TeleRead: Bring the E-Books Home

Problem with Amazon’s market dominance and affiliate program

By Robert Nagle

The Millions recently published a three part series about Amazon’s market dominance. (Part 1 examines the decline of book review sections. Part 2 examines why many indie bloggers use Amazon’s affiliate program. Part 3 examines the effect of the Kindle on the marketplace.)  Read ahead for juicy quotes and my reactions.

In Part 1, Garth Risk Hallberg  mentions the declining pay rates of book reviews:

Even more consequentially, in an era of rising unemployment, the economics of reviewing have shifted radically. For years, a good, professional newspaper book review was worth about $400, or 50 cents a word. Now, even as the number of column-inches available in print diminishes, online venues are starting to meet or exceed that threshold. Rumor has it that The Barnes & Noble Review pays nine times as much as a reputable newspaper for which one of our contributors has reviewed.

In Part 2, C. Max Magee talks about how many the  Amazon affiliate program allows many small and independent sites to earn some money, thus creating an interdependence between online sites and Amazon:

At its simplest, the model is as follows: get a lot of traffic by writing compelling content and then throw in the occasional Amazon link when applicable. In this way, Amazon’s Associates Program has helped breathe life into thousands of websites. Eclectic, mom-and-pop publications get a shot at making some money in a fairly unobtrusive fashion. And those publications, adapting to the altered terrain, allow Amazon to expand its presence across the Internet.

…

If someone clicks on a link to 2666 and in wending his way through Amazon, ends up buying a $1,700 grill, The Millions gets a commission on that grill. As you can imagine, this doesn’t happen very often. However, the open secret of literature and culture sites that get a modest amount of traffic is that the commissions earned on books alone are not all that impressive (though for sites that earn commissions on a lot of book sales, they can add up). Instead it is the big ticket items that sometimes get bought that help make Amazon’s program more worthwhile than others from a financial standpoint. The grills pay the bills. This is another gray area in an a revenue discussion that is sometimes portrayed in black and white. Amazon sells books at prices that undercut many small players in order to draw people in who will buy big-ticket items with bigger profit margins. For many people, the discussion ends there, but the truth is that the commissions on those big ticket items help subsidize the very same literary and cultural coverage that is having so much trouble finding a workable business model in newspapers and other traditional media. Amazon in some small way, and likely not intentionally, is helping to fund small online publications like The Millions. And there are other well-respected book sites that seem to have come to the same conclusions that we have.

(I left in the affiliate links for the $1,700 grill. If anyone wishes to buy one and let Millions get a cut, here’s your chance.)

In Part 3, C. Max Magee talks about how the Kindle is creating a vertical market which allows Amazon to phase out the affiliate marketing program:

In short, by making it possible for Kindle users to buy Kindle ebooks via the device itself, Amazon has cut middlemen out of the picture. The Associate’s commission depends on a click in a browser. For ebooks bought via Kindle, there is no click. And, just to be certain that intermediaries are cut out of the Kindle food chain, Amazon recently made another, symptomatic adjustment to its Associates Program. In February, the same month that Amazon launched the Kindle 2, Amazon quietly stopped paying Associates commissions on Kindle ebooks bought via the web. (Unsurprisingly, Amazon still pays a healthy bounty on Kindles sold. The calculus is clear. Sell more Kindles and sell more books via a vertically integrated system that only Amazon controls.)

Magee also mentions the problem with finding ad revenue for book/literary sites and notes the paradox that the book-reading demographic is generally affluent and attractive to advertisers:

When I worked with Bud Parr on the short-lived literary blog ad network Brainiads, the holy grail was securing advertisers from outside the publishing industry. Brainiads wasn’t able to meet this goal. So far, this development hasn’t materialized elsewhere and, in all likelihood, will be delayed by the current economic downturn. This isn’t to say it can’t happen, however. The audience for online book coverage is actually quite attractive for many advertisers, generally well educated and well off, and in the most likely scenario, some enterprise will make good on what Brainiads hoped to do (it occurs to me that the NYT would be an intriguing candidate), and, with a dedicated sales force, will reach out to companies to offer ads on a basket of book- and culture-focused sites with an attractive readership.

