There is a lot of disagreement over the value of different ebook readers. This post is intended to help you:
Understand why you’d want one
Decide whether or not to buy one now or in the future
As a starting point, I took the product features set displayed on Amazon.com’s Kindle website and pasted the bullet-point feature specs below in bold, and inserted my own observations and research after each bullet in plain text and pictures.
Say Hello to Kindle ($299)
Slim: Just over 1/3 of an inch, as thin as most magazines
This is Kindle’s version 1.0 and 2.0 in a side by side comparison. I’m not too impressed with the size improvement-1.0 was good enough as far as I am concerned.
Lightweight: At 10.2 ounces, lighter than a typical paperback
I’ll discuss this benefit farther below, but here’s a diagram of the unit’s functions.
Wireless: 3G wireless lets you download books right from your Kindle, anytime, anywhere; no monthly fees, service plans, or hunting for Wi-Fi hotspots-Books in Under 60 Seconds: Get books delivered in less than 60 seconds; no PC required
Only a few weeks ago Sony took the electronic book reader market by storm with its announcement of two new devices that undercut the popular Amazon Kindle by $100, but lack the wireless connectivity of the Kindle. Sony’s latest announcement of a wireless-equipped ereader shows that the Kindle pricing is actually reasonable.
Sony unveiled the 3G ereader today. It will be available in December of this year at a retail price of $399 — a price tag $100 higher than the equivalent Amazon Kindle. It seems that making a cheaper device than the Kindle is one thing, but that making a comparable device cheaper is a horse of a different color.
The 3G wireless feature is not very impressive to me. Reading a book is simply not like making a phone call. You don’t need to be permanently connected. The most avid book reader would get away with a once per week connection to the internet via their laptop, and load up the week’s reading. If you read blogs and news every day, leave it in a cradle overnight that downloads your text, just like itunes does for podcasts on your ipod to your favorite talkshows. If for some unique circumstance you must be able to download books lightning-quick, 60 seconds is a really long time to download a book! I can download the largest eBooks on my PC in 10 seconds or less.
Paper-like Display: Reads like real paper; now boasts 16 shades of gray for clear text and even crisper images
Remember the etch a sketch? That’s what they look like. No backlight for night reading either.
Long Battery Life: 25% longer battery life; read for days without recharging
There is a secret value missing here-you’re notes are stored digitally on memory, never tarnishing the original book, and as long as you keep a good backup of your files, you’ll never have to worry about damage to an old book-think digital cameras!
Carry Your Library: Holds over 1,500 books
This has to be the biggest reason to switch to digital book formats-you’re saving the rain forest and your back at the same time! Plus your e-books are searchable, so you’re not spending hours flipping through pages. To give you an idea, the guy below is only carrying 25 books (I counted). Amazon’s Kindle 2.0 offers 1500 books in a petite 10.2 oz package.
Read-to-Me: With the new text-to-speech feature, Kindle can read every newspaper, magazine, blog, and book out loud to you, unless the book’s rights holder made the feature unavailable
This youth shows us how incredibly easy this feature already is to do on your MAC for any type of text document to become an audio book, and their are many free software variants available for windows.
Free Book Samples: Download and read first chapters for free before you decide to buy.
There are free previews of almost every book available all over the internet, and not to mention the ability to paruse those available at Barnes & Nobles while checking out the nerdy librarian gals and sippin on a latte. Previewing a book is absolutely expected of any legit ebook reader’s purchasing gateway.
Large Selection: Over 300,000 books plus U.S. and international newspapers, magazines, and blogs available
“During the night of July 16th, while Amazon Kindle owners slept, Amazon was quietly deleting their copies of George Orwell’s 1984 and Animal Farm. Most people who are upset about this were upset and surprised that Amazon would unilaterally delete their books. They’re missing the real points.
Whether Amazon had the right to do this is an argument for another day. There is no question that they badly mishandled it. At the very least, Amazon should have told their buyers that it had turned out they hadn’t the rights to sell e-copies of those books and that they were going to need to remove them. That appears to be what Amazon will do in the future, or that Amazon will let people who bought copies in good faith keep them while not selling any more copies in the future.
