Amazon: Still Evil After All These Years Pt 1

Last week I discussed, among other things, the rise and rise of Amazon’s Kindle in the ebook space over the past few months, and how difficult it is going to be for other retailers to get into this space. Despite this, I’ve been happy with my choice to buy a Kindle, and still think that Amazon has the best overall ebook platform for readers. I also said that I hoped Amazon would not do anything too evil in 2011.

Then I read this. For those who don’t have the time to read a ten-page investigative report on Amazon and the book trade, allow me to break it down for you. For a number of years, Amazon has been using their clout (they are responsible for about 75% of online book sales in the US) to demand larger and larger discounts on sales from publishers. This is pretty much par the course for large booksellers, and it’s been happening the world over since the 80s. What disturbs me more than this, however, is what booksellers call the ‘co-operative advertising’ element of Amazon’s demands on publishers.

For those who don’t know, co-operative advertising, or promotional allowances (known as co-op) is the term used by big booksellers for the fees charged for premium placement at the front of a bookstore for that publisher’s books. For example, if you go into a Dymocks or Angus & Robertson bookshop, the books that are placed right at the front of the store in big carousels and piles are not there by accident. Their publishers have paid to ensure that they get good placement in the store. These payments even extend to the so-called ‘Top 10’ areas in many stores – which are often not even the real top ten or bestseller lists at all, but a list of books that publishers have paid to be placed there. Evil, you might say, but these payments are pretty standard now, and according to the Boston Review article linked to above, publishers (at least in the US) now allocate approximately 4% of their net revenue for co-op payments.

Where Amazon is different is the scope of what they can charge for, mostly because of the technology they have access to. For those of us used to using Google, we assume when we search for products on a store’s website, we’re getting a kind of ‘best pick’ attempt to find what we’re looking for. Apparently this is not so:

“Amazon also may turn off the search options to publishers’ books, making it possible to find a title only when the correct name of the book or the ISBN is entered.” What publishers were supposed to get in exchange for this co-op, was, essentially, not being made to disappear from the Web site.

This is a two part post. Please click here for Part 2.

Amazon: Still Evil After All These Years Pt 2

The following is the second part of a two-part post. Click here for Part 1.

More amazing to me is the co-op payments involved in Amazon’s recommendation engine. If you’ve ever bought anything from Amazon, you’ll have seen the panel at the bottom of every screen telling you what other products people who liked this bought. I’ve always seen it as a useful way to discover books I may not have heard of, through the purchases of readers who buy similar books to me. I assumed there was some kind of mysterious Google-like search algorithm at play, and that it was designed for me to find books I want to read. Not so:

Most customers aren’t aware that the personalized book recommendations they receive are a result of paid promotions, not just purchase-derived data.

But wait – there’s more. Not only are Amazon’s explicit advertising, search and recommendation algorithms a result of publisher co-op payments – the very price you pay for a book on Amazon is determined by yet another algorithm.

Algorithms can also affect how much customers pay for books. Individual customers may get different discounts on the same book depending on their purchase history. The practice is euphemistically called “dynamic pricing.”

So, Amazon is certainly not the benign dictator I kidded myself into thinking they were. But here in Australia, where we don’t have a homegrown Amazon distribution network, and people still have to pay exorbitant shipping fees to get their books out here, one has to assume they have far less sway.

That is until ebooks really take off. Despite the fact that we don’t have a local Amazon presence, this makes absolutely no difference whatsoever for Australian ebooks. And Australian ebook sales are overwhelmingly dominated by the Kindle, and are likely to remain so for some time. At the moment, it’s unlikely Amazon is charging these kind of co-op fees for ebook promotion, because very few publishers are making enough money out of ebooks to justify payments. But you can guarantee they will.

So my question for you today – what do you think of Amazon’s bully boy tactics? Is this just the new reality and publishers should simply get used to it? Or should they be fighting the web behemoth every step of the way? Does information like this make you less likely to buy from Amazon? Does it even come as a surprise? Sound off in the comments and let me know.