Pub Res Q (2010) 26:119–128

DOI 10.1007/s12109-010-9162-7

Amazon: Love Them? Hate Them? Let’s Follow

the Money

Ted Treanor

Published online: 2 June 2010

 Springer Science+Business Media, LLC 2010

Abstract What is Amazon up to and why? Amazon reported $24 billion in annual
revenue, from their 2009 year-end financial results. The Media/book category
delivered $5.96 billion, or 1/4 of their total revenue. That’s considerably more than
any of the largest companies in the traditional print or digital book business. Barnes
and Noble/B Dalton collected $4.52 billion (2008), while Borders/Waldenbooks
combined revenue was $3.11 billion (2008). Amazon’s book revenue steadily
increases, while Borders and Barnes and Nobel continue to decrease. What strategies
and values are fueling this growth? What is their vision and where have they put their
money? Amazon has a demonstrated history of consistent behavior since their start-
up in 1995, with big visions, long-term strategies, dedicated to streamlining, surgi-
cally eliminating costs, prolific innovations, strategic investments, and an obsession
over the customer. We’ll track Amazon’s M&A investments in book publishing and
digital to see exactly what they are doing to learn where they may be going. It is wise
to stay current on one of the most influential companies in the world.

Keywords Acquisitions
AbeBooks
Amazon.com
Amazon

Chris Anderson
Apple
Audible
Audiobooks
Authors
Barnes & Noble

Jeff Bezos
Booktour
Bookseller
Borders
Brilliance Audio

BookSurge
B2B
B2C
CreateSpace
Customer-centric
Digital

e-Books
eStore
Google
Innovation
Invent
iPad
Kindle
Lexcycle

Libraries
LibraryThing
M&A
Mergers
Mobipocket
Random House

Reinvent
Retailer
Shelfari
Technology
Touchco

T. Treanor (&)
14151 Brownsville Highway NE, Poulsbo, WA 98370, USA
e-mail: ted@tedtreanor.com

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What is Amazon up to and why? Unlike Alice in the story Alice in Wonderland, we
will not be embracing a naı̈ve fanciful strategy of following a rabbit down a hole
along a whimsical bunny trail.

Remember…initially, Amazon exclusively sold books. They have since

expanded into a retail omnivore that sells personal electronics and vacuum cleaners,
shoes, pet food and everything that any member of a household could possibly want.
Amazon reported $24 billion in annual revenue, from their 2009 year-end
financial results. The Media/book category delivered $5.96 billion, or 1/4 of their
total revenue. That’s considerably more than any of the largest companies in the
traditional print or digital book business. Barnes and Noble/B Dalton collected
$4.52 billion (2008), while Borders/Waldenbooks combined revenue was $3.11
billion (2008). Amazon’s book revenue steadily increases, while Borders and
Barnes and Nobel continue to decrease.
What strategies and values are fueling this growth? An Amazon official quote,
‘‘When we have both editions, we sell 6 Kindle books for every 10 physical books.
This is year-to-date and includes only paid books—free Kindle books would make
the number even higher. It’s been an exciting 27 months.’’ And digital revenues are
rapidly increasing.
Amazon has a demonstrated a history of consistent behavior since their start-up
in 1995, with big visions, long-term strategies, dedicated to streamlining, surgically
eliminating costs, prolific innovations, strategic investments, and an obsession over
the customer. They’ve started from $0 in 1995, and will capture more than $6
billion in media/book sales in 2010. The better we understand Amazon, the more
successful we will be in executing our market strategy. Let’s identify Amazon
strategies and follow their investment money trail.
In December 2009, when the NY Times asked Jeff Bezos, CEO of
Amazon.com, ‘‘What is your goal, exactly?’’ He responded, ‘‘We want to have
earth’s biggest selection. Earth’s biggest river, earth’s biggest selection.’’ When
asked, ‘‘How quickly are paper books migrating into their digital equivalents?’’

