Joe Wikert's DisruptorFest

How Will eBookstores Earn Your Loyalty?

Where I buy a print book often comes down to convenience (which store is closest), pricing, availability (is the book in stock?) and loyalty programs (e.g., member discounts).  The choice of a brick-and-mortar vs. an online store adds in the component of urgency; do you need the book today or can it wait till tomorrow?

I'm buying ebooks almost exclusively now.  In fact, I can't even recall the last print book I bought for myself.  Although I ditched my Kindle on day one with my iPad, I do most of my book reading in the Kindle app on the iPad.  Although Amazon has a major selection advantage of the iBookstore, Apple will catch up at some point.  Then there's B&N and Borders.  Both of them have iPad apps and ebook stores.  And don't forget about Google and their upcoming Editions program as well a host of other up-and-coming e-tailers.

So here's the question: With all these ebook retailers just a click away from each other, what must they do to earn your business on a repeat basis?  This is a critical question for all the e-tailers looking for loyal customers.  I've come up with a list of some of the items that affect my buying habits:

Reader Features -- I'm referring to the bells and whistles the vendor builds into their ereader apps.  Today they're all about the same but I believe this will be a critical point of distinction in the years ahead.  Integration of social networks (easily sending excerpts to your friends, tweeting them, etc.) is just a simple example.  I'm willing to bet the features we'll see in ereader apps in a year or two will make today's apps look pretty basic.

Sharable Content -- B&N took the first steps of this for the Nook but that's not going to cut it long term.  Customers need to be able to share their purchases with all their friends, one by one, of course, just like they can with a print book.  Which leads to...

Eliminating DRM -- Which major ebook retailer will be the first to feature nothing but DRM-free books?  We sell a lot of ebook bundles on oreilly.com and I believe one of the reasons why is because we've totally eliminated DRM from the transaction.  We trust our customers to do the right thing and they reward us by coming back and buying more.  This is a tough one though as it's the publishers who need to be convinced DRM is bad, not so much the retailers.  I was pleased to see that one of the larger, old-school publishers who was a huge advocate of DRM at our 2009 TOC conference became a convert by the time they attended our 2010 TOC show.  I figure if they can make the change, anyone can!

Price -- It's the obvious way of winning customers, but is it a legitimate, significant long-term advantage?  Probably not.  I compare the top e-tailers before I buy books for my iPad and I rarely find a price difference.  On top of that, I'd be willing to pay more for each book if the more expensive option offers me some of the other advantages I've listed in this post.

Loyalty Programs -- Here's one we really haven't seen tapped into yet.  When will I be able to take advantage of a "buy-2-get-1-free" ebook campaign?  We've done some experimentation like this on oreilly.com and it works.  What's nice about this model is that the e-tailer has easy access to your account, so you could accumulate buyer points, buy 1 book now and come back a week or two later to buy the 2nd book that gets you the 3rd one free.  Good luck trying that at your local brick-and-mortar store.  If I know that I'm one book away from getting a free one I'm much more likely to go back to that same store for my next purchase.

Non-book Content -- Up to now all I've been talking about is books.  What about magazines and newspapers though?  When I bought my Kindle v1 I thought it would be a way to always have my newspapers and magazines on the road.  Unfortunately for Amazon, the user experience for newspapers and magazines was awful, so I quickly dropped my subscriptions.  Although most of these publishers are trying to go direct to customers (e.g., iPad apps), there will also be subscriptions through larger e-tailers.  Part of this has to do with discovery, which is why print magazines/newspapers are still at your local convenience store.  How could e-tailers leverage these products to make their site/reader the most compelling one available?

Those are just a few ideas off the top of my head.  What have I missed?  What products and services can an e-tailer offer to earn your repeat business?  Or, with all these stores just a click away, are we less likely to remain loyal to only one or two of them?

When Will eBook Prices Start Going Up?

Amazon did us all a favor.  In late 2007, almost 3 years ago, they introduced the Kindle.  Although it didn't immediately make ebooks a mainstream phenomenon, the Kindle was the first major step towards significant momentum.  More importantly, Amazon looked to set the ebook pricing standard at $9.99.  It's widely known that Amazon lost money on most of those ebooks they sold, but they must have felt it was worthwhile to quickly build a presence, even at a loss (just like Amazon did initially with print books).  They also probably figured they made enough profit on the hardware to justify a loss on the books.

That hardware margin must be looking pretty thin right now.  Not only were they forced by B&N to lower the price of the Kindle, it doesn't take a rocket scientist to see that the iPad is cutting into dedicated reader sales right and left.

So how much longer can Amazon afford to subsidize the $9.99 ebook prices which, as Rupert Murdoch said earlier this year, "devalues books"?  I think the trend towards higher prices has already started but nobody seems to have noticed.

It's far from scientific but as I write this post I see 2 of the top 10 paid titles on Amazon's Kindle bestseller list are priced at $12.99.  The product pages for each, btw, include Amazon's not-so-gentle reminder to customers that "This price was set by the publisher."  I don't recall anything over $9.99 in the top 10 a year ago.  2 out of 10 is interesting, but 6 out of the top 15 and 8 of the top 20 are priced higher than $9.99.

FWIW, even I've become more willing to pay more than $9.99 for a Kindle or iBooks edition.  Two of my most recent purchases were $12.99, so even a tightwad like me is coming around.  And even though I'm no longer locked into $9.99 as a ceiling, I comparison shop to see who's got the best price.  More often than not they prices are identical, but every so often I find a difference and go with the lower one.

