Amazon Opportunities: Kindle and Audible

It is no secret that Amazon started by first targeting book sales out of Jeff Bezos’ garage, and has now become a competitor for the title of “World’s Largest U.S. Retail Bookstore Chain” through its move into the brick-and-mortar space with Amazon Books, while easily acknowledged as the largest retailer of digital (e)books through the Kindle platform.

Today, Amazon has demonstrated its commitment to providing traditional hardcopy text content through media that evolves as technology and market trends do. Development of its Kindle Store and Mobile Application with the introduction of features such as highlighting, X-Ray vision, and note taking, and the acquisition of Audible in 2008 to engage readers through auditory delivery are clear signs of this commitment.

At the same time, Amazon has also begun the move into the Smart Home Assistant with its introduction of the Amazon Echo, and subsequent iterations such as the Echo Dot, and the Echo Show.

Each of these products on their own are exceptional but there remains an even stronger brand presence and product offering by capitalizing on yet unexplored synergies between these three products, as well as improvements on the existing product offerings that will engage users even further.

To begin, let us try to paint a picture of the typical Kindle/ Audible user. We will do this by exploring data primarily from the Pew Research Center and Edison Research.

Let us first establish who our potential target market for books in general is by looking at information on who is not our target market as gathered by Pew Research dated Nov 2016 focusing on adults.

In general 26% of adults have not read a book within the past 12 months, with education levels being a significant predictor. 40% of adults with a high school degree or less report not reading a book within the past 12 months, whereas only 13% of college graduates report the same, around a three time factor. As is often correlated with education, income levels also matter; 17% of those earning $75K or higher report being in the category whereas 33% of those earning 30K or less report the same. In terms of gender, women are more likely to read than men with 21% of women reporting not having read a book in the last 12 months vs 31% of men.

In general a book reader is more likely to be educated and wealthy, with a skew toward the female side.

Next let us take a look at the breakdown of what media our book readers use to engage with the material, again provided by Pew Research dated Sept 2016.

The survey focuses on the number of U.S. adult who say they have read a book on a specific format within the past 12 months. As might be expected, the share of e-book readers has increased over time starting at 17% in 2011 and rising to 28% in 2016. The proportion of print book readers starts at 71% in 2011 and falls slightly to 65% in 2016. An interesting point of note is that the print book proportion tracks in the same way over the period as the response to having read any book at all in the last 12 months which starts at 79% in 2011 and falls slightly to 73% in 2016. This suggests that as a proportion, the print book market is significantly more weighted in the overall book market than any digital format, and this plays out in the data as Pew notes that “nearly four-in-ten [38%] Americans read print books exclusively while only 6% are digital-book readers”, and 28% read both formats.

So who are our digital book readers? Generally, they are younger as 35% of survey respondents within the age range 18–29 read an e-book in the last year, and 32% of respondents in the 30–49 age range indicating the same. This number drops off with increasing age going down to 19% of those 65+. As before with reading a book in general, education and wealth positively correlate with consuming digital books. Of those with a college or higher level of education 41% read an e-book, and of those earning $75K or higher 40% read an e-book in the last 12 months. Across the board, women were more likely to read books than men but the difference was especially pronounced when looking at reading books in general and print books in particular.

In general our digital book reader is again more likely to be educated and wealthy, with a skew toward the female side.

We can also examine the trends for which electronic platforms are most used to read e-books in the figure below courtesy of Pew Research.

In general the typical audiobook listener is similar in demographic to the e-book reader, except at a diminished scale, only 14% of survey respondents in the Pew Research survey listened to an audio book in the last year, and with equal interest from men and women.

In order to understand the Audible consumer, we will turn to its market neighbor, the podcast consumer and look at data provided by Edison Research.

Demographics are again fairly similar to e-book consumers. 13% of the entire US population (ages 12+) listens to podcasts weekly, with 21% listening monthly. The bulk of podcast consumers are in the age range 18–34 (38%) and 35–54 (34%). They are generally more highly educated with 51% of respondents having either completed four-year college or higher and 41% of respondents earning $75K or more. One big shift from e-book consumption however is in gender. 56% of podcast consumers are men. 60% of podcast consumers are also frequent users of social media platforms, saying that they use social networking sites and services “at least several times a day”.

Before we enter into opportunities for Kindle and Audible, it may be useful to examine the motivations behind engaging with text content as illustrated below.

Opportunities

1: Tighter integration between Kindle and Audible.

Currently there is some core overlap between Audible and Kindle in the form of Whispersync for Voice which allows owners of both the Audible and Kindle versions of a book to fluidly move between the text and audio versions without losing place in the narration/text. This is a critical feature for aligning Kindle and Audible but there are other opportunities for further integrating these to appeal to consumers.