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Jeff Bezos replied, ‘‘When we launched Kindle 2 years ago, it was 90,000 titles,
and today it’s more than 350,000. We’re adding thousands of titles every week.
Our vision is every book ever printed in every language, all available within
60 s.’’ You can imagine the Amazon army’s unified response to the latest raising
of the bar from their founder and CEO. ‘‘He promised WHAT!? How in the world
are we going to deliver on that vision??? Failure is not an option. We better get
working on it!’’

‘‘Traditional trade book publishers are scared,’’ says former CEO of Random
House, Peter Olson, now a Harvard Business School professor. ‘‘The world that they
have known, of print books and brick-and-mortar bookstores—the whole physical
distribution system—is on the cusp of changing fundamentally.’’
In 2005 I remember becoming acutely aware of Amazon’s publishing strategy
when they bought BookSurge (print-on-demand) and Mobipocket (e-books) in a
single month. It was a clear message to both the digital and traditional book
publishing industry that Amazon was investing in their vision of the future of book
publishing. Hmm, in retrospect, which two emerging publishing trends have
experienced the fastest growth over the past 5-years?
In a conversation I had in 2005 with an Amazon executive, it was explained that
they were putting their money on future growth areas in the book industry as well as
demonstrating a commitment to digital books and print-on-demand technology and
services. While they believed that message would be clearly understood by the
industry, in reality, that message was lost in a rapidly changing, increasingly
complex, 24/7, on-demand, e-commerce world. Consequently, I began following
their market moves much more closely, believing that it would be beneficial to
better understand the strategy and tactics of one of the most influential companies in
the book industry.
Here is an awesome link to a remarkable visualization of Amazon’s entire history
of investments in buying companies across all industries. Many of their acquisitions
and investments are in technology infrastructure to support their book business and
other industries as well. From their many acquisitions I’ve extracted a steadily
growing list of 18 direct investments in the book industry.

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Amazon M&A visualization chart (Color figure online)

Bookpages (announced April 27, 1998)—Bookpages was one of the largest

online bookstores in the United Kingdom. It became Amazon’s online UK store.
Telebook (announced April 27, 1998) Telebook, operating through its ABC
Bücherdienst subsidiary, was Germany’s number one online bookstore—It became
Amazon’s German online store.
Internet Movie Database (announced April 27, 1998)—launched in 1990, terrific
repository for information about movies and television—www.imdb.com. IMD is
included here because it shows an early interest in Hollywood…for future book
deals?
Audible.com (announced January 31, 2000) An investment of millions of dollars,
for 5 percent ownership, which featured content from newspapers and magazines,
and books on audio. For promoting audio.com, Amazon would receive US $30
million over 3 years.
BookSurge LLC (announced April 4, 2005) BookSurge print-on-demand book
printing and fulfillment from Charleston, South Carolina with growing global
relationships.
Mobipocket.com (acquired April 2005)—Mobipocket, a very popular French
ebook company that specializes in e-books for mobile devices, with both e-reader
and server software. Estimated purchase price is US $10 million.

