Inside the heads of prospective e-book buyers: Q & A with Marie Campbell of MarketIntellNow
By Robert Nagle
Below, Marie Campbell, an analyst with MarketIntellNow, shares details from the company’s timely e-book report. Also see 5,000-surfer poll: Lower e-book prices, not gizmos like the Amazon Kindle, will be the big spur for book sales. Go here for details on our relationship with MarketIntellNow, an advertiser that we feel is a good fit for the TeleBlog. - RN
Nov. 21 Update: Read the reaction by David Rothman and the reaction by Robert Nagle.
Dec. 6 Update: Statistics from Amazon jibe well with Marie Campbell’s conclusions. The 1,000 bestsellers in the Amazon Kindle Store are almost all priced low. A mere 27 sell for $10 or above. Also see Tim O’Reilly’s criticism of the poll and Real Life vs. Publishers’ Wishes, David’s rebuttal.
How did you collect and analyze your data?
In the first week of November, 2007 we polled 5,000 Netizens using the web. We paid nothing and there was no other incentive for someone to complete the survey. We made sure that in the end we had a survey demographic that matches the Internet demographic.
In your opinion, what do you think was the most unexpected result?
The “Conventional Wisdom” (CW) is that e-books will only take off with the right handhelds. Indeed, Sony Reader’s value proposition has been “get this reading device.” But just as people want holes, not drills, Netizens yearn to read more; that is, if books cost less, can be grabbed instantaneously, and don’t cause back pain (lugging the weight of several volumes).
Thus our view: e-books will take off if the value prop “read more for less” (less money, less weight, less waiting time to get the book) is emphasized especially by big brands.
Keep in mind plenty of folks downloaded music (admittedly with questionable legality– remember KaZaA?) to their PCs/laptops well before the hand-held known as the iPod with its elegant design caused eMusic to go mainstream. A cool hand-held device is nice-to-have for the e-books take-off, not need-to-have.
You mention that a significant number of respondents (38%) chose “lack of a cool design” as being their main objection to buying a hand-held e-book device—as opposed to cost (21%) or difficulty in reading off a screen (21%). When respondents gave that answer, do you think they were referring mainly to the exterior hardware (along with accessories, like the case)? Or do you think they were referring mainly to the software interface?
The physical device. Now that the Internet “dialtone” is ubiquitous and user interfaces increasingly cluster around an obvious mean in terms of look and feel, it is physical design/heft/cachet that is a key differentiator.
A device with the brand-love and compelling conception that is the iPod may arrive on the scene to propel e-books forward yet faster– but the value prop that will resonate loudly with Netizens now is “read more for less.”
One of the more startling results from your survey was that over 75% of consumers say they have a lot of extra time where they could read if a book were handy. A lot report having 4+ hours per week. Isn’t this merely wishful thinking? (”Gosh, I need to read more” sounds a lot like “I need to exercise more.”) I personally find that the panoply of entertainment options has sharply curtailed my personal reading. In your opinion, what parts of their schedule are respondents referring to when they gave this response?
Yes, clearly this smacks of the response to the query “what TV shows do you watch” (Answer: documentaries and PBS, mostly).
We all imagine ourselves to be kinder, thinner and more well-read than we really are. But we detect a deceleration in listening to one’s own music list (what we call “Radio Me”) and one’s own videos (”TV me”)—thus the imminent rise of the third leg of the stool, “Book Me,” where yes, we believe Netizens who can read more for less will carve out the requisite couple hours per week.
Of course Netizens are reading plenty online, too (see the declining subscriber rolls of every major newspaper), but much of this of late is reading blogs, which we believe is a “Loyalty Shallow” endeavor, for the most part. We see a significant chunk of blog-reading time moving to e-books.
What did you find about the importance of being able to share content among computing devices? Do you see any differences between consumer expectations for mp3s and e-books in this regard?
The other “CW” in e-books (besides that it requires hand-held devices) is that Digital Rights Management (DRM) is a gating factor. We don’t think John and Jane Doe know much about DRM. Nor do they plan on stealing files. They merely want to pay less for books to get them instantly, and then use them across their array of devices in a facile manner.
The winning file format is a de facto standard that will emerge in time, over the aggregate of John and Jane Does. In video, that was VHS (not Betamax). In music, it’s the MP3. In e-books, it will likely be what Amazon and Google make it.
You decided to exclude from your survey people who were unfamiliar with the concept of e-books. Why did you make that decision? And don’t you think that this portion of consumers could be persuaded to read e-books later on?
This is a core part of our methodology, “ANWO.”
