The Facebook Epoch

First came the PC, and on top of the PC the Internet. Then, mobile, but what will rule mobile?

What is Medium Doing?, Facebook Updates Notes

Medium just raised $57 million on a relatively modest valuation, but lots of folks aren’t still sure what the company is trying to accomplish: today I give it my best shot. Plus, Facebook has updated Notes, which look a lot like, well, Medium posts. The appearance, though, isn’t what will make them succeed or fail.

Onshape and Disruption, Office 365 and Sustaining Innovation

Onshape is CAD software making a bet that starting with the cloud is fundamentally disruptive. However, disruption includes an economic component, and as Office 365 v Google Apps suggests, if that doesn’t exist the incumbents will respond

[FREE] Are Ebooks Declining, or Just the Publishers?, Oyster Goes Out of Business, Media Notes

Are Ebooks Declining, or Just the Publishers?

I framed yesterday’s piece Disconfirming Ebooks as the search for, well, disconfirming evidence about Aggregation Theory, which, I believe, has the potential to provide a framework for understanding how the Internet will fundamentally remake traditional industries. To that end I was very interested as to why ebooks, according to this New York Times article, seemed to be behaving differently than I expected: specifically, why were they declining?

To my regret, and in a rich bit of irony, I failed to research disconfirming evidence for the New York Times’ conclusion that ebook sales were indeed dropping.

Fortunately, the Author Earnings blog took no such shortcuts and came to some different conclusions. I strongly suggest reading the whole thing, but here are some pertinent excerpts:

The widely-heralded “plateauing” of the US ebook market has gotten plenty of press over the last 18 months, fueled primarily by these reports of declining ebook sales from the AAP, from Nielsen, and in the released quarterly financials of the Big Five. Traditional publishers and publishing industry pundits are claiming that the broader US ebook market has now flattened, or is even shrinking…

A lot of the confusion stems from this: in nearly all media coverage of the AAP’s declining ebook revenue, their sales — the sales of just 1,200 traditional publishers — are being conflated with the overall sales of the entire US ebook market…

Here at AE, over the last seven quarters we have steadily built up a comprehensive database of quarterly cross-sectional snapshots of the Kindle store, each of which captures between 45% and 60% of Amazon’s daily ebook sales. And while Amazon’s Kindle store alone doesn’t comprise the entire US ebook market, it does account for 67% of all traditionally-published ebook sales by most accounts.

AE’s conclusions, captured in this chart, certainly seems to suggest that the original Aggregation Theory thesis — that suppliers (authors) would be unbundled from distributors (publishers) — is exactly what is happening:


That is a pretty stark shift from the big publishers to independents (and it’s present in units as well).

However — and in the spirit of seeking disconfirming evidence! — I’m not sure exactly what this data says. Specifically, note that it only shows share of ebooks, not total sales. And, in fact, if you dig into the underlying data, it turns out that despite this shift Ebook sales are at best flat. I compared the Author Earning’s blog’s May 2015 report to its May 2014 report (to best match the data in the New York Times story, which is for the first five months of the year) and found that publisher ebook revenue is only up 1%, while Amazon’s revenue is down 1% (which, should be noted, contradicts the company’s public statements.

Moreover, I’m not sure how much stock to put in these numbers: as best I can tell the Author Earning’s blog takes snapshots of the entire Amazon store on a single day, which has two problems: there could be an outlier effect, depending on what is happening that day, and given Amazon’s push towards its own labels and to independent publishers in general there is likely a stronger representation of independent writers in Amazon’s data.

Ultimately, I actually do think most of my conclusions in Disconfirming Ebooks holds. Ebooks aren’t nearly as revolutionary as you might expect, in part because they’re basically like online travel agents: a more convenient mechanism for what actually exists. That said, one takeaway from the Author Earning’s blog data is that books do seem to be very elastic: it seems obvious that the shift to agency pricing and associated higher prices has a direct connection to the falling share for big publishers in the ebook market. And, beyond that, the fact that there is any shift at all away from publishers to directly dealing with Amazon is very much inline with the original formulation of the theory.

That said, based on some of the responses I got, I think many folks missed the implications of my conclusion:

There is one more point though: books don’t exist in a vacuum. The implication of ebook sales falling while remaining 20% of the industry is that the industry itself is in decline. Ultimately, in the grand competition that is the market for consumer attention, the fact that books aren’t really improving while everything else is getting better means the publishers may in the end be celebrating the most pyrrhic of victories.

If ebooks don’t really modularize books, that doesn’t mean modularization isn’t happening. Consider this blog: the length of a standard book is about 64,000 words which just to happens to be about how many words I write in a month-and-a-half! Basically, since the launch of the Daily Update, I’ve written the equivalent of about 10 books.

Moreover, the time you all spend reading this update has to come from somewhere: attention is the ultimate zero sum game. By my count I have basically reduced ebook sales by the tens of thousands, in part by breaking up what in the past may have been my book into many component parts. That, ultimately, is probably the true modularization: ideas, not books.

Sadly, I wanted to prove this was the case: I spent nearly eight hours today trying to massage the Author Earning’s data to discover which types of books had increased or decreased over the last year. Unfortunately, that meant dealing with an Excel file with 197,225 lines, and after about my 30th crash (not exaggerating), I had to give up. For today, anyways — I’m going to give it one more go after I finish this (for good reason!) late update.

To read the rest of this Daily Update, including a discussion of Oyster and how niche the book publishing market is, along with some notes about the Washington Post, Business Insider, and yet another problem with programmatic ads, you must be a subscriber.

Disconfirming Ebooks

Aggregation Theory would seem to argue that ebooks are destined to dominate the publishing industry. However, that is decidedly not happening; understanding why is a powerful tool to make the theory better.

About that Apple Car (and Jony Ive), The 21 Inc Bitcoin Computer

I’ve agreed that there is probably an Apple Car for a while, but I do need to make it official that I was likely wrong about Jony Ive. Then, what is the deal with 21 Inc’s Bitcoin Computer? Is there any way it makes sense?

Medium and the Publishing Long Tail, Content Blockers and Facebook, Amazon Prime and the Washington Post

A bit of follow-up on yesterday’s post Popping the Publishing Bubble, and why Medium is potentially trying to replicate Stripe’s strategy. Plus, the key decision-maker when it comes to ad-blocking is Facebook, and it’s not at all clear what they will do. Finally, an experiment from Jeff Bezos with the Washington Post and Amazon Prime.

Popping the Publishing Bubble

For years publishers haven’t had to worry about business models: they just captured attention and watched the money come in. Those days, though, are over: the publications that survive will start with business models and build journalism around it.