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Shelfari (invested February 2007), Shelfari book shelf social network site from
Seattle.
Brilliance Audio, Inc. (acquired May 23, 2007)—Brilliance Audio is one of the
largest audiobook publishers in the USA.
Shelfari (acquired August 25, 2008), Shelfari book based social network site
from Seattle.
Audible.com (acquired April 2008) Audible, the online audio-book provider, was
purchased by Amazon for US $300 million and assumption of liabilities.
AbeBooks (acquired Dec 2008) Purchased for US $110-$120 million. AbeBooks
is an online marketplace for books, with over 110 million primarily used, rare and
out-of-print books listed for sale by thousands of independent booksellers from
around the world. The following seven companies are included in the AbeBooks
acquisition.
• Bookfinder.com (subsidiary of AbeBooks, acquired Dec 2008)
• LibraryThing (a 40% share, subsidiary of AbeBooks, acquired Dec 2008)
• Justbooks (subsidiary of AbeBooks, acquired Dec 2008)
• IberLibro.com (subsidiary of AbeBooks, acquired Dec 2008)
• Gojaba.com (subsidiary of AbeBooks, acquired Dec 2008)
• FillZ (listing-management service, subsidiary of AbeBooks, acquired Dec 2008)
• Chrislands (subsidiary of AbeBooks, acquired April of 2008)
Lexcycle Inc. (acquired April 27, 2009) This is the company behind Stanza, an
electronic book reading application for the iPhone, iPod and iPad.
Booktour (Seed capital investment in April, 2009) The Chairman of Booktour is
author and journalist Chris Anderson, who is the editor in chief of Wired Magazine,
and the author of the book The Long Tail and his latest 2009 book, Free. The
company lets authors create profile pages where they can communicate with fans,
and provide a schedule of events. Chris Anderson has a personal relationship with
Jeff Bezos.
Touchco (acquired January 2010 estimated) Touchco flexible screens for
e-readers with color screen technology and touch capabilities throughout.
There are 18 plus book-related investments, so far. Their rational is bound to
be complex and varied. We’ve all noticed that they are fairly private about their
acquisition strategy. If they wanted to, they certainly have the resources to
acquire and stifle a competitor, or keep a promising company from being
acquired by a competitor. An acquisition may lose their separate identity and
become Borg, or they may continue to operate as a separate company, wholly
owned by Amazon. You can bet that there will be a steady flow of investments
to come.
There are many other Amazon investments in customer enabling technologies,
and to improve the customer experience for any product or service through the
ever reaching and growing Amazon.com. It is not just B2C, but B2B relationships,
too, such as hosting and in cloud computing services. They are building a
comprehensive online shopping platform for entire verticals and horizontals. They

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make money selling directly to the consumer, or helping merchants sell to their
customers, and more recently by supporting supply chain relationships. No small
vision here.
I see two major historic strategies for acquisitions; enabling technology and
acquisition of customers. Most investments, unless they are at a very early stage
in the life of the company, have both technology and customers. Amazon buys
technology that enables business transactions and customer relationships. They
also buy customer platforms that accelerate their market penetration. Good
examples of platforms are Audible (audiobooks) and Mobipocket (e-books). Both
companies also have customer enabling technologies that facilitate ecommerce
transactions, not to mention major strategic contracts with key channel partners
and publishers.

Amazon Mission

Their current published corporate mission statement is, ‘‘We seek to be Earth’s most
customer-centric company for three primary customer sets: consumer customers,
seller customers and developer customers.’’

Amazon Strategy

Jeff Bezos has a simple, four-part strategy for Amazon.com.

1. Obsess over customers: Start with the customer, then work backwards to
develop products and service solutions. Listen to the customer!
Unlike most traditional publishers, Amazon doesn’t obsess over maintaining the
status quo of the printed book. They focus on what is important to each customer.
If customers want digital products, they don’t shed a single tear over the print
dynasty.
I have long stated that the Achilles heal of publishers is the lack of a relationship
with their reader customers. The companies that have a trusted relationship with
retail customers are in a very good position. Amazon was recently named the #2
trusted online retailers, by customers.
2. Invent: Do not accept either-or thinking. Try to invent a solution out of any box
on behalf of customers. Unlike the dynamics of a technology company,
developing a cohesive culture of innovation may be one of the most difficult
challenges for traditional publishers to overcome.
3. Think long-term: Apply #1 and #2 above. It is ok if it takes 5–7 years for a
return on investment. The customer will benefit much sooner. Bezos’ advice is
that it is ok to be misunderstood. Don’t buckle to pressures of short-term
thinking. Long-term thinking is a competitive advantage, which serves the
customer much better than short-term thinking.

