Last year, when Bookish launched, I asked the question on this blog, “will [start-up book retailer backed by three of the largest publishers] Bookish succeed or fail?” The answer today is “yes.”
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Start-up ebook retailer Zola has acquired Bookish. In a way, this is success and failure for Bookish. On the one hand, it is no longer a free-standing concern and its fate will be decided by a former rival (failure). On the other hand, it will continue to be run by Zola as an independent site due to its large traffic (several hundred thousand visitors a month) and, besides, this was part of the plan all along (succeed). Michael Pietsch, the CEO of Hachette, one of the three large publishers that invested in Bookish, told me that the plan all along had been to create something that would eventually stand on its own (either by being spun off or sold, presumably).
Both companies were very small with only a tiny percentage of the U.S. ebook market but it’s the buzz in the book publishing world today. Why? Well, even though both companies are small, one with about $5 million in funding and 20 employees and the other with a reported $10 to $20 million in funding and 22 employees, they both represent significant challenges to Amazon in what is becoming an increasingly one-sided competition for U.S. ebook readers.
In a cash deal, Zola will take over Bookish, get rid of about half its employees and continue to run its site (Bookish.com) in the near term. The acquisition was about the Bookish book recommendation engine, which has been highly touted, both parties told me.
While Zola CEO Joe Regal and Hachette’s Pietsch both assured me that the move was logical and a positive development for both companies, I think it has more to do with the complexity and difficulty in competing with Amazon in what was already a tough business (bookselling) before the Seattle e-tailer came along.
First, Amazon has a dominant position in the U.S. ebook retail marketplace, with estimates of its market share ranging from 50% to 75%. (My guess is that it’s closer to two-thirds right now.) That momentum alone would make it hard for any new competitors without an already established brand to break in.
Second, Amazon has very high quality devices that it sells to consumers very cheaply so they can then easily buy Amazon ebooks. Neither Bookish or Zola make or distribute devices. Zola’s consumer-facing side is an iOS app.
Third, Amazon keeps its prices extremely low and tends to match rival retailer sales, making it very hard for a new entrant to compete on price.
Fourth, assuming Bookish has had about $20 million pumped into it and Zola about $5 million, they may just not have enough firepower to compete with Amazon, Apple, Kobo and Barnes & Noble, some of which sink that much money into their ebook operations on a weekly basis — at least.
So, what’s left for Bookish, Zola and other related start-ups? To compete on things like “better discovery engine” and exclusive content, which seems to be the going strategy for digital platforms these days. Zola has had some success with the latter, Regal, the CEO told me. For instance, the best-selling book The Time Traveler’s Wife by Audrey Niffenegger (who is a Zola investor), is available as an ebook exclusively from Zola.
“All of the exclusives sell every day and that’s a really happy thing,” he said. “The authors who committed their content to us are happy.”
For Bookish, the strategy was to create a better book recommendation engine. Unfortunately, most readers don’t have problems finding new books to read and new authors. That said, Bookish did a great job (and this piece of technology is why Zola said it acquired the company).
Tough competition in ebook retail isn’t just affecting the little guys. Barnes & Noble is struggling mightily at the business. By all reports, Apple is having a bit more success but still has a relatively small market share compared to Amazon. While abroad Kobo has strong positions in growing ebook markets, it’s considered a small player in the U.S. ebook market. Even giants like Sony and Google aren’t nearly as good at selling ebooks as Amazon and have very little market share to show for their efforts.
This move may also be related to the difficulty in three large competitors working on a joint venture (see Hulu) or the very difficult environment for book-publishing related start-ups. Either way, the next question is, what happens in the U.S. ebook retail marketplace given Amazon’s increasingly dominant position?
“Can Zola survive? It ain’t no Kobo,” said Andrew Rhomberg, founder of book discovery start-up Jellybooks, and digital publishing observer. “Book retail is tough, tough, tough.”