The online book industry is a case study in cornering a market online via first-mover advantage. How can this be? The barriers to entry are low. Books are selling briskly online. There are plenty of bricks-and-mortar players. So how can we explain the Amazon-Barnes & Noble duopoly online? Jeff tells you how the big guys have sewn up all the ad space online.
The online book industry is a case study in cornering a market online via first-mover advantage. How can this be? The barriers to entry are low. Books are selling briskly online. There are plenty of bricks-and-mortar players. So how can we explain the Amazon-Barnes & Noble duopoly online?
Books Sell Online
Online bookselling is the most popular category for e-commerce. A remarkable 41 percent of online purchasers cite books as one of the things they buy most often on the Internet, up from 24 percent in mid-1998, according to Internet User Trends: Mid-Year 1999, which will be released this week by The Strategis Group.
Books sell well on the Internet for several reasons. They're easy to ship. They're homogenous, since a given book is the same, no matter where you get it. Also, online search utilities make it easy to find a book online, even if you do not recall the title or the author's name.
Where Are the Other Guys?
The Strategis Group recently published Advertising on the Internet: 1999, which contained The Strategis Net Presence Survey, a study of 6,972 ads from over 700 companies on the top 50 ad-supported sites. Among the 700-plus advertisers, there were countless merchandisers, scores of computer equipment sellers, dozens of financial firms
And how many booksellers? Nine. Only nine.
It seems that the big guys have sewn up the ad space online. Using the Net Presence index (an index of online advertising visibility), Amazon had an NP of 57.6 and Barnes & Noble had an NP of 56.1, which placed them #1 and #2 among all advertisers on the Internet. Borders, incidentally, was no slouch, garnering an NP of 10.0 and finishing twentieth among all online advertisers. Audio Book Club took fourth with an NP of 4.5. The bottom five - The Literary Guild, 1bookstreet.com, Doubleday (part of Random House), Crossings, and Fatbrain - combined for a tiny NP of 1.8. Click here for a pie chart of book advertising visibility.
The big guys have already lined up major partnerships with the top portals and have a permanent presence on some home pages and in the portals' shopping areas. And no matter what you search for on the engines of MSN, Lycos, HotBot, Snap, and WebCrawler, you'll get a Barnes & Noble ad. Likewise, you'll get a plug for Amazon no matter what you enter on the search engines of Yahoo, Excite, AltaVista, and AOL. Same for Borders on the GO Network.
Amazon and Barnes & Noble are going to be hard to dislodge. It's like soft drinks at your local supermarket. Pepsi and Coke pay a slotting advantage to gain a zillion product facings at eye level, while RC Cola and Jolt Cola duke it out for that dusty space down near the mouse hole. RC and Jolt avoid the slotting premium, but miss out on the spotlight. Amazon and Barnes & Noble are betting that the Coke/Pepsi strategy will work for them.
It isn't all about key relationships, however. Amazon has been a case study in using PR and marketing to build a brand name, which it has fully leveraged to gain first-mover advantage online. Barnes & Noble and Borders have been somewhat slower, but are making a substantial effort to leverage their bricks-and-mortar reputations into an online presence.
And books aren't all they're selling. Once you have the brand name and the traffic, you can leverage your early advantage by doing auctions, selling music, and providing toys, for example, as Amazon has. After all, they didn't name the company "Books Are Us," did they?
The Moral of the Story
What's the moral to my story? I have three of them:
The bottom line is that a great business model for a popular product will only take you so far. Unless you have an early-mover advantage, the right partnerships, and a sterling brand name, you're likely to be a minor player in the category and you need to scale your investments accordingly. And remember, Amazon and Barnes & Noble's online units are still losing lots of money.
The next chapter is yours to write.
Jeff Moore is an analyst for Current Analysis, the leading provider of online tactical competitive intelligence for sales and marketing professionals in the IT and communications industries.
US Consumer Device Preference Report
Traditionally desktops have shown to convert better than mobile devices however, 2015 might be a tipping point for mobile conversions! Download this report to find why mobile users are more important then ever.
E-Commerce Customer Lifecycle
Have you ever wondered what factors influence online spending or why shoppers abandon their cart? This data-rich infogram offers actionable insight into creating a more seamless online shopping experience across the multiple devices consumers are using.
September 9, 2015
12pm ET/9am PT
September 16, 2015
12pm ET/9am PT
September 23, 2015
12pm ET/ 9am PT