We believe that consumers can only indicate Need about that which they are Aware. I am not aware of the Insulin Pump for Diabetes, so my relative Need, if rolled up in survey results, would pollute the analytical punchline.
However if I have Awareness (the “A”) then my relative “N” (Need) is meaningful. If I have Need, I may or may not be Willing to Pay (the “W”)– which in regards to online content often means sustain advertising.
And if I have a Willingness to Pay it doesn’t mean I’m a buyer, for I may have Objections (the “O”), that can be overcome at some cost or not by vendors.
We do think the Unaware will become Aware over time, which if Need/Willingness to Pay/Objections remain the same or improve means continued–perhaps even accelerated– e-books’ growth. The currently held, inaccurate conclusions about e-books (a hand-held device is necessary; DRM issues are paramount) likely came about because the Unaware registered their (mostly illogical) views in myriad surveys.
After looking at consumer needs, do you see any technological deficiencies in current devices or devices soon to hit the market?
There’s one device that’s rock solid that many will use for e-books: The laptop/PC. But as for gating factors on handhelds, they’ve mostly dissipated—screen size, resolution, device weight and battery life are now well-past the clichéd “Tipping Point.” The larger problem the device-makers face is how to make THEIR device the hip, cool, yearned-for one? Hand-held devices increasingly are fashion accessories.
What is “appliance intimacy?” Would consumers opt for an e-book solution if they can’t read it 1) in bed, 2)in a fast food restaurant 3)on the bus?
We see folks gazing into the screens of their laptops with the moony expressions of puppy-love.
As a function of listening to our very own music (”Radio Me”) or watching our videos (”TV Me”), we’re cocooning with our laptops with an intimacy that, conversely, is now lacking from America’s family rooms where folks once gathered to watch TV together. E-books may not take over bed-based reading, but wherever folks lug their laptops (come to think of it, plenty of people take their laptops to bed), e-reading will happen. And as the fashionable hand-held devices emerge, they’ll be used at times, too. But e-books does not need a wave of popular devices to boom.
One surprising conclusion you found is that over half of people surveyed expected e-book prices to be $5 or less and 1 out of every 5 expected the price to be $2.50 or less. But most publishers are used to setting sticker prices (and profit margins) that are double that. What will publishers today need to do to adapt to this business model?
We believe that the Publishing Industry will very quickly discover that they’re blessed with ELASTICITY. That is, the lower the prices of e-books up to a point, the more net revenue they drive (thus the cannibalization effect on traditional book sales will be overcome). E-books may start around $10.00 each, but come down in the 2008-09 timeframe and approach $5.00.
If an ad-based ebook business has a potential, what would be the best way to decide which ads go in a book: a book’s specific subject matter, general reading correlations or surveys of individual users?
Actually, it will be as a function of registered user data, and perhaps even behavioral data.
Where one surfs on the Web is far more predictive of buying behavior than one’s demographic (which is gathered during registration, or imputed from registration data). If an Amazon knows that you’re always after tennis gear/tickets et al in their vast e-store, they’ll know to serve you tennis-related ads. That’s why the Oligopoly (Microsoft, Google, Yahoo, AOL, Amazon et al) have a natural advantage in ad-serving. They know what you like based on your “Intrasite Clickstream” (as opposed to across a series of web properties).
I bought Ovid’s Art of Love in 1992, and I only got around to reading it today. If that book contained ads, do you think they would still be relevant to me at the actual time I read it?
The ads are pointers, and as your device is hooked to the Internet, when you go to read Book of Love the ads will be pulled/inserted in real-time (or from the last time you were Net-connected). Expect to see a number of Ad Networks targeting the eBook market to facilitate this; they’re already targeting video.
And no, you won’t see 300 ads for just Coca-Cola when you read a 300 page book, but a medley of ads.
Are advertising metrics for e-book ads harder to value than those for web ads or print ads? Wouldn’t it be impossible to audit whether someone has read a book without compromising privacy?
The great lie is that online ads are judged by whether or not they are clicked upon. You may have bought a Trek Bike at a retail store, but you were influenced by the 47 online ads for Trek that you saw and never clicked upon, however fleetingly. The popular mechanism for online ad tracking is cookies, and we expect the same for eBook ad-serving.
Smaller companies like Wowio have taken the lead in offering free ad-supported downloadable ebooks. Will smaller companies like that be at an inherent disadvantage in distributing ad-supported ebooks (when compared to Google and Amazon.com for instance).
