The Worst of DRM

This blog post offers a cautionary story on how Amazon can wipe out your entire account:

As a long-term writer about technology, DRM, privacy and user rights, this Amazon example shows the very worst of DRM. If the retailer, in this case Amazon, thinks you’re a crook, they will throw you out and take away everything that you bought. And if you disagree, you’re totally outlawed. Not only is your account closed, all your books that you paid for are gone. With DRM, you don’t buy and own books, you merely rent them for as long as the retailer finds it convenient.

One reason I still prefer to own physical books versus e-books.

Flat-Out Love for Amazon

Jessica Park, author of Flat-Out Love, writes about the publishing industry in her post “How Amazon Saved My Life.” It’s well worth the read in entirety, but here are the highlights:

Publishers pay terribly and infrequently. They are shockingly dumb when it comes to pricing, and if I see one more friend’s NY-pubbed ebook priced at $12.99, I’m going to scream. They do minimal marketing and leave the vast majority of work up to the author. Unless, of course, you are already a big name author. Then they fly you around the country for signings and treat you like the precious moneymaking gem that you are. The rest of us get next to nothing in terms of promotion. If your book takes off, they get the credit. If it tanks, you get the blame.

On her incredible success publishing with Amazon:

Because of Amazon and other sites, I’m making enough money that I can continue writing. I’m averaging sales of 3,500 books a month, not including the month that Amazon featured Flat-Out Love in a list of books for $3.99 and under. That month I sold 45,000 Kindle copies, and sold over 10,000 the next month. Those numbers are insane to me. Absolutely insane. The fact that I continue to sell well a year after the book’s release is humbling. Yes, I wrote a book that has earned me excellent reviews, so I take credit for that, and I worked myself to death finding bloggers to review my book (God bless my loyal bloggers who took a chance on me!), but I have to credit Amazon with giving me such a strong platform with such overwhelming visibility. I can be a writer. I am a writer.

On being connected and encouraged by the fans:

Oh, the fans are simply unbelievable. We are so directly connected to them, and the ease of communication and feedback is unparalleled. I’m learning what readers want, and I can incorporate that into my work without worrying that an editor will nix all the good stuff. Their support and enthusiasm breathes life into days when I feel particularly challenged.

And who said that the traditional publishing industry is changing?

Amazon’s Knock-Off Problem

CNN reports on Amazon.com’s knock-off program, which has gathered some steam:

There are a number of books on Amazon with similar titles to much more popular ones. Fifty Shades of Grey, the steamy romance novel that has created buzz around the world, is the No. 1 selling book on Amazon. Also available on Amazon: Thirty-Five Shades of Grey. Both books are written by authors with two first initials – E. L. James and J. D. Lyte – and both are the first in a trilogy about a young girl who falls for an older, successful man with a taste for domineering sex. The publisher of the bestseller Fifty says the book is “a tale that will obsess you, possess you, and stay with you forever.” The author and publisher of Thirty-Five, which came out in early April, apparently believe that description fits their book as well, word-for-word. Also selling on Amazon is I am the Girl with the Dragon Tattoo and Twilight New Moon. Neither is the book you are likely looking for.

And if you want to buy bestseller Thinking, Fast and Slow on Amazon, be careful where you click. A number of Amazon shoppers looking for the book by Nobel Prize-winning economist Daniel Kahneman ended up with Fast and Slow Thinking by Karl Daniels, which until recently was also on Amazon [editor’s note: it is no longer available on Amazon.com]. Says Kahneman of his doppelganger, “There is no such expert, it’s a rip-off. The comments on it are quite amusing – rather shocking that Amazon allows this sort of thing.”

Just be careful what you’re typing into your search.

This was quite the shocker, though:

Karen Peebles, who is the author of I am the Girl with the Dragon Tattoo, says she has self-published around 10,000 books though CreateSpace, not all of which are in her own name. “I am a single mother who home schools her children,” says Peebles, who says she sells “thousands and thousands” of books a month. “Self-publishing is a great way for me to make income. I receive a pretty nice royalty every month.”

People have trouble publishing 10,000 words — she is claiming to have published 10,000 books!? Give me a break.

Unethical Amazon Reviews

Imagine you bought an item from Amazon.com and upon opening the item, you found a note that said:  “We take pride in our products, and encourage you to write a review on Amazon.com. In return for writing the review, we will refund your order so you will have received the product for free.”

This is exactly what a lot of customers did who purchase a Kindle cover from a merchant called VIP Deals, according to The New York Times.