Possible Solutions:

1. Double down on existing discounts for purchasing the Kindle and Audible editions. Currently if a user purchases the Kindle version of a book and then proceeds to purchase the Audible version, there is an associated discount. As an example, Guns Germs and Steel¹ as a Kindle book retails for $9.48 while the Audible book retails for $25.75. However, if the Kindle book is purchased, the price of the Audible book drops dramatically to $8.49. The total price of the package is $17.97, a full 30% cheaper than purchasing just the Audible copy alone. This repeats with Algorithms to Live By which retails for $9.99 as a Kindle book and $17.95 as a standalone Audible book, while as a purchase after the Kindle book, the Audible version retails for $7.49. Kindle+Audible package price reduction of 2.6% from just the Audible edition alone.
   
   A simple fix would be to offer a Kindle+Audible package purchase option to consumers and do some marketing to educate consumers about the benefits of having both.
2. Improve the highlighting integration between Audible and Kindle. Currently, Audible uses audio clips in place of highlighting as is found in the Kindle edition of books. However, there is no consolidation between the highlighting and audio clips for package Kindle+Audible books. This means that clips captured on Audible are stored in a separate place from highlights in the book. Customers will therefore be reluctant to use two versions for books that they would like to highlight text, and it is more likely that the Audible edition will suffer than the Kindle edition.
3. More generally, an improved marketing strategy to position Audible and Kindle as extensions of each other will help integrate the two.

2: Related to the previous opportunity, the Audible highlighting/audio clip system needs an overhaul.

The primary reason a customer will use the Audible format is to go handsfree. The current audio clip system requires the user to open the app after hearing the content they wish to save and then open the app to click the audio clip icon. This defeats the purpose of being handsfree. Additionally, the current UI for the audio clip system is clunky making it difficult to make a precise audio clip and repetitive to check if the clip is accurately positioned.

Possible Solutions:

1. Audio clip UI redesign and update.
2. Alternative input mechanisms that are designed around handsfree including headsets/headphones and even potentially bluetooth speakers. For headphones, one option is to retool the play/pause button so that a long hold of the button will create an audio marker at the location for later review of audio clip. For bluetooth speakers and/or airplay, may be able to integrate Siri/Hey Google/Alexa assistant to make a note on verbal command.

3: Social Reading and Book Clubs.

Social Reading and Book Clubs present a strong opportunity for growth. BookBrowse.com presents data on a survey of book readers conducted in 2015. Before discussing the data, we will clarify that the sample size was a little over 3,000 responses of which 27% were BookBrowse members, and that this sample was specifically pulled from individuals who self-reportedly read at least one book a month. This is not a generally representative survey but it does focus on individuals of interest for Audible and Kindle customers, i.e. individuals that are high consumers of books.

The survey captures some fairly interesting information. In the first case, among persons who read at least one book a month, 57% say they are in a book club of some kind, up from 33% in 2004, although this proportion has recently been flatlining in growth. The proportion of book club members tends to increase with age moving linearly from 39% of 25–34 year olds to 68% of 75+ year olds. As far as gender, the report does not indicate the exact proportions but it does hint that bookclub members are almost wholly female with some small minority of male participants. This is supported by Google Search Results for “Are book clubs still popular”, where a sampling of the results are as follows:

• “Really? You’re Not in a Book Club?” from the NYT which mentions a female member and female only bookclub.
• “Women’s Groups and the Rise of the Book Club” authored by Pamela Burger which discusses the influence of Second Wave Feminism on the creation of the book club as a means of female self-improvement.
• “11 Reasons Every Woman Should Join a Book Club” authored by Charlotte Ahlin and posted to bustle.com

The historical origins of the Book Club rooted in Second Wave Feminism as argued by Burger may be indicative of why we find the skew in gender of book readers towards female in the Pew Research discussed above.

The Book Club opportunity is clear through statistics such as:

• 44% of book club members buy 3+ books a month
• 85% of both book club and non-book club members buy at least one book a month
• “most book clubs usually wait for the paperback/cheaper electronic version of a book to be available”
• “almost half of book club members reading [sic] e-books frequently/always”

While Book Clubs seem well tailored to the needs and interests of women, men generally do not find the idea of a traditional book club attractive. However, they don’t appear averse to the idea of the general goals of a book club, i.e. reading and discussing book material. One quote from the survey captures this well:

“I take the train to work every day and usually sit with the same group of men. We often discuss books but I don’t consider this a book club.”

The responses from the men indicate in an interest in social reading, but not a book club. They need a different value proposition than that of the traditional female-oriented book club. Relevant quotes from the survey:

“I’ve occasionally seen lists of the books being read by local book groups … and scanned the book shelves for book group reads at the local library. Many of the titles have looked interesting (and some I’ve read, on my own). The books do seem a bit weighted towards ‘interpersonal dynamics’ literary fiction (can’t think of a better description) … not my favorite reading.”

“A public place would be preferable. Homes become too onerous as the hosts compete for the best cookies.”

“I like historical fiction, fiction, non-fiction, world history, philosophy, travel, survival stories, and poetry. In order for me to join a club, it would have to be relevant to men.”

Given Amazon’s acquisition of GoodReads in 2013, the time is right to leverage that network into a social reading product for Kindle and Audible.