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4. It is always Day One: Each day brings new ways to obsess over customers, to
invent and start all over again. Never rest on your laurels.
These strategies are not proprietary. They are tested, proven, smart business.
When applied at every level throughout a company and its supply chain,
competitive advantage is gained.

Kindle is a major strategy: They invest heavily in personnel, advertising and

market positioning. Amazon has been looking to compete with Apple on other
fronts as well. In February 2010, it announced plans for a Kindle applications store
and an effort to get developers to create the same breadth of programs for the Kindle
that they have created for the iPhone and the iPad.

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The Kindle will see significant market competition in 2010. Google Editions is a
web-based e-bookstore that has content, infrastructure, vision, motivation and a lot
of capital to invest. Apple’s iBookstore is a digital bookstore to reckon with. Then
there are a multitude of existing devices, online stores and new partnerships that will
make up the book business of tomorrow. These include; print manufactures that
want to be relevant in the digital space, mobile devices (smart phones and cell
phones), mobile telcom carriers that are partnering with all promising up-starts,
e-reader devices and software readers.
Small-to-medium and large publishers: Amazon has done well ingesting content
from large publishers. Now, they realize growth will come from small and medium
publishers. Thus, fulfilling their Kindle mandate, ‘‘every book ever printed in every
language, all available within 60 s.’’

Authors

Amazon’s direct to author strategy is distressing to the publishing industry. With the
potential result being disintermediation, publishers have a lot to lose. Amazon assets
(i.e., Kindle, POD, e-bookstore, etc.) offer authors a complete publishing platform,
with the added benefit of real marketing clout.
Amazon Author Central: Amazon.com and Amazon.co.uk each have hundreds of
dedicated author pages, offering customers a full bibliography, recommended titles
and videos. This offers Amazon the ability to cross-sell related products tied to the

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author’s work. This also builds a personal relationship with the author, while
serving the consumer customer.
CreateSpace: Self-publishing services are located in the newly branded
‘‘CreateSpace’’. Here you will find print-on-demand services (previously Book-
Surge). From the CreateSpace website, ‘‘The Expanded Distribution Channel (EDC)
offers the potential to distribute books to a larger audience through more outlets
including: retailers, bookstores, libraries, academic institutions, wholesalers, and
distributors. Through the EDC you have the potential to distribute your work to
thousands of retail and wholesale outlets throughout the U.S. Regardless of whether
or not you include your title in the EDC, all CreateSpace titles can be distributed
through both the Amazon.com and various eStore Channels.
Most online retailers, bookstores, and libraries find books through purchasing
relationships with large wholesalers. If your book is not listed with these
wholesalers, some retailers may not be able to buy your book, even if a customer
specifically requests your title. Through the EDC you can make your title available
to these wholesalers who in turn make your title available to thousands of online
retailers, bookstores, and libraries.’’
There are three distribution outlets available through the Expanded Distribution
Channel:
• CreateSpace Direct—make your book available directly to certified resellers
through our wholesale website.
• Bookstores and Online Retailers—make your book available to major online
and offline retailers.
• Libraries and Academic Institutions—make your book available to libraries and
academic institutions throughout the U.S.

Observations on Additional Amazon Strategy

Global Marketplace: Think globally, act locally is good advice for the publishing
industry.
Amazon is a large player that thinks big and moves toward scalable businesses
that supports its long-term strategies. They are thinking years into the future, a
future that will continue to significantly impact the publishing industry.

Conclusion

Due to Amazon’s sales prowess, the Amazon revenue factor is important for
publishers’ market strategies. Whether you see Amazon as a friend, a threat, or both,
will depend on the strength of your market position. If you follow the lessons
learned from Amazon’s meteoric growth, your success will depend on you and your
company having access to an intimate relationship with your customers, a bold
strong vision, and an ongoing commitment of innovation and investment in
developing a customer-centric future.

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Perhaps in a future issue of Publishing Research Quarterly, we can explore

potential market winning strategies, within the publishing value chain.
Where do you weigh-in?

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