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Brace for impact. What I’m about to say is going to make a lot of people angry, including some of the people at Google (NSDQ: GOOG) who are…

Google Ebooks computer and devices
photo: Google ebooks

Brace for impact. What I’m about to say is going to make a lot of people angry, including some of the people at Google (NSDQ: GOOG) who are going to rightly point out that when they pre-briefed me on today’s Google e-books announcement, we never once discussed ad-supported reading.

Instead, they told me all about their plan to establish a set of tools that will offer e-books to people looking for book information through Google’s search engine. They explained that this will make it possible for the millions of people who conduct book-related searches every day to have easy access to 3 million books — some out of copyright, some out of print but under copyright, and a full range of in-print titles including bestsellers. They also described how independent booksellers will be able to use the same set of web-based commerce and reading tools to build their own branded e-book stores to finally extend their brick-and-mortar customer relationships into the digital space.

Since then, I’ve spoken to half a dozen reporters who were also pre-briefed and they have all had a similar set of questions: can Google compete against Amazon? (NSDQ: AMZN) (No, but it can compete against Barnes & Noble.) Is it too late to make a dent in a mature market? (No, less than 10% of online adults in the U.S. read e-books; there’s plenty of room to grow.) Is Google’s cloud-based strategy unique? (Yes and no: It supports all devices except the Kindle, but the Kindle platform actually supports as many devices as Google will.)

All of that is true, and I’m genuinely glad to have Google enter this market because it will be reaching potential customers at a unique point in their book-buying journey: at the point of web search, not at the point of searching the bookstore. This means many things you didn’t realize a book can help you with — overcoming depression, remodeling a bathroom, making friends and influencing people — will now be surfaced alongside all the YouTube and other results Google will offer. This is a net plus for books.

But the ultimate effect of Google e-books, if Google knows what’s good for it, will be the creation of an ad-supported publishing model. This is where the anger starts. Because I’m putting words in Google’s mouth — words they may or may not be thinking but certainly words they don’t want to say out loud — but mostly because I’m proposing something that is so counter to the philosophy and mindset of the publishing industry that I may be shunned for even suggesting it.

Opponents of my suggestion will conjure a worst-case scenario, where Dickens’s, “It was the best of times, it was the worst of times,” could end up sponsored by a Google AdWords campaign that reads, “Is your day feeling like the worst of times? Try our new sports drink to get your afternoon back on track.” I’ll agree this example may be atrocious, but I can just as easily identify dozens of very smart examples. For example, not only would Kohler and Home Depot want to sponsor your browsing of a book on bathroom remodeling, as a reader you may actually appreciate the link to the relevant plumbing resources.

Before anti-advertising types crawl all over me, let me explain the most important reasons why this makes sense. First, books are the only medium left not significantly sponsored by advertising. From the Android Angry Birds game app to Pandora music streams to Hulu.com to the venerable NYT.com, advertising is essential to the success of nearly all media — analog and digital. The only reason book advertising has not happened is that the economics of distributing books have required that people pay for them — in a way they have never paid for the newspaper, magazines, or even music, where a majority of listening has always been radio-based. If you make people pay the full price of a book’s creation and distribution, you can hardly expect them to endure advertising. Plus, books last for such a long time that an ad placed 25 years ago in my copy of The Hunt For Red October would be laughably irrelevant today.

That has all changed now. Since Google intends to provide its books from the cloud, it can deliver ads that are timely and targeted. And the economics of publishing are swiftly moving away from an analog production model. (I blogged about this to much ado last month), which means that soon, we will no longer need to force the entire cost of a book on the buyer of the book, but instead can extract value from the reader of the book, in direct proportion to the value they get from it. In other words, the more pages they read (the more value they get), the more ads they see and the more value the publisher and author receive.

Also, consider this: The two most common ways people acquire books today are borrowing from a library and borrowing from a friend. There are several reasons for that; economically, a principal reason for this is that until you’ve read a book you can’t be sure whether it’s worth the price printed on the book’s jacket, so you prefer to get the book for free when possible. But how can you get people to try a book to find out if they like it before buying it?

In the e-book world, Amazon and now Google can let you sample the first chapter or two (or three) for free. And while that’s a good way to get someone interested in a book, advertising is an even better solution. Imagine you find a new book, highly recommended by your Facebook friends or a blogger you trust. Instead of a limited free trial of the first chapters, from which the publisher and author get no recompense if you don’t ultimately buy, what if you were offered an ad-supported read of the book instead? As you read, the meter starts ticking and revenue accrues directly to the publisher and author. If you don’t like the ads, you can buy the book at any time to remove them. But even if you choose to read the whole thing without buying it, it’s an easy thing for Google to figure out how many ads you have to see for it to generate enough revenue to replace the cost of buying the digital book.

I’ll stop there, I have a hundred more justifications for why this is the next logical step for the industry, why Google is perfectly poised to do it. And, I can anticipate all the complaints from publishers as to why they will hold strong and reject this extra (easy) money. But it will happen. And by raising this flag and starting the verbal war that will ensue, I have done my part to ensure we get to the future sooner rather than later.

James McQuivey is an analyst at Forrester Research, where he serves Consumer Product Strategy professionals. James blogs here.

This article originally appeared in Forrester Research.

  1. Meh.

    Amazing! Ad-supported content! Revolutionary thinking!

    Stop patting yourself on the back. Google may do it, but its not the first time people have mentioned or thought about this, and certainly not that revolutionary to create anger.

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  2. Oh the unintended consequences. Here your reading a book about the famous female Ape researcher and on the top is a flashing Punch the Monkey ad.