Low Book Prices: New York Times Best Sellers and New Releases $9.99, unless marked otherwise
“As important as device components and competition are, a standardized ebook format is the Holy Grail that will ultimately determine the fate of electronic book readers. The Amazon Kindle has captured the imagination of some, but the high cost of the device itself, combined with Amazon’s proprietary Kindle book format make it a difficult purchase for the average consumer to justify.
The Kindle books are generally cheaper than their tree-killing paper counterparts, but even if each Kindle book saves $10 you have to buy 30 books before you break even on the investment in the Kindle. And, you have to hope that the Kindle survives and that the format doesn’t change or your Kindle collection will have to go in the attic next to your 8-track tape deck and your Betamax video player.
Dollar for dollar, it does seem like Sony is blazing new territory in terms of the functionality and value it provides with its e-readers. Sony has embraced the open standard e-pub format. The Sony readers can also read PDF and Word docs (the Kindle is capable through some convoluted process of emailing yourself the doc so it can be converted to Kindledom). Sony provides access to more than 1 million public domain documents available from Google, and an ability to check out books electronically from participating libraries.
Perhaps Sony or Amazon should explore either the subsidized device model of the mobile phone industry, or the subscription model of Netflix or Blockbuster. AT&T is providing the 3G wireless connectivity for the Sony device. Maybe they could also offer the device at a subsidized price under contract like an iPhone. Sony is providing public library access to check out books for free, but perhaps a model that lets users borrow two or three books at a time like a Netflix subscription would make an investment in the reader device itself easier for consumers to justify.
The battle between Sony and Amazon is good for the future prospects of the ebook market. The Kindle continues to be popular even with its proprietary format and $300 price. The Sony 3G offers more in terms of features and value, but at $400 it will still face an uphill battle against the Kindle. Eventually the format should standardize and the devices should be cheaper and everyone will win…except Sony and Amazon maybe.”
Years before I started this company (buyplaywin), I studied eBay and Amazon very closely, and more accurately, the founders of each: Jeff Bezos (amazon) and Pierre Omidyar (eBay). You might say they are my surrogate role models, because no matter what their companies have become, they saw an opportunity, and millions of convinced customers, business partners, and investors agreed.
These two e-commerce giants have become household names and I thought they’d always have a place online for their brand identities: eBay is authoritatively known for auctions, and Amazon is the same for having the most selection of goods, prices, and happy customers. The following articles show how the founders cashed out, describe the current state of the two companies, and suggest that their future is not as secure as I thought.
Amazon CEO Jeff Bezos and about 7 other top company execs just sold $82,221,046 worth of Amazon (AMZN) stock — with all but $3 million of that going into Jeff’s banking account.
Do we have a case of insider trading on our hands?
No way. No how.
Clusterstock’s John Carney tells us these kinds of sales are scheduled “way ahead of time, without inside knowledge.” John says it’s also unlikely Jeff or any other top Amazon execs would have been able schedule the Kindle news around a pre-planned sell date.
“They can get in trouble if they schedule events to coincide with sales,” says John. “Usually, they get around this by not even knowing exactly when the scheduled sales happens. It’s all done blind.”
Here’s a chart we put together show who sold how much.
SEC filings are boring and hard to understand but often give revealing tibits about the companies we cover. In SEC Stalker, we translate these filings back into English, revealing the plays and people behind the companies we know so well.
Check out the list of folks above, other than Jeff, who also cashed in their shares. Tom Alberg, for example, sits on the board of directors with Jeff, and is the Managing Director at Seattle-based Madrona Venture Capital Group. They were amongst his very first investors, thanks to Tom’s instincts.Diego Piacentini is Senior Vice President, International Retail, at Amazon.Com, Incorporated, since he came on in 2000. The list goes on.
Now let’s take a look how the market compares eBay to Amazon.
