Why Amazon Bought Goodreads and What it Means for Publishing

On 28 March 2013 Amazon made an unexpected move and acquired San Francisco-based Goodreads for an undisclosed sum. Forbes says it must have been in the low 8 digits, on Twitter the figure swirling about is a modest $150 million. Clearly this is no big deal in terms of money but it shook up the world of publishing. 

Twitter flew in a deafening  roar of tweets. From one (@islaisreading) who exclaimed "NOOOOOOOOOOOOOOOOOOO! Amazon is buying Goodreads. What will this mean for reviews?" to others who felt quite comfortable with the idea.  Literary agent Sarah Polla tweeted that "the thing is, Amazon buying Goodreads makes SO MUCH SENSE. It's dickish, but smart. If Barnes and Noble thought of it first, we'd be congratulating them." Yes, they didn't think of it...And neither did the Big Publishers who could easily have done so, instead of wasting time on setting up their own sites like Bookish where people don't easily go, feeling this is little more than a marketing trap.

Same reaction in the blogosphere, from wringing one's hands in horror at the rise of an evil monopoly to giving enthusiastic support to Amazon. Like Scott Turow, President of the Authors Guild, who called it "a truly devastating act of vertical integration... a textbook example of how modern Internet monopolies can be built." Like author David Gaughran pooh-poohing it on his blog exclaiming: "Much of that nonsense is typical (hysterical) Amazon bashing, or reflexive defense of the status quo."And he goes on to remind everyone that there is plenty of evidence that Amazon treats its authors better than most publishers (true) and that Goodreads CEO Otis Chandler stated in a message to all Goodreads members (see his blog) that "Goodreads and the awesome team behind it are not going away" and that Amazon has pledged to support Goodreads in its "vision as an independent entity".

So is this Goodreads-Amazon deal a good or a bad thing? Does it spell a sea change, the end of Big Publishers, the rise of Amazon as the single biggest actor in the publishing industry grabbing everyone else by the throat?

The obvious first thing at stake here are the links to retailers other than Amazon. Will they remain? All indications are that they will. And that Goodreads book reviews won't be gobbled up by the Big Zon. Otis Chandler is putting his hands forward, stating in no uncertain terms that nothing will change about Goodreads: "We plan to continue offering you everything that you love about the site—the ability to track what you read, discover great books, discuss and share them with fellow book lovers, and connect directly with your favorite authors—and your reviews and ratings will remain here on Goodreads."

Can we believe him? David Gaughran does and for more arguments how this is all a really good thing for everyone, publishers and self-published authors alike, go to his site. But I would favor a more cautious, middle-ground position.

The first thing this deal does is lay to rest an annoying dispute between Goodreads and Amazon. Once again, we'll have the ability to link books uploaded on Goodreads with their url address on Amazon, so that when you click on the title you can go directly to Amazon to purchase it. Amazon and Goodreads used to be linked that way until a year ago when a technical dispute erupted and the link was broken.

What else? Goodreads book reviews will likely turn up on Amazon but probably as an option. Indeed, it would be nice if that were an option on the sites of all other major e-retailers, Kobo, Barnes and Noble, Apple store etc. 

Much is made of Amazon being able to lay its hands on a huge trove of data. The trove is indeed big: Goodreads is the largest online reading club in the world with 16 million members, 30,000 book clubs and 68,000 authors, each with their own author page. No online reading club comes near Goodreads and certainly not Shelfari, a club founded a year earlier (in 2006). Shelfari was bought by Amazon in 2008 and since it bought it, Shelfari has withered on the vine, displaced by Goodreads. 

Will Amazon ownership prove to be a stranglehold on Goodreads the way it has been for Shelfari? Now did Amazon really throttle Shelfari? I don't think so. Let's remember that Shelfari benefited from Amazon's support, both technical and financial, including a near-incestuous link with Kindle. So Amazon did try to sustain it as best it could, but in the competition, Goodreads won out, simply because it is the better site, has more book clubs providing a real sense of independence. 

