Amazon and Goodreads: Five Ways This Smart Acquisition Will Hurt the Competition - Forbes

Jeremy Greenfield

Yesterday, Amazon acquired Goodreads, the largest book-focused social networking site with 16 million users.
The acquisition sent shock-waves through the book-publishing world.
“It’s a really smart acquisition by Amazon and it goes to show that the competition missed a chance,” publishing consultant (and DBW partner) Mike Shatzkin told me yesterday.
“Out of all the commenting about books, Goodreads was the most powerful ecosystem for recommending what you read next and Amazon was a close second. Now it’s just Amazon,” said Vancouver-based publishing consultant Thad McIlroy.
Within hours of the announcement, Goodreads users had left hundreds of comments on a blog post by CEO Otis Chandler, some congratulating him, some lamenting the move, some looking forward to what it might mean. And, of course, the Twitterverse exploded with commentary.
I can guarantee you, however, that there is nowhere that the acquisition is being more discussed than within the halls of Amazon’s competitors: Apple, Barnes & NobleGoogle, Kobo and others.
Why? Here are five ways this acquisition will hurt Amazon’s competition:

Logo concept by Todd Goldstein.
1. Amazon becomes the No. 1 recommendation game in town. As McIlroy said, when it came to a “what should I read next” source, it was Amazon and Goodreads. Despite that Amazon said it would keep Goodreads independent (like IMDB, Zappos and several other Amazon acquisitions), most in the industry will look at it as just Amazon now. Providing that service is a chief concern for booksellers who want to make it as easy as possible for readers to discover their next book purchase. Now, Amazon is the undisputed No. 1 when it comes to book recommendations. Ebook retail sites, like start-up Bookish, have long claimed that readers need a better way than Amazon for finding new books. Those claims now have little teeth; Amazon pretty much has it all right now when it comes to recommendation.
2. Data. Amazon already has more reading and book-buying data than any other player out there. With the acquisition of Goodreads, Amazon has that much more. In addition to getting all the “to read” lists (a valuable indicator of what Goodreads users intend to buy), Amazon also captures all the social interaction data — the recommendations, the book clubs — which is completely lacking from its own site (though it does own also-ran book social networking site Shelfari and an interest in the slightly more successful LibraryThing). Not only can Amazon use that data to improve its conversion rates and enhance the Kindle experience, it also prevents its competition from getting a hold of it.
3. Affiliate traffic. Right now, Goodreads has buttons on its book pages that point to Barnes & Noble and other places where readers can buy the books their browsing. In fact, Barnes & Noble is featured more prominently than other retailers. How long do you think that’s going to last? While Amazon and Goodreads said nothing would change, I seriously doubt that in the long term the other affiliates will remain. At best (for them), Amazon will just be much more prominent and they will be in the background. How much revenue does, say, Barnes & Noble get from Goodreads? Impossible to say. But it’s not nothing. Also, that Barnes & Noble is so prominent on Goodreads pages is free advertising that it will likely cease to get.
4. One less ebook retailer to worry about. We had heard sources familiar with the situation tell us that Goodreads was planning on becoming an ebook retailer itself in 2013. Now that Goodreads has been sold, we’re hearing from all corners that this was the buzz. Shatzkin, the publishing consultant, told me yesterday, “They were on the verge of opening a bookstore – they were hiring people, talking to people…so Amazon takes it off the table.” For retailers like Apple, Kobo, etc., which are fighting for every point of market-share against Amazon, any disruption in the current dynamic helps them. If Amazon has to pivot to counter a threat from Goodreads, the other retailers may have an opening.

Logo concept by Joe Encarnacion.
5. Goodreads greatly enhances the Kindle experience. For most readers, everything above is incredibly wonky and way below the surface of what’s important. What most readers (and observers) do know is that Amazon and Kindle are the best book-buying and one of the best (if not the best) book-reading experience. It offers the largest catalog of titles at the lowest prices. It’s incredibly easy to read across devices — that is, if you want to stop reading on your Kindle Paperwhite, the consensus best e-reader on the market. Bringing a true social presence into the mix will make it that much better. Imagine finishing your Kindle ebook and being prompted at the end to rate it for your Goodreads profile; your Goodreads (and Facebook) friends see this — that you finished the book and rated it — and respond. In a world where everything one does is becoming social (which most people seem to like), this makes a lot of sense.
Overall, this is, in the words of more than one publishing commentator, a “brilliant” acquisition by Amazon. It remains to be seen how Goodreads will be integrated with the company and its products and how Kindle be integrated into the Goodreads experience, but if the predictions of so many are true, it’s ultimately going to be good for Amazon and its readers.
Read much more on Goodreads and Amazon:
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