Why comparing ebook stores on bestseller lists is ridiculous

There are two very interesting things happening at the moment –

  1. Mark Mahaney is comparing the availability of New York Times bestsellers in the Kindle Store and in Apple’s iBookstore and using that to claim Amazon has a mere 10% price advantage and a very small availability advantage and that it’ll disappear over time.
  2. Certain people are claiming that Mark Mahaney is the biggest Kindle cheerleader and that his article signals the end of the Kindle.

Let’s start with the first.

Odious Comparisons

During my time in Seattle there was a giant Borders a couple blocks away. It carried 95% of the New York Times’ Bestseller lists. There was also an airport convenience store (almost a 7/11) at SeaTac that used to carry 75% of the New York Times’ Bestseller lists.

Mark Mahaney would take those two numbers and arrive at the conclusion that the 7/11 is going to kill Borders. This is obviously an exaggeration – However, the analysis Mr. Mahaney uses is just as weak. He’s just lucky that Apple really is a huge threat to Amazon.

An actual Kindle Store vs iBooks Store Comparison

It is a disservice to do a narrow comparison based on bestseller lists. Let’s look at a more detailed comparison of range of books –

  1. New Books – Kindle Store has over 500,000. Apple has around 30,000.  
  2. Public Domain Books – Kindle Store has 20,000. Apple has around 30,000. Both sell devices that can access the millions of free public domain books available. 
  3. Random House – Only in the Kindle Store.  
  4. Independent Authors – Beginning to arrive in iBookstore although they have to own a Mac to be able to submit their book (isn’t that a nice touch).

Next, here’s a more detailed comparison of price –

  1. Apple is the company that gave Publishers the leverage to raise prices from $9.99 to $14.99/$12.99. We shouldn’t forget this little fact when we compare prices. 
  2. Agency Model 5 books – Same price.  
  3. Most other books – Cheaper on the Kindle.  

However, we can’t really compare on price because there are 30,000 new books in iBookstore and 500,000 new books in the Kindle Store. That means 470,000 books get left out.

Here’s the twist – This is a pretty poor comparison too. Ideally you want to take a person’s past reading history and use that to project what books they’ll end up buying over the next 10 years and compare the availability and pricing of those books (another projection).

For people who buy 1 book a year and it’s always a bestseller Mark Mahaney’s analysis is perfect. For people who read a lot it serves no purpose and, quite frankly, neither does my marginally better analysis.  

Why Apple is still a huge threat

Mark Mahaney is still making a good point – There is a chance that eventually Apple will have the same range of books. That would probably mean books at $12.99 and $14.99 so anyone who wants cheaper books ought to side with the Kindle Store.

The Agency Model is a diversion – let’s get back to why Apple is dangerous. Apple is a huge threat on a few fronts –

  1. Their devices have Kindle Apps. Kindle for iPhone and Kindle for iPad mean you can access the much better Kindle Store on Apple devices.
  2. Their devices will also have the default iBooks App. That means that users will be shown this app much more and directed to this app much more. If Amazon loses its price and range advantage it’ll begin to lose iPad and iPhone owners.
  3. They have 5 big Publishers on their side who’ll do anything legal (plus a lot of illegal things) to block the Kindle Store’s rise to dominance. 

We haven’t even talked about things like Retina Display and the NY Times’ Apple marketing group. Add on that Steve Jobs is a master of marketing and has trained nearly 100 million people to buy and unconditionally love his products.

Basically, if price and range are the same Apple people will always go with the Apple product. Even if the difference is 10% or 20% Apple people will still go with the Apple product.  

There’s nothing stopping Apple from kicking Amazon out of the App Store

Perhaps the biggest trump card Apple have is that they can figure out a way to kick Amazon out of the App Store. They just did it to AdMob and pretty much nuked the $750 million Google spent to buy it.