Goodreads is simply better than just about any other online reading club. I know, I've checked out Shelfari and other sites but in the end I stayed with Goodreads. I've been with them several years, I've gained Librarian status (I've done over 100 reviews, a prerequisite for that status) and created this Goodreads group discussing Boomer Lit. I can only testify that it's been a wonderful experience: in six months we've grown to an unexpected size (320 members) and we've been able to carry out group activities without ever feeling any interference from anyone, and, mind you, we're a public group, open for anyone to join. I know some people complain about trolls and bullies on Goodreads but so far I must say I've never experienced any such disruptions. I suspect trolls and bullies are everywhere anyway. It's fair to say that our group feels like home to anyone interested in Boomer Lit. Goodreads, even though it's a somewhat slow, creaky and antiquated site, has provided us with the means of doing what we wanted, like upload book covers, book trailers and running discussion threads and polls to select our monthly reads. Sure, things need to be further improved technically, like our links to Facebook (we have our own Group's site here, take a look and "like" it!), and I'm sure that's an area where Amazon can help.

Can Amazon help in other areas? Hope has arisen in some quarters (David Gaugran again!) that it will prove a windfall for self-published authors, making the Amazon algorithms for book search better and the Kindle a stronger tool for book recommendations.

Quite frankly, this is something I don't believe in. Why would Amazon algorithms improve just because they can "crunch more data"? We all know the old adage: trash in, trash out. I'm not suggesting that Goodreads data is trash. I'm just saying that what's wrong with book recommendations system so far on Amazon is that it's based solely on book sales. The more you sell, the more you rise in Amazon rankings, the more you are visible to anyone searching the site (indeed only the top 100 are visible), so the more you sell. It's a vicious circle, it automatically excludes any good book that's out there and didn't get the chance to hit the top 100 because of a lack of marketing power. Book recommendations ought to be based on something else than sales rank.

This is where book reviews enter the picture. But here again Amazon is not particularly good at exploiting the reviews it accumulates. Yet it does have clever presentation - for example, here is the status of my book, A Hook in the Sky, this morning, 2 April 2013:

Now, there are obviously some excellent features in that format for presentation:

- ranking shown under "product details": overall, my ranking is poor but I've hit Kindle ranking #57 in a special category: family relationships > divorce (yes, A Hook in the Sky is about the unraveling of a retiree's marriage when he decides to become an artist, to the dismay of his wife).

- positioning of customer reviews right next to book ranking with a clear graph showing total number of reviews and breakdown by "stars" (5= I love the book, 1= I hate it - terribly subjective and liable to become silly as I've argued in a previous post, see here)

- a neat presentation of 3 statements that are shared by most reviewers, giving you a thumbnail evaluation summary of the book without having to read every review

But there it stops. There is no overall ranking of customer reviews across the Amazon site that would provide a bird's eye view different from one based on sales.

Goodreads is a little better at it, though far from perfect, it does not have an overall ranking like that either. What it does have is an editorial book selection system put in place by Otis Chandler's wife Elizabeth. By they way, here they are, an attractive couple that started Goodreads in San Francisco. Otis Chandler is part of the famous Los Angeles publishing family and like so many young Silicon valley types, a software engineer-turned-entrepreneur.

The Chandlers. Photo taken at Book Passage, San Francisco Calif. July 10, 2012. Photo: Lance Iversen, The Chronicle
So how does this editorial system work? A year ago, Otis Chandler gave an interesting interview to  the SF Gate where he explained that Goodreads clients were really the publishers and that they looked at what happened among Goodreads groups, what books gathered the most book reviews. Chandler described how the process worked for 50 Shades of Grey, a book that has recently reported historically unprecedented sales (70 million in 9 months). This is proof, if one needed it, of the ample marketing power of Goodreads. 

Apparently this is how the story went: "early on," Chandler explained, " it was picked up by one of the bigger Goodreads romance book clubs". Then, in October 2011, the Goodreads editor noticed  that while it had only a thousand ratings, it was extremely highly rated. The next step was a nomination for the Goodreads Choice Awards, and though  relatively unknown, the book won second place. Next the author E.L. James was invited to the site and talked with several Goodreads book clubs. The media got a hold of the story in March 2012, and it exploded from there.

Yes, that's how it's done. Not a matter of hitting Amazon's top 100 list, that's too dry. What we have here is a social media event. And that is the power Amazon CEO Jeff Bezos recognized when he bought Goodreads. What the deal does in the immediate is strengthen Amazon in an area in which it has been quite weak so far: social media. But then, Bezos has always been very, very strategic and long-term in his thinking...