Possible Solutions:

1. Introduce a book club/group price for purchase of multiple volumes of a book on the Kindle store.

2. Develop a social reading product for Kindle.

Product features:

1. Ad-hoc social reading groups. A social reading group would consist of friends that users are reading a book with.
2. Highlights in the book are tagged to the highlighting user within the reading group with ability for other users within the group to see who made the highlight and also engage with the highlight through a comment thread. The highlighting user can begin the comment thread by notes about the highlight.
3. Users within a group can track other users’ progress through the book. This will help to bench mark reading speed for the group to avoid unexpected fall-off from reading. However, users will not be required to all read or end at a specific time. Highlights and comments will remain so users can read at their own speeds and engage as able.
4. Users can suggest a new book to friends who can join an ad-hoc social reading group if interested in reading that book. Users can join reading groups even after creation.
5. Introduce influencer followers. As an example, Bill Gates often reads and recommends books. Kindle readers can follow Gates to see what he is reading and look at the highlights he makes.

4: The loss of the physical bookshelf.

One of the accompanying consequences of the e-book revolution was the loss of the physical bookshelf. When we see that one of our favorite celebrities released a biography and we elect for the 1-click delivery to our Kindle app, we have forgone the opportunity to put on display Kevin Hart’s I Can’t Make This Up: Life Lessons on a bookshelf. This has been one of the traditional joys of buying and reading a book, closing it after the last page and placing it on the shelf where we can look back on it, maybe pick it up again one day and re-discover our appreciation for it all over again.

Beyond that, the books on bookshelves are generally an expression of who we are. This plays out both as a reminder to ourselves but also as a display to those we trust enough to let into our homes. They can get a glimpse of who we are and maybe even discover that parts of who we are, are similar to parts of who they are through the books we read.

The following are a few quotes from articles describing the value of the bookshelf:

• “Sharing your shelf is sharing yourself — showcasing the building blocks that have crafted your knowledge, personality, and identity.” “Your bookshelf is an intimate physical representation of your accomplishments (titles as trophies earned), aspirations (that ever growing to-read pile), associations (that book your boss gave to each employee), personal development (those self-help titles that urged you to talk to strangers), guilty pleasures (50 shades of beach reads), escapes (sci-fi to some, travelogues to others), memories (meeting that author, visiting that indie shop on vacation), interests (the bigger the Star Wars fan, the more Star Wars books) and countless other tells that another reader would unconsciously and immediately compare against their own shelf.” — The Guardian
• “At any time, I can glance up from my computer and see my books are with me. If I’m in a room where I can see Brewer’s Guide to Phrase and Fable, 10 used books about hacking and espionage, and a complete set of Harry Potter all at once, then I know I’m home. This space is all mine. But even if a stranger were to stand there and take note of every book on the shelf, I’m fine with that. I’m more than happy to be judged by the content of my bookshelf.” — Book Riot
• “More than an entire bedroom, a bookshelf can reveal someone’s interests, or how organized they tend to be. A bookshelf is, in a way, like a mirror.” — Bustle

Possible Solutions:

1. Develop a digital bookshelf display.

Product Design:

1. Large thin digital display suitable for wall mounting. Initial thoughts are the 2.57mm thick LG OLED display demoed at CES 2017, but this may be too cost prohibitive for mass market.
2. Touch screen interface.
3. Variable sizing possible but if standardized for initial launch, display can be 45’-55’.
4. Optional additional smaller digital display for displaying an e-book. Similar style to a tablet.

Product Features:

1. Displays Kindle library of books. Different possibilities for display. One possibility is classical spine storage view. Another possibility is some type of clustering display of front covers. See Noteshelf App for additional inspiration.
2. Sorting options for books. Sample sort options: Alphabetically, Color Coded
3. Screen saver style interface when not active. Screen saver interface will display highlighted text from books with indicator of book title either through text of visual display of book cover. This feature is specifically intended to encourage re-discovery of books after reading.
4. If optional smaller digital display available, a selected book can be automatically loaded onto the smaller display for spontaneous browsing. If not, e-books can be display on main screen if selected.
5. Possible Echo integration to allow for an additional display from a main Echo unit. Echo unit would function as speaker and main input while displaying results on screen in a similar manner to the Echo Show.

Assumptions/Hypotheses for Additional Market Research:

• Male readers are more interested in non-fiction texts on average than female readers.
• Users want to continue to passively engage with highlighted text in e-books after finishing the books.
• Customers will engage with, and purchase, more books if they have a social group to discuss and read books with.

Recommendations:

The four core opportunities outlined in this article each have their own ease of implementation and potential impact on the Kindle and Audible product lines. The table below summarizes these metrics.

Based on these metrics, my recommendation is to start with the two items that have a low difficulty of development, with the Audible Audio Clip Overhaul first, and then move onto Social Reading and somewhat further in the future explore the Digital Bookshelf opportunity.

___________________________________________________________________

Footnotes:

1. ISBN-13: 978–0393317558; Prices accessed Jun 19th 2017 3:10 p.m.