Yes—see the point above about Intrasite Clickstreams. Behavioral Targeting is unpopular with some industry pundits, especially relating to privacy, but it’s far more effective than Demographic Targeting, and folks who like tennis would probably be open to seeing ads for tennis-related products and services.
Do you see ad-supported e-books as an either/or proposition (”Either you pay for a book or it is totally ad-supported”). Or do you see it as a little bit of both (”It will still cost a fee, but we’ll keep the price low with advertisements”).
E-books will start sans ads, at prices of about $10/book. But as the $5.00 point-of-pain for publishers is reached, hybrid models will begin to flourish. And some outriders– likely VC-backed– will stake out the “free books supported by advertising” segment and drive earnings for all to see.
The college campus has driven consumer acceptance of several major devices. I’m thinking of the laptop and the mp3 player (and possibly the iPhone). Yet in this case, reading books is a core function of being a college student (it’s not just entertainment). And textbook companies have started to focus on multimedia and interactive extras which can be presented only when online and logged in and sometimes only when using a proprietary reader. Do you see the mainstream e-book market as following this trend?
No. It makes perfect ergonomic sense (what’s heavier than five college textbooks?) but we believe these publishers will be the slowest to play ball with e-books, largely because they’re protecting a very profitable business. Once e-books are completely mainstream (2009), one of the big college textbook publishers will capitulate and offer eTitles, and the rest then will be forced to follow.
Many older audiences (over 60 for instance) say that they prefer reading a print book instead of reading on a screen. Is there any evidence to suggest that they could switch easily if presented with the right device and interface?
No. We see e-books the province of the younger set. The e-book vendors we know are far too smart to waste time fishing where the fish don’t live.
Are consumers comfortable with managing files and synchronization/backup of files? Or are they more comfortable with a reading their paid content through an online browser?
It has to be dead-simple, not because the target 18-44 year old demographic isn’t computer savvy, but because their online attention span is gnat-like. The UIs will all be virtually frictionless through to the e-book store– and these UIs are easy to design and execute because there are literally hundreds of download-and-display models to emulate, and no “look & feel” patent protection that matters.
Is there any evidence to suggest that the consumer’s worry he won’t be able to read an e-book 10 or 20 years from now is a major hurdle to buying e-books or an e-book reader?
It’s a reality (do we know MP3s will be playable in a decade or two?) but unlikely to affect purchasing behavior. People just want to read more for less money, weight and with less waiting.
Why did PDA’s fail? Is there anything you can glean from your e-book data to explain this?
The Apple Newton failed, sure, but was a net accelerant because it provided earnings that created the vast PDA business of today (see BlackBerry among others). With e-books it’s never been “if,” just when. That it follows the tidal waves that are online music and online video is mostly a function of relative appeal to the core Netizen demographic.
There are reports that the Amazon Kindle will feature automatic downloads from major newspapers. (As of this writing, there is no mention of a fee.) Would consumers be open to the idea of paying a “convenience fee” for the ability to enable these automatic downloads to happen? Or would they expect these things to come for free?
You can always count on Netizens wanting all content for free, with the exception of music and e-books (at least in the beginning of e-books). The fact that Amazon will offer newspapers as a “Trojan Horse” feature to get their device in the hands of Netizens intimates another reason e-books will soar—Netizens are already decreasingly reading newspapers and magazines in analog format, in favor of digital format, and overall it is causing revenue growth for publishers.
Also see: Blogs. They’d never have boomed if they were offered on paper, much less for a fee.
Netizens may indeed be encountering fatigue now with reading just newspapers/magazines/blogs online. E-book offerings will find instant traction among those who are reading newspaper/magazines/blogs for 6 hours per week, but will halve that and begin reading e-books for 3 hours per week.
Technorati Tags: MarketIntellNow , Amazon Kindle , Kindle , report , reports
November 19th, 2007 at 9:39 am
>>>Thus our view: e-books will take off if the value prop “read more for less” (less money, less weight, less waiting time to get the book) is emphasized especially by big brands.
Yes, yes, yes!
This is one of the best interviews and interview *guests* I’ve read in a *long* time. This interview should be read by *every* publisher (and, in fact, every *writer*). Well done!!
November 20th, 2007 at 8:49 am
I beg to differ in analysis. The hardest market to crack has been education and it is the vital market.
For this to happen the right device is needed at the right price. That is not a computer, but a simple cheap reader, eink is vital, power consumption has to be tiny, it has to be robust, light and neat.
Iliad has some of the right functionality, but not price. For students, handwriting is superior for notes and writing in general, but that is an aside.
