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Why buy Goodreads?

Amazon has agreed to buy Goodreads (the largest social network for readers) for an undisclosed sum thought to be in excess of $150m.

There has been plenty of speculation around why the retailer would do this, but it largely focuses around two areas: 1) preventing other retailers from purchasing Goodreads or 2) as the Atlantic put it: giving Amazon 'a direct line' into the thoughts of book buyers.

Here are six other key reasons Amazon would buy the site:

1. No Reason Not To Buy

It's worth remembering that Amazon bought AbeBooks several years ago and largely left it untouched. It did similar with shoe and apparel retailer Zappos. It may well do the same here. Goodreads has already pledged to 'remain independent'.

Amazon is a bit of a collector of companies, owning IMDB, Audible, LoveFilm, Pets.com, The Book Depository, and many others. It has lots of money, and very predictable future revenues. There is literally no reason not to have a site like Goodreads within the Amazon stable, rather than outside.

2. Pure Retail

If Goodreads had decided to, it would not have been particularly hard to start selling directly, or in much closer partnership with another retailer. Even outside of that, it is straightforward for Goodreads to divert tens of thousands, perhaps hundreds of thousands of sales to whichever retailer they choose. In many regions, the most prominent 'buy' button at the foot of each book page on Goodreads urges users to purchase the book on Kobo. I'm sure those will all switch to Kindle at some point.

3. Missing Data

I don't totally buy the "Goodreads gives Jeff Bezos & Co. a direct line into [readers'] thoughts and habits" line taken by the Atlantic. Goodreads has an API that I'm sure Amazon had access to anyway. Outside of that though, there is a lot of worth in Goodreads' data for Amazon.

Amazon has a near-perfect picture of what readers do via Amazon. It knows what you buy, when you buy it, which books you actually read on Kindle, which books you quit reading part-way through on Kindle and where you quit reading them, and—based on all of that—what else you might read, and which books it should promote to other people like you.

What they don't know is "how much are we missing?". Are their prolific book buyers also buying prolifically from Barnes & Noble offline? At present, Amazon has no way of knowing. By cross-referencing its data against data on the same people within Goodreads it can get a much better picture of that.

And of course, with a truer picture of readers' habits, Amazon can do a much better job of recommending books to Goodreads' audience, including the prolific readers they may currently miss.

4. Review Volume, and Review Quality

I've done a lot of work around Amazon and Goodreads over the last few years, often mining review data on each. If you spend any amount of time looking at either, you will see the review volume is phenomenally high on Goodreads in comparison to Amazon. Goodreads has 16m members and, while they are not all active, it's not unusual for a book to have had 100x (or more) reviews on Goodreads than it has on Amazon, and 1000x as many 'ratings'.

The segment of users reviewing on Amazon differs greatly to those reviewing on Goodreads too, which causes an odd problem for Amazon. On Amazon, many of the reviews for books tend to be by either 'professional reviewers' who review everything they buy, or by 'non-fan' readers. That suits many of Amazon's other product categories (technology for example), but it does not suit books, where a review by a fan of the author is usually far more valuable than a review from a 'drifter'. Those fans are less likely to review on Amazon, where there is zero reciprocal benefit to them. They are far more likely to review on Goodreads.

You only leave one review for a book and—for prolific readers—many choose to leave that review on Goodreads rather than Amazon. By buying Goodreads, Amazon will presumably eventually surface those reviews on Amazon itself.

5. Other Niches

Looking a few years into the future, Goodreads is really a vertical social network platform. The current incarnation is applied specifically to books, but there is no reason Amazon could not use exactly the same technology and apply it to games, or technology, or software, or shoes, or music, or any of the other hundred-plus categories Amazon sells in today.

6. Publishers as Competitors

While it's not widely discussed outside the world of books, those within the publishing world are very aware that Amazon is a publisher itself, as much as it is a retailer. The absolute largest advantage Amazon has over every other book publisher is that it has direct contact with its customers. As a publisher, that gives it insight into exactly what will work from a retail point of view. As a retailer, it removes the risk in publishing, as they have direct marketing contact with their potential buyers.

If any publisher, or consortium of publishers, were to have purchased Goodreads, that would have immediately taken away Amazon's unique, utterly key advantage in that area.

Dan Barker is an independent digital consultant working with retailers, publishers and online businesses. His website is: http://www.barker.dj/