As someone who spends thousands of dollars on Amazon.com annually, this is unnerving news. I read product reviews carefully before buying a product, but how can I be certain that what I am reading are genuine reviews? As the Times article notes, this is a major issue for Amazon, and there are researchers out there who are trying to devise mathematical models to systematically unmask the bogus endorsements.

So what’s worked for me? I don’t just look at the average reviews for a product, but choose to filter the reviews by star rating. In particular, reading the 3-star and 1-star reviews is often a better indicator for me to NOT buy a product, even if the average review is 4-stars or more. In fact, I’d be wary of purchasing a product if you only see 4 or 5 star reviews (my theory is that by law of large numbers, you’d expect to see at least a small percentage of 1 or 2 star reviews). And you’d be surprised how many compelling and well-reasoned 1-star reviews exist.

Why Did Borders Fail and Barnes & Noble Survive?

A short piece in Business Week provides some clues:

Borders’s demise, though, has as much to do with real estate as any metaphysical market shift. During the superstore boom of the 1990s, Barnes & Noble paid close attention to where it put its outlets, which were usually in prime locations. Many of the profitable Borders stores were also centrally located, but numerous industry observers characterized the company as grasping for growth. It had a policy of picking “B locations,” says Fox, and trying to turn these sites into “A economics.” Leases on its stores were also “unproductively long,” adds CEO Edwards. As the company’s fortunes turned, it was difficult for Borders to buy its way out of leases that still had seven and eight years remaining on them.

Analysts predict that Barnes & Noble will have to shrink the number and size of its stores, and it hasn’t tried to gobble up many of the vacated Borders locations—70 percent of which, Barnes & Noble says, were within five miles of one of its outlets. (Barnes & Noble did purchase the remainder of Borders’s Web business.) But so far Barnes & Noble is holding on to its stores, focusing on e-books and filling its outlets with high-profit-margin nonbook items, such as educational toys and games.

The one thing Borders did have going for it was its huge selection, yet even that wasn’t worth as much as the company thought. An average Borders superstore stocked around 140,000 titles at immense cost, but if a customer craves selection, no store can compete with the long tail of the Internet. Maybe more crucially for Borders, the assortment of titles that provided the key to its identity didn’t give it a competitive edge over Barnes & Noble. Mark Evans, a director of merchandising strategy and analytics at Borders until 2009, says that [Borders] surveyed customers to understand why Barnes & Noble, with its slimmer selection, continued to clobber them in terms of year-over-year growth, average sales per store, and even the number of books sold at each location. “Customers didn’t notice our larger assortment of books,” Evans laments. “They didn’t care.”

It’s true — I hadn’t noticed the larger selection of books at Borders.

Also, do you really expect a company to survive whose claim to fame is their “secret sauce”?

The Borders story began in Ann Arbor, where Louis and Tom Borders opened their first store in 1971. Students at the University of Michigan, the brothers developed a then-revolutionary system to track sales and inventory; for years Borders executives called it the company’s “secret sauce.” Their “Book Inventory System” could oversee the flow of a huge number of titles broken into thousands of different subject categories across multiple stores. By evaluating sales data, the system could understand local tastes and predict demand in specific communities. Initially, the brothers hoped to sell the program to independent stores across the country, but bookshop owners proved resistant, asserting that they—and not some punch-card computer—intimately understood their clientele. Instead, Borders opened additional stores, first in suburban Detroit, Atlanta, and Indianapolis, ultimately forcing out many of those reluctant independents. By the 1990s it had stores all over the country, and together with Barnes & Noble controlled 40 percent of the bookselling market.

Perhaps a better answer comes from Mark Evans, who provides his answer of why Borders failed and Barnes & Noble is thriving in this Quora post:

