Analyst: Google E-Books Push Will Force Amazon To Drop Prices
The big question around Google’s new push into e-books is how, if at all, it will change Amazon’s fortunes. Jefferies & Company analyst Yousseff Squali argues that Amazon will likely remain the e-books leader, but that the move by Google (NSDQ: GOOG) may force Amazon to provide publishers with better financial terms and offer aggressive discounts on the Kindle. Squali didn’t provide specifics on what those new terms might be, but he did analyze the competitive challenges the two will face as they grow their e-books businesses.
–Search is a key advantage for Google: Squali said Google could use its dominant search engine as a distribution channel that could trigger impulse buys. Google could, for example, easily publish its own sponsored search or paid click listings alongside searches for e-books or relative products.
–Google’s profit margins will likely be higher: By offering an e-books sales-and-delivery service rather than selling an e-reader, Squali believes Google could get higher profit margins from its e-books business than Amazon (NSDQ: AMZN). (Amazon, of course, has manufacturing, distribution and support costs related to the Kindle.) If Squali’s prediction that Amazon will have to drop its price for the Kindle is right, margins would be even lower since the costs of making and distributing the Kindle likely wouldn’t change.
–Several factors will determine the winner: Squali sees three primary factors in deciding who will be the ultimate winner in the e-book battle: 1) whether users gravitate to reading e-books online or on devices; 2) whether users will be satisfied with reading books that are stored on Google’s servers or “own” them on their hard drives; and 3) which company wins the pricing war.
The analyst underestimates that Amazon concentrates on the casual reader not on techies like google. The campaÃgn for kindle is quite calm, puts living, relaxing and reading into the center and not the technology.
I am quite sure that the real pain will be for all players BETWEEN amazon and google: classic book retailers who want to exploit the ebook space like the printed book business without adding value. Newspapers that dream about paid online content etc.
I am quite sure that the real pain will be for all players BETWEEN amazon and google: classic book retailers who want to exploit the ebook space like the printed book business without adding value. Newspapers that dream about paid online content etc.
Big print publishing houses without massive online reach will get huge problems soon – they have to share revenues with google and amazon or they will have to buy reach … from Google, Bing, Yahoo and other big online players if they want to sell directly to consumers.
The only way Google is going to win this is if they give publishers a large take from each sale (better than Amazon's percentage). Amazon is already dropping prices and presumably taking a loss against their wholesale prices from publishers. Google's plan will allow publishers to set prices for consumers; how will that lower prices for buyers? It won't, publishers are historically wary of lowering end prices to sell more.
If Google can give them a larger percentage than Amazon, there is a chance that this will cause publishers to set prices lower than Amazon, driving business to Google. They cannot compete with Amazon any other way, other than creating a slew of readers (software and hardware alike) to hold consumers/users captive with convenience.
I wonder about some of these financial analysts. They really suck when it comes to analyzing anything technological.
It would be great for the publishing industry to get more publicity for ebooks, but I think that Amazon is still going to be dominant in this field no matter what Google does. That's just where people go for books.
What will really determine the winner is who first and/or best socializes books. Integrating livingsocial's virtual bookshelf or goodreads so that people can read and converse with the right people at the right time in their books. I've written a proposal saying as much to Amazon, but haven't heard anything.
May the most social-semantic book reader/social network/learning application/living classroom win!