Here’s what Apple are probably thinking –

  1. Let Publishers side with us hoping for $14.99 prices. 
  2. Let Amazon and B&N make the iPad a better option for reading in the hopes of capturing our customers. 
  3. Let’s become a viable reading option.  
  4. Lots of people will buy us thinking they can get all the books they want and also use Kindle for iPad and Kindle for iPhone and B&N eReader.
  5. Then, we’ll make it a free market and let competition and smaller publishers bleed big Publishers to death.
  6. Then, we’ll start promoting iBooks as the default and let the power of the default take over.
  7. If that doesn’t work we’ll kick out Amazon and B&N and readers will be forced to use iBooks.

It’s the way any shrewd company would do it – Use existing brand names to strengthen your ecosystem and brand name and become the go-to destination. Then kick them out.

Publishers are making the exact same mistake newspaper publishers did with the Internet. They think they can take on hungry, desperate authors in a fair fight and they can’t. Worse, they think they can take on a free market and super-entitled customers who expect everything free and they can’t.

Apps in the App Store sell mostly for $1 and $2 with the occasional $5 and $10 apps and yet Publishers think they can undo all that training and sell books for $15. Publishers are going to go through exactly what newspapers went through and they’re going to wish for the days of $9.99.

Mark Mahaney is not exactly a Kindle cheerleader

Mr. Mahaney is most famous for revising his Kindle sales estimates every few months. Here are a few of the things he’s predicted or said –

  1. Attach rate of 1 book per Kindle per month.  
  2. Oprah’s recommendation will not have any effect on Kindle Sales. 
  3. His estimates in May 2008 for Kindle sales were 189,000 in 2008, 467,000 in 2009, and 2.2 million in 2010. He’s since revised them upwards a half a dozen times.

Don’t see how he’s a Kindle cheerleader – He’s had to revise his sales estimates for the Kindle half a dozen times and is pretty pessimistic about how many books Kindle owners buy.

Here’s a comment from Business Insider (courtesy KenC) –

If Mahaney of Citi is lukewarm, then Amazon and Kindle are really in trouble.

Essentially, Mahaney has been the Kindle’s biggest cheerleader, kind of how Gene Munster was Apple’s biggest cheerleader back when only he believed the iPod was going to be a hit for Apple and create a “halo effect” for its other products.

Well, Mr. Mahaney is only a Kindle cheerleader if constantly underestimating a product’s sales and lowballing the amount of follow-on sales it generates defines an analyst as being a cheerleader.

Back to Bestseller Lists

At the heart of all this dissent and Kindle hate is the same simple issue –

  1. People who hardly read refusing to acknowledge that other people read a lot and would want a device made especially for them.

The same applies to us readers too – we ought to understand that some people like shiny, flashy devices and there’s nothing wrong with that. The point at which it gets a bit galling is that owning such shiny, sexy devices predisposes their owners to berate devices that are not shiny and flashy or that Big Brother decides are not cool.

Why is having 200,000 apps a big deal and yet, when we want to compare bookstores, we look at only the hundred or so books on the New York Times bestseller lists?

22% for iBooks – Was Steve Jobs trying to mislead us?

Here’s what was in Steve Jobs’ presentation regarding iBooks’ share of the ebook market place  –

  1. On the Slide – 22% Share of total eBook sales.  Check the image at the bottom of Engadget’s coverage of the Apple conference.
  2. What he said (one version) – Publishers tell us that sales of their eBook sales are at 22% right now. 22% in iBooks.
  3. What he said (a second version) – 5 of 6 biggest Publishers tell us that share of eBooks is now 22%.

What has happened is that we have had the Press react in multiple ways –

  • The majority have interpreted it to mean that iBooks has 22% of the eBooks market. 
  • A small minority are focused on it being 22% for Agency Model Publishers and consider that significant. 
  • Another small minority think the numbers mean nothing.

Whether or not Steve Jobs intended to get that reaction – It’s the best possible reaction. The current press interpretation will help Apple to get more Publishers on-board and to a lesser extent will help iPad sales.