“At this point, the Street basically calls eBay a value trap,” he said. “‘It’s cheap, but it’s cheap for a reason. Things aren’t going to be better; they’ll get worse.’”
EBay’s sagging price-to-earnings ratio, and the expensive price tag on Amazon shares are clear barometers of investors’ appetite for the two e-commerce giants inexorably linked in Wall Street’s mind.
While shares of eBay have risen 7.5 percent since January, Amazon shares, on a steady upward climb since November, are up 55.5 percent.
Shares of eBay are valued at 10 times projected 2009 earnings, compared with Amazon’s 54 times.
The online auction pioneer is touting impressive growth at its PayPal Web payments service and Skype Web telephone company — once-auxiliary units — while trying to assure Wall Street it can invigorate its stalled marketplaces business which has been hit by competition from Amazon and others.
“They admit to a lot of mistakes and they have a very ambitious plan to turn the company around over the next couple of years,” said Solaris Asset Management’s Tim Ghriskey.
But he cautioned: “The Street basically doesn’t believe they’re going to do it.”
EBay predicts 2011 revenue of $10 billion to $12 billion, compared with the $9 billion expected by analysts.
“Until (eBay) has positive momentum on their marketplaces business, it’s hard for the stock to react and the valuation keeps creeping down,” said Royal Capital Management’s Robert Medway.
As Morningstar analyst Larry Witt said: “People are saying, ‘It’s got some interesting segments, but at best we think it’s flat growth or 3 percent growth. That’s not a reason for us to buy it.’”
He added that the market appears to have priced in a “very severe decline” in eBay’s auction business.
Amazon has the opposite problem. Its dizzying valuation caused Barclays Capital analyst Douglas Anmuth to write that the online retailer was “priced more toward perfection.” He downgraded shares to “equal weight” from “overweight.”
The company, which analysts say has navigated a difficult spending environment well, was not always so well-loved.
As recently as last year, Wall Street was griping about Amazon’s decelerating margins and focus on sales instead of profits. But as the recession took hold and consumers began cutting back, investors went ga-ga at the company’s ability to lure buyers and post double-digit sales rises.
“Amazon went through years of pain,” Ghriskey said, as Wall Street knocked projects like discount shipping program Amazon Prime — now lauded as a traffic driver — and profit-crimping technologies now deemed smart, such as the e-book reader Kindle.
Still, some investors say eBay might eventually get its house in order — just don’t expect short-term results.
Value investors are still getting a deal on eBay, argued Medway, even if its marketplaces unit continues to struggle.
Returning cash to shareholders could be the key to mollify eBay investors in the short term. Investors have pushed for more capital, including a dividend, with some complaining that eBay sinks more money into acquisitions than share buybacks.
Also, a sale of Skype looks increasingly likely amid reports that the unit’s co-founders are eyeing a purchase.
“If eBay doesn’t fix marketplaces, it’s still worth more than $15,” said Medway, who owns the company’s stock, citing eBay’s dominance in auctions. “This isn’t General Motors where they have a lot of expenditures. This is an all cash-flow business. It’s worth something.”
Since most investment analysts are concerned about the ability of Amazon to grow in the future, let’s take a peek at Amazon’s investment track record in startups that share a common goal with the e-commerce giant.
Amazon.com today said that the value of its investments in private companies fell to $89 million in the first quarter, down from $247 million at the end of last September. That’s a whopping 64 percent decrease in six months. The online retailer has been one of the more active investors in new Internet startups in recent years, taking stakes in companies such as Yieldex, Wikia, Elastra and Engine Yard.
Earlier this month, Amazon invested in Seattle online recipe site Foodista and San Francisco startup BookTour.
But just like venture capitalists, Amazon is having a hard time figuring out what value to place on startup companies these days.
“The current global economic climate provides additional uncertainty,” the company wrote in today’s SEC filing. “Valuations of private companies are inherently more difficult due to the lack of readily available market data. As such, we believe that market sensitivities are not practicable.”
Amazon.com was burned badly during the last downturn because of its invesments in failed Internet companies like HomeGrocer.com, Kozmo.com and Living.com.
