) flocked to the service. Even Amazon has copied the model with their Kindle Unlimited program. 

(Btw, as I’ve said before, the current all-you-can-read ebook models are unsustainable. How long can these providers keep paying publishers more than they’re earning from most subscribers in top-line revenue? Amazon is the only player with enough resources to pull that off, and based on their stock’s performance in 2014 it looks like Wall Street is becoming impatient with Amazon’s loss-leader philosophy.)

I mention these three examples because I believe we’re in the midst of yet another shortsighted moment. Ebook revenues have plateaued for many book publishers. Some believe the market has reached equilibrium and that a roughly 75/25 split between print and digital is the future.

These publishers are quite comfortable living in the “print under glass” world, where they drive incremental revenue from digital editions that are identical to the print editions. They don’t like it that consumers expect to pay less for the digital edition (vs. the print edition price), but they’re growing comfortable with the model. Many of them briefly experimented with native apps and enriched ebooks; for the most part, their expenses exceeded revenue on these failed projects.

This is largely why these publishers have an allergic reaction when someone mentions the phrases “enriched ebook” or “enhanced ebook”.

In the early days of television most shows were simply radio programs in front of a camera. There were probably quite a few executives back then who figured that was the future and radio-plus-camera was as good as it would get.

I firmly believe that quick-and-dirty digital editions of print books are not the endgame. Some consumers are and will be perfectly content to read digital replicas of print products, but many will crave something that’s much richer though, especially once they experience it.

We won’t be stuck eternally in today’s “print under glass” world. In the not-too-distant future I’m convinced at least one model will emerge to take us out of this rut. Publishers would be wise to continue experimenting with content enrichment and enhancement (yes, we need better a better term for this!) so they’re not caught flat-footed when the movement takes hold.

Disney shows how to tear down walled gardens

Tired of dealing with the fragmented mobile marketplace that iOS and Android represent? The imagineers at Disney have come up with a terrific way to address that problem. It’s both a much-needed solution for consumers and also a clever way for Disney to maintain a direct relationship with consumers who buy indirectly.

I’m referring to the Disney Movies Anywhere initiative, which lets you buy a movie on one platform and watch it on either platform. Imagine a world where all those ebooks you bought on the Kindle platform could also be read now on the Nook platform, and vice versa. You’d be free to choose the lowest price, no longer worrying about ebook library lock-in, where you’ve bought so many titles you can’t imagine abandoning that retailer.

Sounds like a nightmare for the big retailers but a huge win for consumers and publishers.

Of course, how many publishers have the Disney muscle to force retailers into such a model? Very few.

But wouldn’t it be cool if one or more of the Big Five book publishers pushed for something just like this? The first thing a reader would see when they open that ebook from Amazon, B&N, or anywhere else is a message from the publisher thanking them for their purchase and showing the steps necessary to register the purchase with the publisher so the book can be read on any ebook platform.

The publisher not only does the reader a service, they also establish a direct link to all their customers. That leads to a better understanding of customer interests and trends as well as the opportunity to upsell other products directly.

Every retailer except the largest should support this concept as well. If you’re the distant #2 or #3 ebook retailer, you should totally embrace the opportunity to level the playing field with this; you’ll suddenly gain more relevance as all those books bought on the #1 retailer’s platform could now be read on yours.

Here’s another interesting byproduct: How long would the #1 retailer continue selling ebooks at a loss when every sale no longer reinforces consumer lock-in and, in fact, becomes yet another ebook the consumer can read on competitor platforms?

The marketing tool every publisher undervalues

Why are publishers so scared of free and sample content? Sure, most publishers offer at least one way to test drive their content but they could be doing so much more. I think free/sample content is the single most under-utilized customer acquisition tool out there. Here’s why…

Have you noticed that most newspapers and magazines don’t offer a free e-trial. Or if they do, they bury it on their site. Most of these publishers have always offered free trials of their print product, but free e-trials are almost unheard of. If they’re concerned about chronic freeloaders, why not just give the first few pages of the replica editions?

Even the stingiest publishers let you sample a few articles on their website. I’m sure they figure they’ll at least monetize the ad impressions during that sample period but the same philosophy apparently doesn’t hold up for replica edition sampling. Even if they can’t count those replica edition sampler impressions, why not mix in some interstitial ads between pages for samplers, thereby creating an entirely new revenue stream?

Btw, Amazon, the undisputed king of data and customer acquisition, understands the value of free and sample content; that’s why they typically offer two-week test-drives for newspapers and magazines. Why aren’t publishers following Amazon’s lead? Don’t forget the benefit of gathering prospective new customer names and email addresses; these readers may not opt in immediately but you’ll have a link to market to them in the future.

Then there’s the opportunity for book publishers… Why aren’t they creating super-sized samples available exclusively on their websites? The book samples available on the major retailer sites are generally the same ones publishers offer on their own sites. That’s a huge missed opportunity to establish a direct relationship with those customers.

I realize plenty of book publishers feel it’s hopeless creating a direct-to-consumer channel. They’re clearly not trying very hard though. Here’s another tip: The first thing a reader should see when they open your ebook is a note from the publisher thanking them for their purchase and a link to your site where they’ll find these exclusive, super-sized samples I’m talking about. They should include this messaging in all copies, including the ones sold by retailers. That’s right…use the retailer channels to build your direct channel.

Lastly, how easy are you making it for readers to share that free sample with others? Most publishers put their sample content under lock and key, missing out on the opportunity for pass-along to family and friends of those reading the samples.

Publishers, it’s time to re-think your free/sample content strategy. Learn a lesson from Amazon and start fully leveraging all that terrific content you have to share.