So what is there for Goodreads in all this?  Two benefits:
(1) internationalization: Goodreads is still very U.S. centric and that could change substantially with Amazon as a global company (in India, in Japan etc)
(2) an improved business model. Goodreads has never made much money, now with Amazon, Goodreads won't be any longer under pressure to monetize and will be able to modernize its site.  Indeed, it has already started to hire new staff.

So is this a marriage made in publishing heaven with two major actors complementing each other? Yes, except that it spells further disaster for the Big Five Publishers. Given Goodreads pivotal role in book marketing, it spells out further weakening of the traditional publishers that have never historically been close to their readers (instead they were close to the bookstores, their main book buyers). Hence expect the traditional "gate-keeping role" of publishers to be further indented.

Whether this spells a sea-change in the publishing industry remains to be seen. Since this is a competitive world, some feel that people will leave Goodreads in drove, out of hatred for Amazon, and take refuge with LibraryThing - at least that's their hope, see here.

How do you feel? Please share your views in the comments!

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Beth said…
A good analysis of the situation, and I was particularly interested in the Goodreads editorial system.
Claude Nougat said…
Thanks, Beth, yes, when I discovered how they managed to create a "social media event" like they did for 50 Shades, it really opened my eyes!
Richard Hughes said…
Well, what do you say? The potential for fraud and abuse is there. It will require a strong moral will on Amazon's part to keep Goodreads objective and fair for all. Will they have that moral will? I hope so, because the merger's happening whether we like it or not. But the history of corporate America (and the corporate world world-wide) is not good. The bottom line is all that matters: all that matters. I'll assume Amazon has the will to keep their merger fair and objective. Only time will tell.
Renee Pawlish said…
A very well-thought out post, thanks. I agree that some caution is in order with all of this. Time will tell. And I will have to check out the editorial system a bit more, and see how it all works.
Wonderful summary of ideas on the impact of the Amazon/Goodreads buy. I think you hit the real attraction Amazon had to Goodreads....social interaction and timing. The direct readership interaction with each other, and authors is something Amazon has not tapped as yet. Goodreads can give that to Amazon. How Goodreads will not be impacted.....we shall see. Great post, Claude!
This is fascinating, and helpful. I have a bad feeling about the aquisition, but hope your middle ground theory is right.
Claude Nougat said…
Right, Richard, only time will tell. I'm hopeful though: Amazon surely realizes that if it indents Goodreads' independence, it's killing the goose of the golden eggs, as it were. For Goodreads' editorial system to work as a successful SM event, it needs to be fully independent from Amazon. Indeed, the reason why customer reviews on Amazon don't drive sales is because of the commercial context they're in...
Claude Nougat said…
Thanks, Renée...Yes, Goodreads editorial system is a model to follow. ut it works mainly because it is NOT in a commercial context...
Claude Nougat said…
Thanks Mary Kathryn, for your comment. Yes, we shall see but much depends on the Chandlers really. And since he comes from a famous Los Angeles publishing family, my hopes are high that he will be able to resist and preserve Goodreads'independence.
Claude Nougat said…
Thanks Geoff! I tend to the middle ground because I'm convinced that's often closest to the truth! There are elements no one can predict, especially human elements (like whether the Chandlers can preserve their independence from Amazon but I suspect that's what they very much want to do)...
Anonymous said…
Claude, I think your take is balanced and pretty much on the money. However, I have a fear that Amazon will "mine" GR data and produce more and more intrusive and unhelpful book recommendations of the type they now send me based on my purchases. I find it remarkable how blunderbuss-like and unsophisticated their current recommendation process is. We don't need more of the same. One of the joys of GR is that I can mine it my way to find the books I want and to see what new works are offered by relatively unknown authors. Lee Holz
Claude Nougat said…
I agree with you and I love GR for the same reasons. I've argued here before that Amazon needs to sharpen its recommendation system...They've even recommended to me books I had already bought! Plus the star-rating system that is very annoying, with many readers who don't seem to realize what they mean: I've had for my A HOOK in the SKY a couple of poor ratings (one 2 star and one 3 star) and yet when you read their reviews, they go on and on saying what a good book is it, how well-written, good character development, suspenseful etc...So why the poor rating?? Because they don't "like" the main character!!! That always amazes me - even Shakespeare has some not very likeable characters...
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