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  3. I’m very impressed, Mr. Joneses, that you are firmly prepared for the future (frankly, most paidcontent readers are), but believe me, I have had this unpleasant conversation many times and expect to have it many more times.

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  4. I fully agree that this is an inevitability. There are already books online in HTML format that have ads around them, but reading a book as a webpage is admittedly clunky. As e-readers and tablets proliferate, publishers will adapt to all available business models for the medium, one of which is certainly ad-supported reading.

    That said, some publishers will fight the model, just as some movie and TV show producers don’t want their shows published on the web supported only by ads. Ultimately, the rate of adoption will be a function of the monetization: publishers will run tests with a few titles, and if they can monetize ad-supported e-books as well as they can for-purchase e-books, they’ll move to the ad-supported model. If the tests we’re seeing with TV shows and movies are any indication, the movement will be slow.

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  5. ” The only reason book advertising has not happened is that the economics of distributing books have required that people pay for them…”

    Um… No. You’re showing your age. (Young-ish.) Paperbacks in the 1960’s and 1970’s frequently had a color ad page pasted in. Trouble was, those paperbacks competed in the marketplace against ones that didn’t have ads, and sold fewer copies.

    “(A)dvertising is essential to the success of nearly all media—analog and digital.”

    Which is why nearly all media — analog and digital — have been having such a hard time lately being successful in the aggregate.

    Advertising is dying.

    Ad buys peaked as a percentage of GDP in 2002 (at 2.52%). Today they stand at 1.8% — a 28% drop in 8 years. Absolute dollars for ad sales peaked in 2008, and haven’t recovered. If you want to know why newspapers, radio, billboards, commercial broadcast TV, basic cable, and magazines are all having trouble, that’s why.

    Yes, Google and others have picked up some of the slack through selling online advertising. Trouble is, it’s not unlike music. Just like digital sales on iTunes haven’t made up for the aggregate loss in the sales of CDs for the record labels, Google’s pickup hasn’t made up for the loss of sales in offline media.

    Actually, far from opening the door to an ad-based model when it comes to books, this strikes me as yet another attempt by Google to find something, anything other than search-based ads to make money (ChromeOS and Android, anyone?). They have a limited window of opportunity before their market collapses completely, and they know it. Who more than Google has the data that shows ads don’t lead to sales any greater than the margin of error? And if ads don’t generate sales, how do you justify the money spent on them to shareholders?

    If you haven’t read Bob Garfield’s “Chaos Scenario” pieces in Advertising Age, or Eric Clemons’ “Why Advertising Is Failing On The Internet” on TechCrunch, you really should.

    But, really… Advising book publishers to pursue ad-based models at this late date is not unlike telling someone in the 1910’s to go into the street cleaning business because horse manure will always fill the streets.

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  6. @James, agree, the model is inevitable.

    Would add this will be a boon to authors. The traditional publishing model doesn’t work well for all authors; this will provide another opportunity in which readers are more likely to sample their content (minimize up front cost to the reader) and that’s a critical first step for an aspiring author.

    @Hal: do your numbers include online ads? Qualitatively I feel that ad as percentage of GDP should decrease over time, mainly because the measurement of online ads shows that ads are not nearly as effective as was assumed when results couldn’t be measured as well in other mediums.

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  7. “Qualitatively I feel that ad as percentage of GDP should decrease over time, mainly because the measurement of online ads shows that ads are not nearly as effective as was assumed when results couldn’t be measured as well in other mediums.”

    Ummm… Isn’t that what I just said? “The measurement of online ads shows that ads are not nearly as effective as was assumed…” Check. Here was my version: “Who more than Google has the data that shows ads don’t lead to sales any greater than the margin of error?”

    The increasing accuracy of measurement of ad effectiveness through the use of online media is what’s making the empirical case ads have hardly any effectiveness at all, and are thus a waste of shareholders’ money. This leads to declining ad buys, measured both as a proportion of the economy and in absolute dollars, as ad buyers increasingly realize advertising doesn’t have any rational justification.

    There will be some holdouts who continue unsuccessful business practices with the attitude of, “we’ve always done it that way…,” but that won’t last forever. Or even 30 years, at current rates of decline.

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  8. If only that would happen…

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  9. Two questions for you:
    1. do you have a source for your claim that the main source of books is loans and libraries?
    2. have you done the cpm analysis of how much one would need to charge for ads to make it pay for anyone except Stephen King? A book that gets read by a million people is a MAMMOTH bestseller–and with a CPM of $5 (which would be a lot online these days), that’s a grand total of $5,000 before everyone takes their share.

    There are plenty of forms of interaction (like massage, say) that aren’t ad supported, because they’re not mass. And individual books… not mass, I think.

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  10. “There are plenty of forms of interaction (like massage, say) that aren’t ad supported, because they’re not mass. And individual books… not mass, I think.”

    Seth, that reminds me of a point the writer/illustrator William Rotsler used to make: Censorship is generally directly proportional to the number of people who can observe a given work simultaneously. Thus leaflets, books, small-run newspapers generally fly under the radar, even in relatively restrictive societies.

    Two interesting corollaries there:

    * It’s amusing to see censorship and advertising behave in parallel circumstances.

    * The fragmentation of simultaneous audiences — whether through cable channel choice, time-shifting DVRs, the internet, or what have you — is having interesting effects. (That fragmentation may also be why political ads [and thus campaign costs] keep rising — you just can’t get enough of the electorate all in one place any more, so you have to seek out/buy multiple channels of contact where one or two used to do.)

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