However, there’s a big difference this time around. Unlike the multi-million dollar bets at the turn of the last decade, Amazon is now putting far less capital to work in individual deals. For example, both Foodista and BookTour raised less than $600,000.
If the startup companies are unsuccessful, the giant online retailer should be able to stomach those types of losses. However, no matter how small the loss, investors may begin to question why Amazon.com continues to bankroll these money-losing ventures.
UPDATE: R. Scott Tilghman, an analyst at Hudson Square Research, notes in an email that some of the declines in Amazon.com’s private portfolio were tied to the sale of its stake in Bill Me Later to eBay. Since Amazon’s investment would have been cashed out, Tilghman said the portfolio valuation would have been reduced. The Venture Capital Dispatch blog also notes the possible effect of the Bill Me Later sale.
Investing to secure your future can lead to playing both sides of the game, as Amazon has done, which is not mentioned in the article above. Amazon, which helped fund the social networking startup, now owns Shelfari and a stake in its primary rival LibraryThing (Techmeme). These sites allow friends to compile and share reading lists and book shelves.
As I’ve said before, I have respect for LibraryThing’s 40+ competitors, but withhold it for Shelfari. They were rather famously called out by me and by others in a series of blog posts exposing a program of spamming and of “astroturfing” (paid employees posing as excited users in blog comments). The apologized on both occasions, but I have, quite frankly, the greatest contempt for them, and for what book-based social networking will become if they beat out LibraryThing.
Picture a boot stomping on a human face forever. Well, okay, not that. But picture the book social network wars ending with a site created by music people who probably wouldn’t get that allusion, with advertising all over, with “community managers” “managing” conversation between book lovers, and under the shadow of what will sell books and not books’ other, greater values. In short, I believe there’s something “to” the idea of book-based social networking which they don’t get, and to which they are a danger. Yes, I’ve drunk my own Kool-Aid.
Any case, once the Amazon/Shelfari deal goes through, we are competing against Amazon.
Amazon and eBay are fighting to stay relevant and current. As a large company, it’s difficult to adapt to a change, so the strategy becomes, “buy what looks like the future for cheap, now”. Look at what has happened to the music industry, who certainly thought they didn’t have to heed this advice, until the iPod came along, and mp3 file sharing became mainstream. Is it any wonder that Jeff and crew are selling shares as fast as they can right now, and cashing out while Amazon stock is over inflated from the dissmal economy compelling consumers to shop online for the cheapest alternative? Pierre (eBay) did long ago.
In today’s cutthroat, unstable, and fast evolving business climate, I think I’d do the same thing, something I never would have said several years ago about a similarly successful company I may one day build.
Jeremy Liew, a respected VC at Lightspeed Ventures, asked his blog readers what product categories would bring strong e-commerce sales in upcoming months/years. My comment never made it to his post, so I’ll share it with you here.
The economy sucks!
The low amount of available job opportunities is influencing millions of young minds to delay joining the workforce, and simply return to school.
In fall 2008, 18.3 million students attended the nation’s 2-year and 4-year colleges and universities, an increase of about 3.0 million since fall 2000. College enrollment is expected to continue increasing, reaching a projected 20.4 million in fall 2016. The expense for books and supplies rose from $801-$904 in 2005 to $850-$942 for 2006-2007.
(National Center For Education Statistics)
It sucks even more now to be poor and smart. You’ll need one of the few limited state scholarships, since school loans are getting even harder to come by, and the 6 month gap until repayment terms take effect won’t give students enough time to secure a decent paying position in this economy. There is simply no money available for loans, although many hope Obama’s promise to make them available comes true.
Students are struggling to pay for increasing costs of education, and paying more, with inflation already taken into account, than any graduating class has before. This is due to many influencing factors, most of which are problems that have been swept under the rug by the previous generation for the next generation to fix. Since most brick and mortar retail locations on campuses across the United States charge a 30% HIGHER margin than e-commerce retailers, many more students are willing to wait until their books are delivered from online merchant origins.