  1. Failure to adequately address the internet sales channel and the subsequent ebook market. Specifically, the decision to outsource Borders.com toAmazon.com. To be fair, Borders.com was costing the company millions of dollars in losses each year ($20m I think when they decided to outsource) and one could argue that the outsourcing solution was a case of letting the most efficient etailing organization (Amazon.com) handle the job and turn a big negative into a profitable business. In the short-term, this saved a lot of money. In the long run, the internet is too important to outsource in this manner and Borders’ branding, multi-channel strategy, and customer base suffered. They also dropped the ball on ebooks, but by the time this became an issue they were just trying to figure out how to keep the whole house from burning down around them, so I find it more understandable.
  2. Poor real estate strategy – Borders leased space that was too large, the storefronts did not compare well to B&N, and they were complacent in picking and relocating existing stores to the best locations. Some of this is subjective as I don’t have great data to back this up – just my own educated assessment based on observation.
  3. Over-investment in music – while this was a big plus for Borders in the early to mid 90’s, it was a disaster in the long run. This is why the stores were too big once the music business cratered – stores were sized and modeled to provide a large music CD business which largely disappeared. In addition, infrastructure was sized to support this business, including a dedicated warehouse distribution facility. This last part has been addressed over time, but soaked up money, time, and energy. Music was also part of what made Borders a destination for many customers, so when music sales tanked, other product categories’ sales suffered as well.
  4. Over-reliance on assortment size to compete as opposed to efficient operations – Borders was renowned for its wide and quality assortment of titles. The very large assortment size was an advantage early on before Amazon. However, by its very nature the internet was better at quickly and efficiently connecting customers with obscure titles and bringing the “long tail’ to market. Thus, competing on assortment size was especially vulnerable to internet retailing and Borders suffered disproportionately as the “long tail” customers abandoned them.
  5. Failure to build efficient systems and processes – While Borders’ legendary “expert system” was considered cutting edge and an advantage early on, the company failed to successfully build upon this foundation and create new, better assortment, replenishment, and supply chain systems and processes to keep pace with the changing state of technology and efficient retail operations. B&N invested considerable time/energy/money through the 90’s in systems and processes. To provide one example, a lower ranked title that sells out in a B&N will be replenished from a central warehouse within 2-3 days. The same process could take up to 16 weeks for Borders. Borders sought to upgrade systems with two large efforts in the 00’s: first one was a home grown effort called Common Systems. Second was a “buy and integrate” project to implement Retek and E3. Both failed spectacularly. The Retek effort dramatically hurt the Walden chain, the only business unit that was managed by the system. With both of these efforts, large sums of money and, perhaps more importantly, human resources and time were squandered.
  6. Branding failure – In addition to the Borders.com problem, Borders never reached the mindshare that Barnes & Noble did for a variety of reasons. Also, Barnes & Noble secured the exclusive U.S. Starbucks partnership, a major branding and traffic-driving win for them.

Don’t get me wrong. I loved Borders. I still go to bookstores. It’s just that I will return home and then purchase the books I saw on Amazon.

On Presenting to Jeff Bezos

I’ve just stumbled upon an awesome personal story from Steve Yegge, who used to work at Amazon (he’s at Google now). In this post, he explains what it was like presenting to Jeff Bezos, Amazon’s CEO.

The first item of business that you should note: Jeff Bezos outlawed PowerPoint presentations at Amazon. As Yegge notes, “If you present to Jeff, you write it as prose.” I’ve bolded my favorite takeaways from Steve’s post:

To prepare a presentation for Jeff, first make damn sure you know everything there is to know about the subject. Then write a prose narrative explaining the problem and solution(s). Write it exactly the way you would write it for a leading professor or industry expert on the subject.

That is: assume he already knows everything about it. Assume he knows more than you do about it. Even if you have groundbreakingly original ideas in your material, just pretend it’s old hat for him. Write your prose in the succinct, direct, no-explanations way that you would write for a world-leading expert on the material.

You’re almost done. The last step before you’re ready to present to him is this: Delete every third paragraph.

Now you’re ready to present!

Back in the mid-1800s there was this famous-ish composer/pianist named Franz Liszt. He is widely thought to have been the greatest sight-reader who ever lived. He could sight-read anything you gave him, including crazy stuff not even written for piano, like opera scores. He was so staggeringly good at sight-reading that his brain was only fully engaged on the first run-through. After that he’d get bored and start embellishing with his own additions.

Bezos is so goddamned smart that you have to turn it into a game for him or he’ll be bored and annoyed with you. That was my first realization about him. Who knows how smart he was before he became a billionaire — let’s just assume it was “really frigging smart”, since he did build Amazon from scratch. But for years he’s had armies of people taking care of everything for him. He doesn’t have to do anything at all except dress himself in the morning and read presentations all day long. So he’s really, REALLY good at reading presentations. He’s like the Franz Liszt of sight-reading presentations.

So you have to start tearing out whole paragraphs, or even pages, to make it interesting for him. He will fill in the gaps himself without missing a beat. And his brain will have less time to get annoyed with the slow pace of your brain.

