If you visit a book-focused startup online these days, chances are Amazon owns a part of it. On August 1st, the online bookselling behemoth snapped up yet another, the online used book marketplace AbeBooks, perhaps the service most widely used by online booksellers putting their wares online, also bringing into the fold two smaller and very visible book-related sites that AbeBooks owns.
It’s a very smart move by Amazon, whose profit margins are higher for its Marketplace third-party sales as compared to its traditional business. While it may seem counter-intuitive that Amazon happily lets used book sellers “compete” with it by offering cheaper copies of almost every book it sells, it’s actually an amazing business. Whenever a used book sells on the site, Amazon gets 15% of the selling price plus additional fees amounting to a bit more than two dollars (and less if you sell a lot). The only thing Amazon has to do is kick back a “shipping credit” to the seller, $3.99 for standard domestic shipping. (Incidentally, this is how people get away with selling used books for a penny on Amazon; what profit there is in that case comes from the shipping credit.) What this means is that Amazon uses its existing infrastructure to let people sell books on the site. All that extra revenue comes at very minimal cost – in fact, less cost (and thus more profit) than if Amazon sold you the book itself. The purchase of AbeBooks brings as many as 110 million books from AbeBooks into Amazon (though in practice, probably a fair amount fewer, since many used booksellers listed their inventories on both sites.) All in all, a very shrewd buy for Amazon.
But Amazon doesn’t just get AbeBooks. AbeBooks also owns bookfinder.com, easily the most comprehensive used book search out there, aggregating results from dozens of used book listing services. Perhaps even more interesting, AbeBooks was also a minority investor in LibraryThing, the very successful book cataloging community, and that stake will pass on to Amazon. Like many in the online world of books, LibraryThing, its founder, and its users have aften looked somewhat warily at the bookselling giant, and so it will be interesting to see how LibraryThing adjusts to its new big investor (if it adjusts at all).
One of the big selling points of LibraryThing is its impressive recommendation system, which plumbs the community’s vast array of individual libraries to come up with book suggestions. The unique element of LibraryThing’s recommendations has been that they are based on what you own versus Amazon’s, which are based on what you buy, which can be very different things. I would imagine that Amazon would be very curious to dig into those recommendations, and it will be very interesting to see if it ever has the opportunity to do so. For the time being, it won’t, and it may never. LibraryThing founder Tim Spalding wrote on the LibraryThing blog, ” Abe gets only anonymized and aggregate data, like recommendations, and they can only use it on Abebooks sites. Nothing has changed here.”
Amazon’s reach doesn’t stop there, it is also an investor in LibraryThing rival Shelfari.
Doing a little back of the envelope math, that brings total sales of the device so far to between $86 million and $96 million (the price of the device was reduced to $360 from $400 last May). Then add the amounts spent on digital books, newspapers, and blogs purchased to read on the device, and you get a business that has easily brought in above $100 million so far. (Each $25 worth of digital reading material purchased per Kindle, add $6 million in total revenues).