The real problem is the quality and price of text books. I mean really well written ones, not the poor brightly coloured stuff supplied by the Textbook Industry.
Cracking the education market, means frontally attacking the well heeled and aggressive Textbook Industry. It means finding the best minds in the humanities and sciences, and commissioning them to write high quality material, for secondary students. A book list that cannot be ignored, a bundle of the most essential text books covering all the major areas of study.
Produce; a reader that is cheap and robust, a fundamental collection of authoritative reference works, an easy to reach shelf interface (a sub group of texts that can quickly be jumped between), and real textbooks that clearly and expertly, coherently, explain subjects in simple language (i.e. not just a dump of handy titles of uneven quality) that is the package killer IMHO.
DRM has no place, the individual title price has to be low, the whole package would have to bundled at the cost of handful of present p-textbooks, and the thing will crack.
The textbook industry by its often shoddy products, high prices and yearly, needlessly changed editions, has made the market for change. Look at any public school in the English speaking world and it is virtually the same story. Students rarely have textbooks of their own, there is a general scarcity of them and the photocopy has become practically the only “reading” most students have in the course of studies. The situation is one brought about by an Industry that has plundered the public education purse.
It is the weakest link.
November 20th, 2007 at 9:58 am
I’ve commented on several occasions concerning my love of my Palm devices for reading ebooks. I like my interconnectivity with the web being able to use my TX for email. I use it to real time read any newspaper or magazine that is available on the web.
I think Bezos has made a key decision to connect his device to readily available software. The real question is one of standards and maybe Amazon being the elephant in the room can just go ahead and create the standard. I like the inclusion of eInk - a process I touted in workshops at teachers’ reading conventions several years ago.
I could have bought an iPhone or an iPod Touch to do some of these activities I do on my Palm TX in a “cooler” way (Cover Flow), but I decided to wait for their next generation at least.
Somehow being a “fish” who has been in the water for a long time in this whole ebook business (60+ demographic) and watching those around me cast doubt toward my 250 books I carry around in my shirt pocket, I’m going to be a bystander until the dust settles since I’ve already had access to all that type of information for over five years.
Now if someone would come up with a device for less than $200 that accesses the internet, includes ebooks using eInk, and also audiobooks as well as podcasts and videocasts, I might be persuaded to part with some of my cash to replace those devices which have served me well. And, it need not have a phone embedded in it…..
November 20th, 2007 at 1:45 pm
I’m with Greg…the e-ink color device for $100 that lasts at least a week on a charge will totally revolutionize (ie hopefully destroy) the textbook industry as we know it. Until then, e-books are always going to be marginal IMO.
“The fact that Amazon will offer newspapers as a Trojan Horse feature to get their device in the hands of Netizens intimates another reason e-books will soarNetizens are already decreasingly reading newspapers and magazines in analog format, in favor of digital format, and overall it is causing revenue growth for publishers.”
There are just too many gotchas to the way Amazon is offering newspapers. For one, why would I pay to read the Washington Post or New York Times on my Kindle when I can read it for free on the web?? Besides, maybe I’m an outlier, but I no longer am interested in reading a single newspaper anymore than I am interested in watching a single network’s programming on a given evening of television viewing…I much prefer reading the best of multiple newspapers, thank you Googley much.
November 20th, 2007 at 2:19 pm
Well, you can apparently still read any paper for free via the Kindle “experimental” web browser. But that makes me wonder just how amazon is going to absorb all that bandwidth cost. I have that Star Wars bad feeling about the Gotcha cost down the road. Sure, it’s great to be able to Buy Now Read Now, but not if a bandwidth bill for monthly service is waiting for people, say, a year from now. WiFi may be spotty, but there’s still lots of it for free. (Attention Sony Reader version 3!)
December 1st, 2007 at 3:12 pm
While I agree with the fundamental assertion that handheld devices are nice to have, not need to have — the real breakthrough is just making electronic copies available. Our Safari Books Online joint venture with Pearson, which delivers subscription access to thousands of computer and business books (admittedly an early adopter audience with a need for professional content), generates more revenue than is normally reported for the entire downloadable ebook business. For my company, O’Reilly Media, Safari is now our third largest reseller, behind only Amazon and Barnes & Noble.
So you’re right on that. But I think that the idea that there’s sufficient elasticity to cut prices by a large amount is totally wrongheaded. Unlike music, which is quickly consumed (a song takes 3 to 4 minutes to listen to, and price elasticity does have an impact on whether you try a new song or listen to an old one again. But many types of books require a substantial time committment, and even regular readers already often have huge piles of unread books, as we end up buying more than we have time for.