However, let’s put what I’ve just told you from an e-commerce retailer’s perspective. How do you think they are feeling?
They’re feeling awesome, at least those e-commerce companies that are well managed are feeling awesome. Amazon has been making a killing ever since the economy began it’s downward and seemingly never-ending spiral.
But books/textbooks shouldn’t surprise anyone as a category winner.
From 1998 up until 2007, (around the beginning of the mortgage financial crisis),McGraw Hill dividend growth stock has delivered an annual average total return of 10.80 % to its shareholders. The majority of the gains were erased in 2007 though, when the stock dropped from an all-time high of $72.50 in June 2007 to a low of $43.46 by December that same year, due to expensive one-time changes of stock options policies, but more closely related to the mortgage crisis they were heavily invested in and rapidly selling off of their mortgage based mutual funds at a loss.
However, the important thing to know for any risk-accepting investor is that in any other single year from 1998-2008, if you invested in McGraw Hill stock between April and June, before kids went back to school, and sold the stock anytime after book buying season ended, that’s up until the end of January in the following year, you would have earned at least 15-20% on your investment. On September 8, 2008, the stock closed at $45.86. It was an average of $40 per share from February through July earlier that year.
The book publishing and buying business is very strong, and for the most part, very predictable. McGraw Hill is as close to a sure bet as exists, and the only reason they suffered along with the rest of the economy is because, like everyone else, they were suckered into investing their huge reserves of cash into risky mortgage-based securities.
So they’re already recouping their losses.
The only worry for McGraw-Hill should be electronic books and textbooks, but they say that they are preparing for the industry coming game changer and welcoming new electronic reading devices. McGraw-Hill Education says they already publish 95% of their textbooks digitally, but as of current they are not as popular because a good reading device is not yet available. Reportedly textbooks are a 5.5 billion dollar market. With Amazon Kindle 2’s new student addition, students won’t really be able to share their textbooks with other students, supposedly, or sell them back at the end of the year. Many are interested to see how the electronic versions are priced as opposed to the paper versions for that reason.
Does this sound familiar to you?
It should, since this was iTunes claim to the music industry many years ago in order for them to be able to sell music for their iPod customers. What happened since then? Well, iTunes is now DRM free, right?
Amazon’s Kindle 2 - $359
Take a look at some of Kindle 2’s competitors, (also available on Amazon):
Sony eBook -$269
Hanvon N510 - $295
Cybook gen3 ebook reader - $350
BeBook 2 - $279
irex iliad ebook reader - (€499, not reasing in US)
Companies like Amazon, Sony, Adobe and Mobipocket are hastily trying to develop a universally acceptable format for eBooks. Unlike its competitor Sony, Amazon decided to allow support for other commercial formats used on their eBook reader device. This may turn out to be either their stroke of genius moment or their darkest hour. Amazon also sells AZW compatible eBooks through their online store. And since they are the webs largest book seller, they are already quite capable of figuring out how to effectively sell eBooks too.
But college students have proven to the world that they’re willing to circumvent the music and movie industry with Nabster and Torrents, and more recently, with YouTube, Hulu, Fancast, AOL and Sling. How long does it take to download the biggest PDF? 5 Minutes? Once the DRM is cracked, the file can be digitally distributed and redistributed. If file sharing, or student group buying and sharing one textbook saves them over $900, trust me, they’ll do it. Those on the fringe already are.
Senator Harry Reid lets poor college students know how he feels about them.
Several senators have vowed that colleges who do not crack down on file sharing will not receive financial aid. Liberals and many college campus groups call this a blatant example of pork-barreling. They say that these senators have decided that poor Americans will be turned away from college if the coffers of ancient and outdated music giants are not filled at the expense of college students. Read the full story from c-net.
First, I have to give a shout-out to Dean Takahashi, writer at Venture Beat, who pointed me to Quake Live in his latest article today. Dean, IMHO, offers the latest and most comprehensive online game industry coverage, and I follow his and Andrew Chen’s posts religiously. Andrew is arguably the most fact knowledgeable entrepreneur, VC, and angel investor. Jeremy Lieu is another to follow for his good insight, although his entries span more than game topics if that is your only interest.