The Rapidly Shifting Ebook Retailer Landscape

As I re-read this recent NY Times article about Google's possible role in the ebook retailer world I started thinking more about how the whole marketplace could shake out.  It's important to note that Google Editions is a program that's been talked about for a couple of years but still hasn't materialized.  The latest rumor is it will launch very soon...pretty much the same rumor that's been around the last couple of years!  Nevertheless, at some point I'm convinced Google will produce an ebook retailing platform and it's sure to have an impact on our industry.

Google Editions is said to be cloud-based and hardware agnostic.  Great so far.  After all, I often worried about being locked into Amazon's Kindle platform each time I bought another $9.99 book for it.  To Amazon's credit though, they're heading away from their original locked-in hardware model where you had to own a Kindle to enjoy a Kindle ebook.  Most of the books I read on my iPad now are from the Kindle store, so kudos to Amazon.

The NY Times article linked to above talks about how Google could change the game by cozying up to the independent booksellers.  Interesting idea.  I've always thought the independents should have banded together years ago to create an uber virtual bookstore chain, both online and as brick-and-mortars.  Think of it as a federation of indies.  Networked together they'd stand a much better chance of competing with Amazon, B&N and Borders, for example.

Here's one way this could work: You search for a print book on an indie's website.  They don't have it but the indie two down street does.  In this new federation of independents, Google ties everything together on the back end as it helps them refine their sites and search results to show that book is available down the street at indie #2.  Indie #1 gets a finders fee on the resulting transaction.  Again, everything is handled with a state-of-the-art Google back-end system.

Extend that same thinking to a combined online presence, all backed by Google to do things like provide the best local information (depending on the customer's IP address or what's being searched for).  In other words, take what's always made the indie stores so attractive (extensive local knowledge and specialization) and bring it online, not individually as they are today, but as one super-sized independent.  Think of it as all these stores banding together with Google to create a large Amazon-like presence but with an indie personality, one that changes on the fly from one region to another based on where you are and what you're looking for.  That sounds like a compelling model to me.

So what does the ebook retailing landscape look like for the next couple of years?  First of all, the Kindle will continue to take on more meaning as a bookstore rather than a hardware device.  In fact, as I predicted last November, I believe Amazon will completely abandon the Kindle hardware space by late 2012.  The only adjustment I'd like to make to that prediction is that the iPad (and the upcoming flood of Android-based tablets) will cause it to happen even sooner.

Next, Google will probably cozy up with indies but Amazon's Kindle apps will help it expand onto all platforms.  Google, however, will be more aggressive on the advertising front and (finally!) give book publishers the option of selling different versions of their products (regular-priced ones without ads and lower-priced ones with ads, for example).  For all you anti-book ad people, please remember that there will still be versions without ads; nobody will force you to buy books with ads!  For cheapskates like me who have no problem with ads everywhere else, we'll save a few bucks along the way.

Meanwhile, Apple has to decide whether to create their own iBooks apps for Windows and Android devices.  That's the only way they'll truly be competitive with Amazon and Google.  If they stick with apps just for Apple products they'll really stunt their growth for the future.  I'm thinking this won't happen though.  After all, can you imagine how hard it would be for Steve Jobs to green-light development of an iBooks app for an Android phone?!

I Want One-Click eBook Sampling

I rarely buy print books these days but I still love visiting my local bookstore to browse the latest releases.  The scenario typically plays out like this: I find something interesting and I pull out my iPhone to see if it's available in the iBookstore or the Kindle store.  If it is, I press a few more buttons to have the sample sent to my iPad.

What's wrong with this picture?  First, you could argue I shouldn't be browsing in my local bookstore if my intent is to buy online.  That's an issue the brick-and-mortar stores need to figure out.  And when they solve that problem, I hope it's by embracing the online world, not asking everyone to leave their iPhones at the door!

Actually, what's wrong here is the fact that I have to go through so many steps to get an ebook sample.  Why don't the major bookstores have apps that let me take a picture, and with that one simple click, push the ebook's sample to my device?  Sampling is one of the key steps I take along the way to making an ebook purchase.  I've probably got a couple dozen ebook samples in my Kindle and iBooks apps on my iPad; I have yet to buy an ebook without sampling it first.

So here's a chance for any book retailer with a mobile app to dramatically extend their reach.  I might be shopping in Retailer A's store but I might be more loyal to Retailer B, so I use B's app for this one-click sampling.  Keep in mind the sampling decision doesn't have to be made in a bookstore though.  You might be sitting next to someone on the subway and they're reading an interesting looking book; if you're brave enough(!), snap a picture of it and know the sample will be waiting for you.  Or maybe you're at a friend's house and see a book on their coffee table.  They rave about it, so you take a quick picture and voila, the sample is heading your way.

At least 2 of the major players already have mobile apps with camera functionality built in, but it's not for what I'm describing.  These camera features are all about physical products, not ebooks, and definitely not ebook samples.  When will one of them take the next step and integrate a one-click ebook sampling feature like I'm describing?

P.S. -- They don't have to do this right away, but at some point I also hope the retailers build a social component into this.  I'd like to identify my friends and family members who also use the app and ask them to opt in so that I can see what products recently caught their eye as well.  Sure, you can see some of this via other networks like Facebook, but I'd prefer a service that's dedicated exclusively to ebooks; there's too much other noise from broad social networks and I believe an ebook-centric one would be very popular.