The Things that Steve Jobs forgot to mention

You could make a good argument that except for the first the others aren’t absolutely essential. We could make a counter argument that while not essential they are important enough to mention –

  1. 5 of the 6 biggest Publishers translates to less than 50% of the market. The Slide should have read – 22% share of 50% of the eBook market.
  2. These Agency Model Publishers had just raised prices 30% to 50% and their share of ebook sales almost certainly dipped compared to Random House and Indie Publishers and Authors.
  3. Lots of Kindle owners and Nook owners were boycotting Agency Model Publishers – meaning even more of a skew towards iBooks users who were less likely to boycott or even know about increased prices.
  4. Penguin stopped selling new books in the Kindle Store. 
  5. iPad owners had just bought their devices and were far more likely to buy books – the new device effect.

The first is definitely a huge, huge thing to forget to mention. By saying 5 of 6 biggest Publishers Steve Jobs creates the impression that the 22% applies to the entire market and he strengthens it with the slide.

The other 4 points should also be mentioned if you want to validate a claim that your channel now owns 22% of the market. On the other hand – if you want to create the impression that your product owns 22% of the market when it owns much less then what Steve Jobs did is perfect.

The Things that Steve Jobs did remember to add-on

Almost as important as what he left out is what he added i.e.

  • iBooks owners downloaded 5 million books.
  • That it translates to 2.5 books per iPad owner.

These figures are obviously supposed to give the impression that the 22% market share is valid.

You could argue that they were never meant to be used as evidence of 22% market share – However, they were mentioned right before the 22% figure was announced and everyone is interpreting them as evidence.

The Trend of Implying things without overtly lying

You begin to see this trend everywhere with Apple’s marketing –

  1. The implication is something very stunning. In this case it’s 22% market share for iBooks. 
  2. There is evidence that seems to add to the implication. In this case the downloads of 5 million books.
  3. Dig deeper and the holes show up – No mention that it is 22% of 50% or less of the ebook market. No mention of whether the downloads are paid or free.

It creates the intended effect without ever having to prove it. If someone disputes the claim (as Kindle owners at the Kindle forum are) Steve Jobs can just go back to his exact words and claim that he never said 22% market share of all ebooks – Even though that’s exactly what the slide says.  

Unintended Slip or Borderline Ethics or Excellent Marketing?

Here’s how people will probably interpret it –

  1. Apple fans – It’s a slip. He was precise in his words. Who cares about anyone other than Agency Model Publishers anyways.  
  2. Kindle owners – That’s shady. It’s pretty obvious that he’s trying to create the impression that iBooks has 22% of market share although it actually has 11% or less. 
  3. Marketing People – Wow! That’s amazing marketing. No wonder he sells so many iWhatevers.

The interesting thing is that this isn’t the only part of the keynote that people are questioning.

Retina Display might not be as magical as we thought

Reuters covers Wired’s article which points out that Apple is again going overboard on marketing

  1. Steve Jobs claimed that 300 pixels per inch was the limit of the human retina for a display about a foot away.
  2. Wired references an expert who differs from Steve Jobs –

    Soneira, who possesses a Ph.D. in theoretical physics from Princeton and has been studying displays for 20 years, said it was inaccurate to measure the resolution of the eye in terms of pixels, because the eye actually has an angular resolution of 50 cycles per degree.

    Therefore, if we were to compare the resolution limit of the eye with pixels on a screen, we must convert the angular resolution to linear resolution. After conversions are made, a more accurate “retina display” would have a pixel resolution of 477 pixels per inch at 12 inches, Soneira calculated.

  3. Obviously Apple is not going to say we are at around 50% of what the perfect display is. However, that doesn’t mean he should claim his display is as good as it could possibly get.

To be fair the expert did say that we might not realistically need anything better than the new iPhone screen’s 326 pixel per inch display.

Apple also forgot to mention that the improved resolution is only worthwhile if apps and content are made to match it i.e. existing apps will mostly not be taking advantage of this improved resolution.

Let’s end with something the expert, Soneira, said –

“If you and I have the world’s greatest display, and we launched it and put down the real scientific numbers, we’d go bankrupt because our numbers would look like the worst display being made.”

You have to suspect that’s what Apple is trying to do with eReaders and eBooks – use its war of perception and its tentacles in the Press to outsell a better product (Better for reading). That’s what the Kindle and Nook and Sony Reader are up against – they might be the best reading devices but they have to fight the illusion of ‘best reading device’ that Apple is conjuring up for the iPad.

free kindle books (religious), reviewing the iBooks threat

Well, one of the books that we’d discussed as likely to be free – now is. So is another one.