Now let’s get down to my experience playing on Quake Live. I have already tried the beta, and the live site is a huge improvement.
After you sign up, you’re put in a queue of other users waiting to play the game, mostly to balance server load. My position in the game playing queue was # 46,457, and 20 minutes later, it was only # 41,757. It’s safe to say that at this rate, I’d get to play sometime tomorrow morning. Unless of course current players realized that I am god’s gift to first person shooters, and made room by leaving. (Doubt it.)
Then something strange happened. Either I cut the line through some fluke, or more likely, the queue is a fictional tool used to deter players from trying to play when they’re already at capacity. They might be trying to impress someone with the high number of fake/realistic players, who’s not really into gaming enough to wait to play. Who knows, but I was sent to another web page to download and install their required browser plug-in, which must be updated from the beta version I already installed.
The installation took no time at all, and after logging back in, I tried to play a game. I was told that I had to first have my skill level assessed through a placement match. It’s basically training mode, where you jump through some hoops and go head-to-head in a deathmatch with a bot that adjusts her skill level to your performance. I think they do this by increasing her skill level each time you are up 1 or 2 kills, so you’re constantly going up and then returning to a draw score. While waiting for the game to begin, you can select one from a bunch of character styles.
Bored and out of my day’s allotment of “playtime” after reaching a draw of around 4 kills, I quit the placement match and tried joining a game, to no avail. I was greeted with the following message, “you must complete the 10 minute placement match.”
At first, this annoyed me. I mean, it’s not my first time playing. I’m the self-entitled god of Quake, or “the Harbinger of Death” as my fallen opponents gurgle at me from their death throes. Actually, my alias is “ragMF1″ in most shoot’em ups, if you ever want to find and play against me.
I’m not going to break down the Quake-playing basics. You’ve played before, and they’re all there. What I will tell you is that they’ve done an incredible job, well-documented everything, and are paving the way for the future of multiplayer gaming.
Last and precautionary, you should make sure you have the minimum system requirements well met, because game play is demanding on my laptop, and I can tell that my graphics card is heating up my machine, slowly and noticeably after 5 minutes of play.
What are the system requirements?
Minimum Requirements
Recommended
Operating System
XP or Vista
XP or Vista
Browser
Internet Explorer 7 or higher,
FireFox 2.0 or higher
Internet Explorer 8,
FireFox 3.0
Computer Processor
800 MHz Pentium III or Athlon, or better
2 GHz Intel Processor or better
Screen Resolution
1024×768
1650×1080 or higher
Graphics Card
NVIDIA GeForce 4 MX or better,
ATI Radeon 8500 or better,
Intel 945 chipset
NVIDIA GeForce 7 Series or better,
ATI Radeon X1800 series or better
Internet Connection
ISDN or IDSL Narrowband
Cable or DSL Broadband
As the computer works harder to cope with it, there is not game lag from my internet connection, but game lag caused by holding down forward, shoot, and a host of other commands that just get backed up somewhere in my machine’s ether-world. Enough backup so that I lose control of my character’s movement and he keeps walking forward. Interestingly, the mouse aim and shoot function stays flawless, so although I’m doomed to walk toward a wall I can still aim and shoot accurately. My machine is a Dell Latitude D620 for your benchmark.
BuyPlayWin will enter private beta in the middle of September. We’ll have the stuff you want, and all the fun. If you have not requested an invitation yet, please do so by sending an email to info [at] BuyPlayWin [dot] com.
We believe that BuyPlayWin is a fresh and unique customer experience, joining several industries together for the first time. This is the first of a 3 part series of posts that give our perspective on each industry.
E-commerce
Web 2.0 Advertising
Gaming.
(Post Updates At The Bottom In Italics)
Just now breaking news: “William Ackerman, the billionaire hedge fund manager who is a major stakeholder in Borders Group Inc., said Wednesday the bookseller should consider approaching online retailer Amazon.com Inc. about a possible acquisition.”