Litblogger Bud Parr adds an informed comment, pointing out that Techcrunch has over 347,000 RSS subscribers on Google Reader (as opposed to a few thousand for notable literary bloggers).

Online ads on the side of a blog are about as effective as direct mail, which have quite low return rates. It takes an awful lot of hits to make an ad productive and the literary arena just doesn’t sustain that kind of traffic.  And I’m not so sure the demographics are that good either. What counts against them is the insularity of the lit world. A very high proportion of your readers have sites of their own, whereas I believe the inverse is true for Tech Crunch and all the big sites out there (except for the Web design field). Look at the number of comments you get on your most commented posts and compare that to a newspaper, which is going to have a more broad reader base. Anyway, I’ll stop there. Brainiads failure was in starting in the first place. From a financial standpoint I think lit journalism has a better future rolled into the lifestyle and entertainment pages, even online, than it does at specialty sites like this and others, which, excellent as they may be, should be done for love, not money.

Here are my  random reactions.

The problem with the book-reading public is not its median income, but  its size.  The underlying problem behind the book review problem is the declining number of  readers interested in books. How do you increase the number of readers who want to read about books (as opposed to gadgets or celebrities or pop psychology or partisan bickering)?

Although I enjoy a good book review, I often  prefer the consumer-oriented reviews on Amazon.com  to the things I find on NYTBR.  Perhaps a certain  number of these reviews on Amazon were solicited or written by the author’s friends, but in general, they are shorter, written in plainer language and usually funnier and more bizarre.  On the other hand, if you find 5 or more reviews on a fiction title released in the last few years, consider yourself lucky.

It probably goes without saying, but writing book reviews is one of the most underpaid and thankless jobs out there. I used to review books a while back (not so much for the money, but for the exposure and  free books), and I found that it took an extraordinary amount of time. It’s not like watching a movie, which usually requires watching the movie twice and (if you’re lucky) two hours to write the review. Just reading a book can take days.

Re: Kindle stealing Affiliate dollars: well, that’s inevitable. (And note to smashwords.com, now might be a good idea to start an affiliate marketing campaign while Amazon.com is floundering). If Kindle drives up the number of readers, that can only be a good thing. But remember that Amazon.com doesn’t comprise the entire literary market. Many writers of my generation publish only online or they sell books/ebooks directly from their website. It makes little sense to list on Amazon or even use affiliate marketing. Many writers use blogs to promote their books and vice versa (with our own David Rothman’s Solomon Scandals being the inhouse example).

Literature benefits by being removed from the commercial sphere.  I write only creative commons fiction, so I’m naturally a big fan of literature produced by that movement. And when I say that Adrian Graham’s ebook   Revelations is a great and witty short story collection, you know that I really mean it; I’m not just saying it because I was touched by a massive PR campaign,  nor have I been “corrupted” by affiliate marketing, nor do I feel the quid pro quo obligations of receiving a review copy (everyone essentially receives a review copy). I don’t mean to imply that reviewers who get paid are any less dedicated to the cause of literature, but many genres such as poetry have absolutely no expectation of being commercial successes (and yet the poetry subculture still seems to hang on).  My complaint with literary review sites like complete-review or quarterly conversation (which are both outstanding) is that they dig deeply from the usual established sources without making the effort to take a chance with ebooks or genre-bending forms which couldn’t possibly become a print book.

Frankly, I am growing bored by the emerging subgenre of complaint literature about the literary market.  When we talk too much  about general trends, we lose sight of what is important: individual books! What stories are inspiring you? What sort of literary experimentation is exciting you and what is  boring you to tears?  Sure, Amazon will matter for a long time because it has become our primary means of learning about previous generations of literature.  But meta-sites like librarything and shelfari  wean us from our dependence on a dominant vendor and help us to find books that are usually missed or ignored.  I’d feel more comfortable if we complain less about Amazon and spend more time unearthing stories which are freely available or too insubstantial to be found for sale at Amazon.