I mean, imagine what it would be like to start off as an incredibly smart person, arguably a first-class genius, and then somehow wind up in a situation where you have a general’s view of the industry battlefield for ten years. Not only do you have more time than anyone else, and access to more information than anyone else, you also have this long-term eagle-eye perspective that only a handful of people in the world enjoy.

In some sense you wouldn’t even be human anymore. People like Jeff are better regarded as hyper-intelligent aliens with a tangential interest in human affairs.

But how do you prepare a presentation for a giant-brained alien? Well, here’s my second realization: He will outsmart you. Knowing everything about your subject is only a first-line defense for you. It’s like armor that he’ll eat through in the first few minutes. He is going to have at least one deep insight about the subject, right there on the spot, and it’s going to make you look like a complete buffoon.

Trust me folks, I saw this happen time and again, for years. Jeff Bezos has all these incredibly intelligent, experienced domain experts surrounding him at huge meetings, and on a daily basis he thinks of shit that they never saw coming. It’s a guaranteed facepalm fest.

So I knew he was going to think of something that I hadn’t. I didn’t know what it might be, because I’d spent weeks trying to think of everything. I had reviewed the material with dozens of people. But it didn’t matter. I knew he was going to blindside me, because that’s what happens when you present to Jeff.

If you assume it’s coming, then it’s not going to catch you quite as off-guard.

And of course it happened. I forgot Data Mining. Wasn’t in the list. He asked me point-blank, very nicely: “Why aren’t Data Mining and Machine Learning in this list?” And I laughed right in his face, which sent a shock wave through the stone-faced jury of VPs who had been listening in silence, waiting for a cue from Jeff as to whether he was going to be happy or I was headed for the salt mines.

I laughed because I was delighted. He’d caught me with my pants down around my ankles, right in front of everyone, despite all my excruciating weeks of preparation. I had even deleted about a third of the exposition just to keep his giant brain busy, but it didn’t matter. He’d done it again, and I looked like a total ass-clown in front of everyone. It was frigging awesome.

So yeah, of course I couldn’t help laughing. And I said: “Yup, you got me. I don’t know why it’s not in there. It should be. I’m a dork. I’ll add it.” And he laughed, and we moved on, and everything was great. Even the VPs started smiling. It annoyed the hell out of me that they’d had to wait for a cue, but whatever. Life was good.

You have to understand: most people were scared around Bezos because they were waaaay too worried about trying to keep their jobs. People in high-level positions sometimes have a little too much personal self-esteem invested in their success. Can you imagine how annoying it must be for him to be around timid people all day long? But me — well, I thought I was going to get fired every single day. So fuck timid. Might as well aim high and go out in a ball of flame.

That last part about not being timid and just laying it out there is so, so good. Will more people at Amazon (or anyone else who reads Steve’s post) change their attitudes because of it?

The Original Name of Amazon

From a good piece on Jeff Bezos, CEO of Amazon.com, in this weekend’s Wall Street Journal:  Amazon’s original name was Cadabra, which was nixed after someone misheard it as “cadaver.” Interesting fact of the day, to be sure.

The other highlights from the piece. Ding!

At first, there were a half-dozen orders per day. One of the programmers set up the computers so that a bell would ring every time an order came in. A great novelty at first, it quickly got annoying and had to be turned off.

I share this philosophy about launching. Put it out there, and then constantly improve what you build (rather than aiming for perfection at the beginning):

At launch, the site wasn’t even truly finished. Mr. Bezos’s philosophy was to get to market quickly, in order to get a jump on the competition, and to fix problems and improve the site as people started using it.

Fascinating tidbit about a glitch of an early version of Amazon’s site:

Among the early mistakes, according to Mr. Bezos: “We found that customers could order a negative quantity of books! And we would credit their credit card with the price and, I assume, wait around for them to ship the books.”

Sounds like I would have been a candidate for the third book mentioned here:

In the very early days, Mr. Bezos had employees pick out the 20 strangest titles sold every week and awarded a prize for the strangest. Some of the winners: “Training Goldfish Using Dolphin Training Techniques,” “How to Start Your Own Country” and “Life Without Friends.”

Finally, I had no idea Amazon had a patent on the one-click purchase option:

From the beginning, Mr. Bezos was fanatical about squeezing from Amazon.com every incremental degree of usefulness. New features were often simple things, like 1-Click ordering—whose notorious patent was called by one law journal “probably the most memorable example of an unoriginal software patent.” It forbids any other online retailer from using a one-click purchasing option without paying a royalty to Amazon.

Way to go, Mr. Bezos.