And as for the kind of books that you don’t read from beginning to end, but just use to look up information, or to learn something new, the “all you can eat” (at least in a category) subscription model may be more appropriate to consider.
Look at the comparison with cable TV. “Channels” and subscription packages generate far more revenue than pay-per-view, which is the equivalent to the downloadable ebook.
Obviously, both models will exist, as well as advertising for some kinds of content. But again, you’re kidding yourself if you think that advertising will replace the revenue generated by current book sales. Current CPM (cost per thousand) rates for advertising range from $1 to $20 at the high end, very targeted (except with a very few rare exceptions.) So if you have a book that sells 20,000 copies, you might generate at most a few hundred dollars from advertising. Do the math, don’t just make pie-in-the-sky assertions.
Take an average book, say a 400 page book, and assume you get an ad for every page read online. That’s 40 cents at the most common ad rates — that’s gross revenue. You have to get a LOT more readers to bring you up to the level of revenue you get today from a printed book.
Advertising works for aggregators like portals and search engines because they can amass billions of page views, often on user-generated (or computer-generated) content for which they pay nothing.
I’m sure there will be ad supported books, and ads as a supplement to other revenue streams, but it isn’t going to be enough to support the publishing industry as presently configured.
December 2nd, 2007 at 2:48 pm
I just remembered: there used to be ads in *paperback books*. It didn’t lower the price nor make them free…
http://www.nytimes.com/2007/12/02/books/review/Collins-t.html
December 2nd, 2007 at 2:58 pm
Great link, Mike. Shows how ads can be positioned in a really obnoxious way. Needs to be done much more carefully. Plus, as I’ve written, ads may not be right for all books. And for EVERY book, readers need to ability to turn the ads off by paying extra.
As for the price situation, I think the bigger market online will help take care of that. You want to put ads in books? Then it’ll either have to be free or sold at a fair price, or the author and publisher will suffer.
HH,
David
December 4th, 2007 at 4:59 pm
Tim Oreilly assumes that the number of copies distributed will stay on a level with typical print book sales. In fact, downloads could exceed that for certain types of content.
Of course, for a million or two million downloads, the CPM numbers will seem better. I have to wonder whether the effort to download something (even for free) doesn’t inherently limit the number of ebook files for potential advertising. Browser-based readers do not impose this kind of limitation.
Realistically mp3s will be downloaded by more people than ebooks. Why? People can consume more mp3s. Not only because mp3s provide only 3 minutes of entertainment, but also because mp3s are bundled together in “albums.” In contrast, ebooks are usually just a single downloadable file. The real ebook “bundle” is the flash media drive which can be preloaded with appropriate content.
I suspect people read more webpages than book pages over their lifetimes. But reading in current browsers and hardware is painful over long periods of time. Computer people are more comfortable doing this. They appreciate the convenience of being able to read and work on the same device (that allows them to google things and cut and paste). But these reasons don’t really matter to the general reader.
Reading an ebook is a more immersive (and hopefully more portable) experience than reading on a PC or laptop. It is also supposed to be more immersive than reading a web page. The hypertextual web allows lots of different paths; an ebook is supposed to limit the number of paths and present a single forward path. Old-fashioned, yes, but many kinds of content don’t lend themselves easily or well to modularization or customized paths taken by the reader. I could see a technical book being more modular and easier to break down into component parts (with ads), but you really can’t break down narrative forms. Think about it; how many types of books published today lack meaningful tables of contents?
December 7th, 2007 at 1:35 pm
[...] I’m gratified to see that technical publishing guru Tim Oreilly wrote a lengthy comment on the interview I did for TeleRead about ebooks. Although I basically agree with his thoughts, I did attempt a kind of [...]
February 13th, 2008 at 1:18 am
[...] economic reality, at least according to one survey, is that ebook users expect to pay less for digital text. One surprising conclusion you found is [...]
February 13th, 2008 at 1:02 pm
What a great article! I agree with a lot of what she says. I think an unfortunate truth for publishers is going to be that they WILL have to grow or adjust their business model if they want to survive. They can give whatever numbers-backed reasons they want for why they charge what they charge, but if people won’t pay it, it doesn’t matter. The Canadian publishing industry is learning this the hard way with the US dollar crash. They have responded to the public complaints about the US sticker price being so much cheaper than the Canadian sticker price with lots of editorials on why this is so and why it must be so, and what’s happening? People are going in droves on-line to buy from the Americans because they just don’t want to pay the higher price. That’s free market, right there, and if the publishers want to get those customers back, they’ll have to change things.