  1. Weight of Shadows by Alison Strobel. Same book we talked about yesterday morning. Rated 5 stars on 7 reviews.

    Meanwhile, as Rick’s wrath extends to their baby, Kim must decide if her penance is more important than protecting that innocent life—and if she should dare leave Rick when he has the power to bring her hidden crime to light

  2. Golf’s Sacred Journey by David L. Cook. Rated 4.5 stars on 28 reviews.

    ” This book floored me. It reminded me of the many discussions David and I had during my last 7 years in the NBA. The same truths I learned from him on the court are entrenched in this moving story of a young golfer who finds purpose at the Links of Utopia.

    This book is full of wisdom that will enhance your game, and I believe it just may change your life.” –David Robinson, NBA, MVP, 2 time World Champion

David Robinson is one of my all time favorite NBA players – it’s interesting to see an author using him as a review/reference.

iBooks’ ebook sales numbers are not meaningless

There seem to be two broad sets of reactions to Apple’s disclosure that their Agency Model Partners are selling 22% of their books through iBooks –

  1. Apple have 25% of the ebook market. 
  2. The 22% number means nothing.

Actually, the real answer is a shade of gray.

Here’s what we do know –

  1. People downloaded iBooks and then downloaded books from the iBookstore.
  2. For the Agency Model 5 around 22% of ebook sales in the last two months (Since April 3rd) were from iBooks.
  3. People downloaded Kindle for iPad and presumably bought Kindle books.
  4. Penguin’s new books were not available in the Kindle Store until a couple weeks ago.
  5. The Agency Model 5 make up some portion of the 60% of book sales the Big 6 Publishers account for. Given that Random House are the biggest single publisher that means the 5 couldn’t be more than 48% of the market.
  6. eReader owners in general and Kindle owners in particular have cut down on buying books priced above $10.
  7. No details apart from the 22% figure were revealed (well, that and 2.5 books downloaded per iPad sold). 

In the absolute best case – 22% of ebook sales went through iBooks and 22% went through Kindle Store and 44% of ebook sales are through iPad. This is obviously unlikely.

In the most realistic case – 22% of the 48% of ebook sales that the Evil 5 account for went through iBooks. That means approximately 11% of actual ebook sales. There weren’t very many indie titles in iBooks and Random House was missing so we couldn’t be off by more than a few percentage points. This also assumes that the Evil 5’s sales weren’t hit after they went with the Agency Model.

In the absolute worst case – People drastically cut down on the number of titles they bought from Agency Model publishers in every other store. In iBooks they didn’t because iPad owners don’t care as much about price (iPads are $499 and above) and their reference point was physical book pricing (and not $9.99). Add on that Penguin books weren’t available in the Kindle Store and that people started switching to Random House and indie authors. On top of that add-on that people had just bought the iPad and would tend to buy more books at the beginning. This means that even though the odds were heavily in favor of iBooks it only accounted for 22% of downloads for the Agency Model 5 Publishers.

There’s always the possibility that Publishers are telling half-truths or outright lies. It’s not like they’ve revealed any real numbers. However, the truth is probably far more mundane – The boycott by readers of Agency Model Publishers, the boycott of books priced over $9.99, the initial excited buying in iBooks by new iPad owners, and other related factors combined to increase iBooks’ share of ebook sales for Agency Model Publishers to 22%.

It probably means that Apple has 5% to 10% of the total ebook market. Pretty impressive for 2 months in but not magical or revolutionary. Accounting for additional iPad sales through the year, the advent of new eReader models (Kindle 3, Nook 2) and color screens, and the addition of iBooks to the iPhone it’s safe to say that Apple might be able to eat up 10% to 20% of the ebook market in 2010.

It is worth keeping in mind that neither are iPhone and iPad better reading devices than the Kindle nor is iBooks a better app than Kindle for iPhone/iPad. The Kindle Store’s position as the #1 ebook store is pretty safe.