Ackerman owns a 30% stake in Borders, so he does want the stock to go up in anticipation of a merger. However, he is proposing to open new “Apple-like” renovated and chic boutique Amazon stores to replace all of the old Borders brick and mortars, producing his cliche, “bricks ‘n clicks”.
If you find yourself scratching your head, here’s a quick recap:
This is not a joke. We just got a confirming email from Amazon, and I’ve pasted it below:
The following are key excerpts from the afore-linked articles above:
After a lengthy hiatus from its solitary existence as an online bookseller, it’s back as an independent entity, and it’s come with a major facelift clearly meant to increase interest in its brand. A visit to the site today will show users a storefront with rich visuals. The site’s centerpiece is a browser window that users can interact with to view highlighted book, music, and movie titles. Border’s has dubbed this feature “The Magic Shelf.”
Borders’ Web site announcement came as the company said it was shuttering nearly half of its Waldenbooks stores.
Before 2001, Borders had its own Internet business, but it wasn’t profitable, Roman said. That led to the arrangement with Amazon, which operated Borders’ Web site, took orders and delivered books.
Amazon obtained all the sales and gave an undisclosed cut to Borders, Roman said. Amazon also runs the Web sites for Target and Bebe and fills the orders.
The loss of Borders could cost Amazon $80 million to $160 million in annual revenue, according to an estimate by Scott Devitt, an analyst with St. Louis-based Stifel, Nicolaus & Co. Amazon and Borders wouldn’t confirm or deny those figures.
Devitt said the loss isn’t material to Amazon, which had revenue of $10.7 billion last year and $190 million in profits.
Devitt said the loss of Borders could result in a 2 percent decline in profits for Amazon.
Perspective:
Borders has struggled for a long time to get its book business booming online. They’ve received a lot of criticism for their past performance, and this continuing tragedy. We’re not sure, but most deals like this go bad when one party realizes they’d be more profitable on their own. Why are they just realizing this now? One answer:
Amazon’s EC2 Cloud Infrastructure
This was the reason that Borders bedded with Amazon in the first place: to leverage Amazon’s superior technology infrastructure. The difference? Today, it’s being basically given away to millions of startups through Amazon Web Services. Borders has been giving their business away to Amazon for a very long time, accepting a small cut for their own business. Now, they see the folly of their ways, but it’s probably too late.
Borders plans to outsource server costs to Amazon through EC2 Cloud Computing, like so many other dot com’s, but the paperback book margins are slimmer now. A lot slimmer. Technically, the data ain’t really goin’ nowhere. We tend to think, same server, must be same sys admin’s.
Kindle has started taking off. Digital books are going to take over reader’s preference as the device becomes more popular and cheaper. Yes, just like your first iPod that you bought after prices came down.
This will be an interesting corporate soap opera for all of us. Stay tuned!
Post Update 1: Borders US partners with Alibris
Significance: This is serious competition folks. This partnership is a move to differentiate Borders online book selling from Amazon online book selling, in a way other than the eventual price war. The split between Amazon and Borders will hurt both companies over the long haul, but the cost of your books will come down.
Significance: We think that Borders and Alibris it’s not going to hurt Amazon at all, as far as we can see. Like they said, maybe 2% of Amazon’s total revenue. It’s going to be tough for Borders.
If you check the Alexa rankings, it does look like they’ve had a big spike lately, but maybe just nothing was happening on borders.com before. The click n bricks thing is a cliche, but it could be a powerful one. We’ve used it a couple times: the ability to check and see if a book was in stock at the store before driving over. If not, we ordered from Amazon. If they can make that work, it could really be something.
However, that won’t work if they try to be a boutique. It’ll only work if they operate like they do now and have a deep inventory. It’s hard to find a real bookstore with a deep inventory these days, and borders is better than B&N.
Compare the rankings: B&N is way ahead of Borders now, and they’re both way behind Amazon. Borders has a steep hill to climb just to catch up with B&N. The difference in number of stores could be significant.
